LCVs defy the trend

After two successive years of 26 per cent growth, auto industry volumes have moderated, thanks to rising inflation, interest rates and fuel prices. For April-August 2011, the overall industry growth has slowed to 13.3 per cent. But while medium and heavy commercial vehicles (MHCVs) remain among the affected, growing only by about 7 per cent, LCVs (light commercial vehicles) have continued to show strong growth. During this period, LCV volumes have grown by a much higher 27.5 per cent.

Shield against slowdown

In fact, even during the 2008-09 slowdown, LCVs showed a lot of resilience. When the MHCV volumes dropped by 33 per cent year on year in 2008-09, LCV volumes dropped only by 7 per cent. Besides, LCVs now constitute a higher proportion of the total CVs sold. From about 44 per cent in 2007-08, the share of LCVs has moved up to 55 per cent of the total domestic CV sales. These two indicators imply good news for CV makers, as LCVs now clearly act as a diversifier in times of a slowdown.

Small vehicles rule

So, what are the segments showing robust growth within LCVs? A further breakdown of the numbers shows that good carriers, which constitute over 85 per cent of the LCVs sold, have grown by 31 per cent while passenger carriers have grown by about 5 per cent. Normally, vehicles with up to 7.5 tonnes GVW (gross vehicle weight) fall in the LCV (goods carrier) category. In this, the sub-two-tonne mini-truck segment has predictably seen most of the action, both in terms of the number of vehicles sold and in terms of volume growth, followed by the pick-up vehicles (2-3.5 tonnes). Together, these small vehicles constitute about 87 per cent of the total goods carrier volumes and have grown by about 33 per cent over April-August 2010.

One reason for the good show could be that given their lower cost, these vehicles may not be as sensitive to interest rate hikes as larger trucks and the proportion of financed purchases too may be less. Also, the demand for such vehicles stands testimony to the catching on of the ‘hub and spoke model' of transportation in India, where such small vehicles are used for last mile connectivity within the cities and towns and large, heavy vehicles, are used for inter-city transport.

The expanding market for these smaller CVs has also meant brisk business for players such as Tata Motors and Mahindra and Mahindra, whose products such as the Ace, Gio, Genio and Maxximo belong to this grouping. Little wonder then that Ashok Leyland has just launched its entry LCV, the ‘Dost', this week. However, although Piaggio (Ape, for example) and Force Motors (Trump) already have a presence in the same segments, Tata Motors, with the Ace and its variants, is still the king of the mini-truck segment. M & M, with vehicles such as the Genio, reigns supreme in the small pick-ups category.

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