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Indian commercial vehicle market to double by 2016-17 - E&Y Report

Ernst & Young in its latest report on 'Mega trends shaping the Indian commercial vehicle market’ said that the Indian commercial vehicle market will double to 1.6 million units in next five years thanks to the increase in infrastructure spend, rapid urbanisation and entry of major multinational players in the country.

It said that the country is likely to see the emergence of more than six cities (each with a total population of over 10 million) and 63 cities with a projected population of more than1 million by 2025.

E&Y said that the Indian market which has seen the entry of international majors like Daimler, Volvo, Beiqi Foton will see a CAGR growth of 15% till 2016-17.

The overall commercial vehicle sales in India grew by 18.20% in 2011-12 at 809,532 untis Vs 684,905 units in 2010-11. The sales of medium & heavy trucks posted a growth of 8.79% in 2011-12 at 299,309 vs 275,121 units in 2010-11 & light commercial vehicles grew faster at almost 30% with 4,11,460 units sold in the last fiscal.

TATA Motors & Ashok Leyland continues to dominate the domestic truck scene in India with a combined market share of over 85-90% and rest of the players making up the rest of the pie.

According to the report, the stakeholders across the Indian CV industry are likely to be impacted by rapidly changing events right from the operating environment, fleet operator/ manager preferences, competition, distribution channel and also supply chain.

Urging the need of road infrastructure development to facilitate OEMs, Mr Rakesh Batra partner & national leader, automotive practice of Ernst & Young said that "By 2012, one expects to have six laning of 6,500 km and a development of 1000 km of expressways. Of the 66,590 km of National Highway, only 38% are single lane, leading to logistics inefficiencies as trucks can cover only 250 km per day vs. 600 km globally. Moreover, the development of road infrastructure enables OEMs to introduce higher power vehicles. By 2012, the modernization of roads under the NHDP ( National Highway Development Program) is expected to involve a total investment of USD 47.2 billion."

The report identifies six mega trends that will impact the revenues, costs and profitability of participants in the Indian commercial vehicle industry:

E&Y report said that going ahead fleets will focus on capacity utilisation to reduce operating costs and diversify customer base. The fleet operators will opt for higher tonnage multi axle trucks and rely on usage of telematics and will focus on the total cost of ownership

The rapid urbanization, improving road infrastructure and regulatory policies will influence CV buyers and OEMs. By 2050, at least five states are expected to be predominantly urban and 12 cities in India with population of more than 2 million are expected to get metro rail.

Global majors will redefine brand position in the market while domestic companies will build R&D competence and optimize costs through outsourcing and modularization

The key stake holders, suppliers will improve local capacity and invest in R&D while improving operational efficiency and developing an aftermarket proposition

The companies will tackle manpower, economic and supply chain risks through skill development, production localization and supplier collaboration

The Ernst & Young study concludes that the competition among commercial vehicle manufacturers in India is expected to intensify as international OEMs raise the bar in terms of technology, quality, durability and reliability; while domestic OEMs invest to upgrade products and technology, strengthen dealer relationships and loyalty, reinforce distribution networks and build new competencies to defend their market shares.

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