Companies

CV industry poised for growth; worst is over, says Tata Motors’ Girish Wagh

Ayushi Kar | | | Updated on: Nov 17, 2021
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Infrastructure push, e-commerce and rural demand to drive growth

The commercial vehicle industry, which faced major headwinds in the past two years, is poised for growth, according to Girish Wagh, Executive Director, Tata Motors.

While the major headwinds for the recovery for the industry remain, and these include rise in commodity and fuel prices, but Wagh believes that the worst is over.

The industry is expected to witness strong growth driven by infrastructure push, e-commerce growth and rural demand. The bus segment still fares poorly, with not much demand from schools, staffing transport, state transportation units and touring services, he said at a media round table on Wednesday.

The commercial vehicle segment went through a major downturn during the peak Covid-19 pandemic, according to Wagh.

While the rest of the world saw, approximately 1 per cent degrowth in the CV industry on account of the pandemic, India was much worse, with the industry shrinking 50 per cent during FY20 and FY21. The CV industry touched decadal lows with the middle to heavy segment seeing degrowth of 60 per cent falling back to FY03 levels. Even now, as the industry commences recovery, the growth is dampened by commodity inflation and other major factors.

Global factors

“Since it is the global economic factors that are causing the commodity inflation, the situation is very unique,” Wagh explained. Rising fuel prices have led to CNG’s prominence, with Tata Motors seeing a 40 per cent conversion to CNG utilisation, amongst transporters using intermediate and light commercial vehicles.

“The uptick in CNG is particularly high in cities with good gas infrastructure,” Wagh explained. Tata Motors, which saw 40 per cent growth in the CV space during the first half of the 2022 fiscal year, expects another 20 per cent growth by the end of the fiscal. “Although starting from a low base….improving GDP and other economic conditions augur well for growth,” said Wagh.

Gains market share

Tata Motors has gained market share during the first half of the 2022 fiscal in all four product segments and overall business, compared to FY21. According to SIAM reports, for the medium and heavy commercial vehicle segment, the gain was 3.6 per cent, for intermediate and light commercial vehicle segment it was 2.4 per cent, passenger commercial vehicle segment saw 2.9 per cent while small commercial vehicle and pick-up segment saw a gain of 1.6 per cent.

While the commercial vehicle segment has largely remained unscathed by the semiconductor shortage, due to low demand volumes, Wagh said the small commercial vehicle segment faced chip shortage. The issue remains a cause for concern. “We have taken steps to de-risk against chip shortage, which include reducing our dependency on a single chip, seeking alternative fuel options etc,” Wagh added.

Low-profit margins for freight operators, retail CV customers facing difficulty in getting loans from financers, who faced a long period of defaults during the second wave, have also slowed down recovery for Tata Motors.

Business agility plan

Amidst this, Tata Motors has been guided by a dynamic business agility plan. This includes generating demand through network interventions — setting up smaller dealerships with lower break-even points, partnerships with financers, including the State Bank of India, and bundling value-added services such as uptime guarantee and fuel management programmes. In light of the high commodity prices, Tata Motors has also increased prices by 1-2.5 per cent for five consecutive quarters.

Tata Motors is also focusing on new product launches, including CVs as well as new last-mile EVs that will be unveiled soon for intra-city cargo applications.

Published on November 18, 2021

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