Bullish on commercial vehicle segment till 2020: Srivats Ram

Srivats Ram, MD, Wheels India at a press conference in Chennai.   | Photo Credit: Bijoy Ghosh

Good times are back for them. And, they are relishing it. Why not? After all, the industries they are in are doing well. Srivats Ram, MD, Wheels India Ltd., shares his perspective of the business environment at the moment. Excerpts:

How do you see the current business environment?

For the first time in many years, we are seeing a demand in all the segments we are present in. What is particularly interesting is that all the cyclical industries we are in seem to be on an upswing, both in India and globally, at the same time. It is a rare co-incidence.The businesses in all our traditional segments are stronger than they have been in the last six years. Volumes are at an all-time peak.

Driven by replacement demand and overloading restrictions, commercial vehicle (CV) segment has done well in 2017-18. Our customers are aggressive with their plans. We are bullish on the CV segment till 2020 as most of the manufacturers are going flat out. Growth in multi-axle segment has been driven by factors such as TCO (total cost of ownership) and the economics for the transport operators.

Demand in construction equipment space has almost been entirely due to the government’s initiatives in road building and the rapid pace of construction. I expect the truck segment, including tippers which is going through the roof at the moment, to have at least one more year of strong growth. Government’s pro-agriculture policy is driving the demand for tractors, and we are doing well in that segment as well.

However, these are cyclical businesses. Hence, I would not get too carried away, as what goes up comes down. I only hope that they don’t come down all at the same time.

You had diversified into a number of new segments. How are the prospects in these?

All the new diversified segments we have been into in the last few years are doing well currently.

Mining segment is growing globally. We expect the wind energy sector to be better this year, and there is a certain buoyancy about the prospects for 2019-20. We have just entered another new segment with the roll out in December 2017 of bogie bolster and block for Indian Railways. We are building components for safer systems that the government is focussing on. We expect this to be a strong growth segment for us in the future.

How are things on the export side?

We have been struggling on the exports front for a few years. However, we managed a 10% growth last year in the exports business thanks to a recovery in the overseas markets in the second-half. We should see a strong growth in exports this year and expect it to be more than what we have seen in the last financial year, with the growth coming largely from construction & mining segments and the windmill component.

Will the capex programme result in greenfield project?

Right now, the markets are quite hot. We are running to full capacity in all our business segments. The speed at which the increase in demand has shot up has necessitated the increased CAPEX this year. In the past, we have typically followed a pattern of once a year CAPEX.

While this has already increased by 40-50% (to ₹122 crore) for this year, it may not be the only CAPEX investment of the year given the huge demand. We had originally planned for Greenfield. But we would have let down customers if we waited for Greenfield. That’s the reason why we have currently gone in for a brown field expansion as there is an urgent need for speed of implementation so that we can meet the immediate on-hand demand from customers.

Will you be looking at a Greenfield plant in the medium term?

Demand has gone up significantly in the automotive space. We have to meet their expectations.

We are driven by customers, and as long as customers grow, we need to invest for them. I will be surprised if we do not go for a Greenfield plant in the next three years. We are already seriously examining the possibility of a Greenfield investment.

When will you go LIVE with the Greenfield project you were setting up for your JV with TOPY?

The construction of WCWL’s (Wheels India’s subsidiary for passenger cars business) new Greenfield passenger cars plant at Vanod in Gujarat is complete. The roll out is expected in the second quarter of this year. In phase 1 of the plant, the plan is to add one line that will be at full capacity within a year of starting production. My grandfather (T.S. Santhanam) always believed that transportation plays an important part in building a nation as it brings people and markets together so that they can transact and engage in business. Geographic distances are compressed by ease of transport. Overall, it is good for the growth of the country. The citizens and businesses will respond to the pace of infrastructure growth and that will ensure economic growth. If the availability of base infrastructure - such as power, road and some non-business related areas like drinking water - is taken care of, the country has got enough of spirit to be able to build and continue growth.

Do you see the capacity expansion translating into more jobs?

There has been unutilised capacity in the automotive sector for a few years. But capacity expansion is starting to come in a bigger way. There will be more employment in the automotive sector, in general, in the next 2-3 years. Employment opportunities will definitely increase in the specific segments we are in.

Are there concerns relating to hiring in your sector?

It is a struggle for us to find the right skilled people. It is more a challenge of availability of skilled people as against just increasing the headcount. There is a large headcount of available people but we have found that they only want to do a certain type of job. Clearly, there is not a surplus of skilled manpower for specific jobs. Skill availability is a big issue in our sector. While there is much talk about joblessness, the skill availability and willingness of people to fill a job vacancy remains a concern. They need to acquire the skill to fill a vacancy and that is a challenge. Finding adequate people in certain skills is definitely a big issue in the industry.

But this is not a new issue. Has it not been there for long in your industry?

Yes, it is not a new issue. But the fact is that the skills are not growing in the segments which are growing at a rapid pace. The issue relating to lack of skilled manpower gets amplified when the demand goes up all of a sudden. In the segments that are growing fast, there are not enough skills being added. And the challenge relates to skills at the associate and operator’s level, not at an engineer level. Skilled manpower and the level of skills of the work force is a real issue just as big as the availability of capital.

So what have been the reasons for this situation?

There are not enough institutions providing the requisite ‘skills training’ for manufacturing companies to hire and straight away deploy. Secondly, these skills take time, and are finetuned over time through constant practice as against knowledge that can be learnt. It is difficult to do that in a short period of time. One needs to spend that much time to gain the specific skill set. So, it is a real challenge for manufacturing companies, especially when growth happens at a rapid pace all of a sudden as they may not have created enough bench strength. The third is about the geography of skills. Certain skills have traditionally been created in certain States whereas the demand for such skills lies elsewhere, in other states. Then location becomes an issue. Thus, there is also a geographic dimension to this issue. Ultimately, there should be a market mechanism. The big concern is the availability of skilled manpower at the time the companies want, especially in a cyclical industry. I do not think that the job market at the current time is flexible enough to handle this cyclicality.

Do you also face a cultural challenge on the skills?

There is definitely a cultural issue. How willing are we to unlearn and re-skill ourselves. That is a challenge that will confront every single industry segment especially on the technology front as technologies evolve. It is already a minor challenge. Traditionally, in manufacturing, it used to be mechanical engineering-oriented. But sensor technologies and automation are making electrical engineering skills relatively more important than what they have been in the past. It is important to learn ‘how to learn’ and be willing to ‘unlearn and relearn’. The flexibility to change direction and to be able to gather knowledge and skill is very important. It sounds very challenging. One has to be quick on his feet. Agility and being flexible in mind are extremely important because no one can foretell how technology is going to change. Information availability and dissemination has improved greatly. The time gap between acquiring information in one country and its dissemination in another country has come down dramatically. As a result, technology adoption has become faster. This is also a reason as to why markets and cycles are getting synchronized globally. The speed at which information and data is moving globally means the speed at which we have to react is faster. And that creates change. I don’t see that slowing down. It is important that our education institutions have to teach us to learn. The youth brings openness and are flexible to challenges. The fact that the country is becoming younger will enable us to overcome the challenges. They are more confident and have the drive and hunger to succeed. Confidence is a big plus among the youth. These are changing times, the script is not written as yet.

Our code of editorial values

This article is closed for comments.
Please Email the Editor

Printable version | Jan 25, 2022 4:44:52 PM |

Next Story