megatrends shaping the indian commercial vehicle industry · 2013-02-28 · page 6 megatrends...

Megatrends shaping the Indian commercial vehicle industry


February 2013


Agenda

► Executive summary

► Six megatrends

► Considerations for stakeholders

Executive summary


-33.2%

34% 32%

8%

-19%

-7%

43%26% 27%

16%

-50%

0%

50%

0

200

400

FY09 FY10 FY11 FY12 9MFY13 FY09 FY10 FY11 FY12 9MFY13

Sales (in ‘000 units, FY09–FY131)

India’s CV industry growth remains flat: growth in LCVs to make up for the sharp decline in M&HCVs

M&HCVs LCVs

YOY growth3 Segment

-27% 16.2–35.2 tonnes segment

YOY growth3 Segment

+73% 2–3.5 tonnes pick-uptrucks segment

1: FY13 represents data for 9MFY13; 2: CAGR for the period FY09-FY12; 3: YOY growth in 2013, Dashed line in the graph represents YOY growth during 9MFY13

Goods carriers Passenger carriers YOY growth


What makes a mega trend?

The Indian commercial vehicle industry needs to raise the following five questions and assess how well they are prepared to respond to the opportunities and challenges in the industry. While addressing these questions, Ernst & Young has identified six mega trends that are likely to impact and change the face of the Indian CV industry.

Operating environment

Fleet operatorsand

managers

CVmanufacturersSuppliers

How will the demand for trucks and buses evolve?

How will products need to adapt?

How will business models need to

adapt?

What are the supply/value chain

issues and implications?

What are the new market dynamics?


Mega trends that are likely to affect the Indian commercial vehicle industry

Economic slowdown, delays in infrastructure projects and evolving

regulations create demand uncertainty and impact OEMs’ product strategies

Fleets increase focus on total cost of ownership (TCO) and restructure composition to

include more LCVs

OEMs to focus on raising after-sales service standards, while dealers adopt measures

to improve operational efficiency

OEMs balancing the need to be flexible while securing

access to talent, supply chain and technology

Global OEMs design products for the domestic market and

look at developing India as an export hub

Suppliers increase localization, improve quality standards and

diversify to related sectors

Operating environment

Fleet operatorsand managers

CV manufacturersSuppliers

How will the demand for trucks and buses

evolve?

How will products need to adapt?

How will business models need to adapt?

What are the supply/value chain issues and

implications?

What are the new market dynamics?

Six mega trends


Economic slowdown, delays in infrastructure projects and evolving regulations create demand uncertainty and impact OEMs’ product strategies

Economic uncertainty, evolving regulations and urbanization impact demand

Rising demand for low-floor, alternate fuel buses

Adoption of process-oriented bus-body manufacturing and introduction of compatible products

Demand for LCVs has risen, while demand for heavy goods carriers has declined

Evolving regulatory policies

Overall economic slowdown

Delays in infrastructure and mining projects

Growing urbanization


Fleets increase focus on total cost of ownership (TCO) and restructure composition to include more LCVs

Restructure fleet composition to include LCVs and used trucks

TCO— prime criterion for vehicle procurement and fleet management

Move toward hub-and-spoke model

Weak cargo scenario Increasing operating costs

Fleets adapt to weak cargo scenario and focus on optimizing costs


Global OEMs design products for the domestic market and look at developing India as an export hub

Increase localization

Leverage India as an export hub

Explore alliances and work towards synergies

Strong competition from well-entrenched local OEMs

Evolving needs of the Indian consumer

Focus on cost-competitiveness

OEMs witness a competitive and dynamic market

scenario

Adapt products to meet local needs

OEMs respond to changing market dynamics


Suppliers increase localization, improve quality standards and diversify to related sectors

Key

impl

icat

ions

for s

uppl

iers

Rising competitive intensity driven by reduced demand

Suppliers looking to reduce concentration risks

Growing commercial vehicle parc

Develop cost-competitive products

Collaborate with OEMs and other suppliers to enhance technical capabilities

Leverage existing capabilities to diversify to related sectors

Expand presence in the aftermarket

OEMs’ increased focus on localization


OEMs balancing the need to be flexible while securing access to talent, supply chain and technology

Explore flexible production and workforce arrangements

OEMs need to balance critical

levers in the Indian CV industry

Industry participants adopt a combination of strategies

Set-up technical centers to strengthen R&D capabilities

Collaborate with suppliers to improve technical and manufacturing capabilities

Volatile and uncertain CV demand

Shortage of skilled workforce

Rising competitive intensity

Growing need for an efficient supply chain


OEMs to focus on raising after-sales service standards, while dealers adopt measures to improve operational efficiency

Growing customer expectations for better service and maintenance levels

Increased focus on supply-chain efficiency

Global OEMs push for dealership network expansion

Domestic OEMs reduce cycle time for service and maintenance

Implement IT systems for efficient inventory management

Enable fleets to order vehicle parts and book servicing online

OEMs encourage dealers to focus on service standards and supply chain efficiency


Key considerations: CV manufacturers

CV manufacturersEvolving demand for commercial vehicles

► Focus value proposition on optimizing the cost of ownership for fleets► Invest in training and upgrading skills of the workforce► Educate truck- and fleet-owners on telematics and create low-cost telematics

solutions

Adapting products

► Focus on R&D to develop products for the Indian market and introduce fuel efficient technologies

► Partner with suppliers to develop cost-competitive products► Increase use of lightweight or alternate materials which can reduce the cost of

insurance claims for fleets

Adapting business models

►Consider offering an approved used-truck proposition for fleets►Develop a distribution channel to offer value added services►Offer lease plans and maintenance contracts to fleet owners

Preparing for new market dynamics

► Invest in flexible manufacturing ► Adopt process-oriented bus body manufacturing► Leverage India’s potential as a low-cost export hub

Addressing supply/value chain issues

► Expand distribution and service network to reduce turnaround time of vehicle► Explore flexible production schedules and workforce relations


Key considerations: Suppliers

SuppliersEvolving demand for commercial vehicles

► Partner with OEMs and other suppliers to upgrade manufacturing and technical competence

►Consider acquisitions in Europe and North America to gain access to technologies, advanced manufacturing skills and customers in new markets

Adapting products ► Localize to cater to the cost-competitive market► Increase volumes of common parts by modularization

Adapting business models

►Create an aftermarket product portfolio and distribution channel► Explore other growth markets and offerings in allied sectors to mitigate

cyclicality risk

Preparing for new market dynamics

►Develop offerings for special purpose trucks► Invest in flexible manufacturing

Addressing supply/value chain issues

►Diversify customer and supplier base to mitigate concentration risks


Thank you

Ernst & Young

Assurance | Tax | Transactions | Advisory

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megatrends shaping the indian commercial vehicle industry · 2013-02-28 · page 6 megatrends...

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