The commercial vehicle industry, considered to be the backbone of the economy, has been hugely impacted by the slowdown in the economy. The Indian truck market is in the midst of prolonged downtrend, as truck volumes have shrunk to levels seen in 2009. Sales de-growth worsened over 2012, declining even further over 2013 (a drop of 38% since 2011). Mining and infrastructure development which are key areas that drive the capacity utilisation of trucks have been hit badly.

The characteristics of the commercial vehicle industry have changed over the past few years by becoming more volatile than being cyclical. This prolonged slow-down in the industry has an adverse impact across the entire ecosystem.

Customers are facing a huge challenge in obtaining load for operating their trucks due to the slowing industrial activity. Rising inflation and fuel prices have further added fuel to the fire by making truck operations unprofitable. High interest rate and not-so-favourable tax reforms are posing a big threat to the industry.

One can start realising the upward trend once the demand picks up from across the core sectors. Agriculture, which is important to the fortunes of the CV industry, will need more support from the government.

Agriculture has to be linked to markets and developing transport infrastructure, infrastructure for storage and warehousing, including cold chains, would aid the growth of the sector and commercial vehicle industry as a whole.

The manufacturing sector, with the policy changes could help build the required volumes in the CV industry in order to cater to the needs of the sector. Increased investment inflows and regulatory clearances can infuse growth momentum. However, inflationary pressures need to be tamed in order to give a lift to the weak sentiment.

The cut in excise duty from 12 per cent to 8 per cent in the interim budget ends on June 30 and should be continued in the coming Budget and retained at that level well into the future.

An effective scheme for scrapping old trucks backed by government regulations and incentives will certainly improve the operating conditions of the industry as well as conserving the environment. This in effect would actually improve efficiency of truck operations and would improve safety considerably. Even though there are clear regulations on this, they have not been implemented due to pressures from vested interests. Prolonged non-implementation will only stifle the growth of new and efficient technology.

A quick and effective resolution of the problems plaguing the coal mining industry is absolutely imperative to stimulate recovery. Speedy statutory clearances are required to expedite growth in the sector. A quick implementation of GST will ease the complexities of tax structure and enhance the operating conditions of a truck operator.

The way forward

The truck industry is expected to gain momentum through and post 2015, making up for the current slowdown. With a stable government at the centre now and a favourable policy environment, the prospects for strong GDP and industrial growth appear very good indeed. The industry is expected to grow at a compounded annual growth rate of about15-20 per cent by 2018. All these factors will drive the commercial vehicle industry to launch new products and upgrades over the coming years. Evolving customer needs would also play a key role in this transition.

If there is one big lesson from the current slowdown, it is that the CV manufacturers have to plan for a broader horizon rather than aiming for short term gains. CV manufacturers will need to look at providing the customers more appropriate transportation solutions by consultative selling so that the customers can benefit from it. The current slump in the industry has forced lot of vehicle manufacturers to offer huge discounts on vehicles thereby impacting the overall growth prospects of the commercial vehicle sector while undermining the value of trucks with customers. The CV industry should have a structured framework with stable and transparent regulations in order to create a healthy and conducive environment for growth. With evolving customer dynamics and increasing demand for specialised applications, vehicle manufacturers have to invest more in developing superior products offering Total Cost of Ownership (TCO) benefits.

India stands in great stead with respect to its manufacturing capabilities. A young, skilled and growing manpower and definite cost advantages coupled with growing investments would aid growth of the manufacturing sector. All it needs are stable and sustainable policies from the government.

The author is MD & CEO, Daimler India Commercial Vehicles

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