Monday, August 07, 2006

Small is in!!!

CVs have interesting futures
The Commercial Vehicle (CV) sector, being highly blasé and unexciting, doesn’t normally make headlines. But lately this sector has been in the thick of action. In a bid to tap into this market, truck monoliths like Volvo & Tata have upped the ante in the Heavy Commercial Vehicle (HCV) game.

Tata Motors has recently entered the 1 tonne segment with the launch of the 0.75 tonne Ace. This vehicle comes under the Small Commercial Vehicle (SCV) category and will cater to last mile operations. According to auto analyst R. K. Dhawan, “There are new restrictions due to traffic conditions and there can be some embargoes on LCVs like Tata 407 & 608, this will make the new segment appealing.” Last mile operations are generally applied in congested areas where large capacity vehicular traffic cannot be sustained. Tata would be taking the fight amidst the market segment dominated by three wheelers. The segment recorded sales of 28,178 units in April-June 2006- 07 (SIAM). Says Debashish Roy, spokesperson of Tata Motors, “Ace will entice three wheeler users to upgrade.” The segment will soon witness a flood of competing products. Dhawan elaborates, “All competitors have suitable technologies in their stable for such a venture.” Players like Mahindra & Mahindra (M&M) and Ashok Leyland are already set to exploit this new segment. Ashok Leyland only gave a rather flippant reference to the availability of technology (which they now have with the acquisition of AVIA’s truck business). Though the positioning strategy of new entrants may not be clear, the market is large enough; more the players the better it is for volumes.

Last mile operations have huge potential for competing players. Nearly 90% of retailing in this country is unorganized and SCVs are the only feasible conduit among the wholesaler-retailer-consumer vicious cycle. A 24% growth in the segment proves the potential. But there is a caveat; the expectant entry of large scale retailers such as Wal-Mart and Tesco, HCVs could also look forward to their place in the sun. Players will have to sense and adapt to variable market demands to ensure long term sustenance.

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Source : IIPM Editorial, 2006, Editor - Prof. Arindam Chaudhuri

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