VE Commercial Vehicles upbeat on aftermarket business

Siddhartha Lal is bullish on the aftermarket business for VE Commercial Vehicles (VECV), the joint venture of Swedish truck maker Volvo and Eicher Motors.

In advanced countries, the aftermarket (or replacement market which retails vehicle spare parts) could contribute to a third or even half of an automaker’s profitability. The MD and CEO of Eicher Motors is quick to add that it is not quite the same in this part of the world, at least for now.

“Certainly, this won’t happen immediately in India but over a decade or two, the aftermarket will become one of the biggest drivers of profitability. ” Lal told Business Line during a recent visit to the VECV facility in Pithampur, Madhya Pradesh.

It is precisely for this reason that the VEPDC-VE Parts Distribution Centre (again in Pithampur) has a big role to play.

As the central spare parts warehouse, it is a critical pivot for the parent, VECV’s aftermarket servicing initiatives.

The 10,000-sq-m facility is capable of handling over 20,000 lines of parts. “We have a 10-20 year horizon on these things and it is important to build excellence today to emerge the differentiator tomorrow. ” reasons Lal.

One of the biggest attractions of the aftermarket is that it does not have business cycles to contend with and is a strong revenue stream for automakers.

Genuine parts

From VECV’s point of view, the objective is to eventually deliver over 95 per cent availability of genuine parts, which would be substantially higher than present Indian standards of 50-60 per cent. Today, most end-users opt for cheaper spares in the replacement market. The Pithampur parts warehouse will also become critical to the global operations of VECV which, going forward, could include ASEAN and Africa. “The ability to service a new country with a high level of parts availability is absolutely critical,” Lal says.

Consequently, VECV would rather establish a foundation with the aftermarket before it enters a new country. “It is never the other way around where we will have to find a way to get parts,” he adds.

Skill centres

VECV is, therefore, giving top priority to service standards and growth of skill centres as part of the aftermarket focus. “Our entire drive is to redeem technicians at the dealership levels. We are never going to have good service levels if employee turnover is very high,” says Lal.

The company is working with dealers on this critical aspect of manpower retention. The next step is training and specialisation through training schools and the like. This is being done both at the local and regional levels to train engineers.

Lal reiterates that these initiatives have translated into tremendous lessons for the alliance. “This has been among the softer benefits (in the partnership) in addition to cabins and engines.

The service and spare parts approach, in addition to training, is the true spinoff in this alliance with Volvo,” he says.

According to Lal, the partnership has made a conscious effort to build a business model which is absolutely different from any truck company in India. The focus VECV has on issues such as quality and the aftermarket is “very significant”, and Volvo’s expertise in processes has played a big role here.

>murali.gopalan@thehindu.co.in

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