Company Description: VE
Commercial Vehicles Limited (VECV) is a 50-50 joint venture between the Volvo
Group and Eicher Motors Limited. Formed in July 2008, the company’s operations
comprises the complete range of Eicher
branded trucks and buses, VE Power Train (VEPT), Eicher’s components and
engineering design services businesses as well as the sales and distribution
business of Volvo trucks within India. The vision of the company is to be
recognised as an industry leader in driving modernisation of commercial
transportation in India and the developing world. The company has around 4,000
permanent employees across its different divisions in India.
How has the year 2012 been
for VECV?
Even though the year 2012 was challenging for the
Indian CV industry, VECV has done relatively better than its peers. There was
an all-round improvement in market shares across all the segments during the
year. Our bus segment’s market share reached 11.9pc, up from 9.7pc in 2011 and
6pc in 2009. In the LD/MD segment, we
are at 31.4pc, up from 30.5pc in 2011 and 25.6pc in 2009. In the HD segment we
are at 4pc up from 3.1pc in 2011 and 1pc in 2009. In the high-end Volvo
tippers, we are at 60pc from 58pc in 2011. Overall, we ended the year with a
sale of 48,831 units against 49,043 units in 2011, a drop of 0.4pc as against
industry drop of 11.6pc. In domestic market, we have in fact grown by 1pc against
market drop of 11.5pc.
Besides improvement
in the market shares, VECV invested in new product launches and made
significant improvement in after sales infrastructure. It also achieved good
progress in industrial infrastructure and CED paint shop productionisation. The
engineering component and engineering solution business also achieved sound
progress during the year as well.
It is now nearly five years
since the Volvo group and Eicher Motors came together to create VE Commercial
Vehicles Limited. What are the strengths of Volvo and Eicher and how have both
the partners benefitted?
We will complete five years of partnership with Volvo
in 2013. Our journey has been very eventful and the symbiosis has been very
clearly experienced by all the stakeholders: dealers, suppliers, employees and
investors. Eicher and Volvo have their own strengths and together under the JV,
we have been able to create a lot of synergies. Eicher has a very strong
presence in mass market products with a formidable institutional network.
Eicher trucks and buses are known for fuel efficiency and over the years have
created good value for its customers.
As far as Volvo is
concerned, it is a global entity with very strong four brands – Volvo, Renault,
UD in Japan and Mak in USA. It has very strong processes. It goes for highly
advanced technology – high-end trucks, buses. It is a renowned multinational
corporation with a hefty financial base. They have entered into the mass market
segment through us. On the other hand, we have got access to their technology
and processes.
India is going to
become a global hub for medium duty engines to meet global automotive
requirements of Volvo. The engine plant at Pithampur will manufacture engines
which would be adapted for Euro III and Euro IV emission requirements to be
used for Eicher branded heavy duty trucks and buses as well. The engine will be
part of a global first initiative reflecting the growing Volvo-Eicher synergy
under the JV.
VECV has recently announced
plans to invest about Rs.2,500
crore by 2013-end. Can you please elaborate on this?
From the beginning of the JV in 2008 till 2012 end,
the company has invested 1,300 crore. It will invest another 1,200 crore on
ongoing projects like engine plant, bus body plant, new products and capacity
expansions in 2013 and 2014 to meet the requirement for 2015.
Out of your total output,
how much does the bus segment account for and how important is the bus segment
for you?
We are steadily improving our presence in the bus
segment and currently around 20pc of our volumes are contributed by the bus
segment. We had just 6pc market share in 2009 and in the last 3 years we have
doubled it to 11.9pc. While the bulk of these numbers come from our traditional
strengths in the light and medium duty segments, HCV sales have also begun to
contribute. We have achieved good breakthroughs in state transport undertakings
with orders of 1,019 and 600 bus chassis from GSRTC and APSRTC respectively.
The potential for our growth in this segment is very high.
Eicher is also setting up a
bus body building plant in Dhar, Madhya Pradesh, with an investment of Rs.125 crore in the first phase. So when
will you be commencing production? And what will be the total capacity by then?
The bus body plant is currently under erection and
will start commercial production from Quarter II of FY 2013. Our initial
capacity will be 7,500 units that will be scaled up to 15,000 units as we go
along.
What are your aims in the
bus segment?
We will continue to grow steadily year on year and we
aspire to reach a market share of 15-16pc in the bus segment (both LD/MD and HD
buses) in the next 2-3 years.
As you have just mentioned,
you have earlier announced that VECV is setting up an engine manufacturing unit
on a 12-acre plot in Pithampur, Madhya Pradesh. You have also shared that the
proposed unit will make 100,000 medium-duty five and eight-litre automotive
engines annually and will be operational by mid-2013. Will these engines be employed on Eicher
products too? If yes, can you put a timeline to that?
Of course, these engines will be employed on Eicher’s
products too. By the end of this year, we will be rolling out next-generation
Eicher-branded products that will be equipped with such hi-tech engines. The
Euro 6 compliant base engines with 5L and 8L capacity will be manufactured at
the upcoming engine plant to meet the global automotive requirements of Volvo
for medium duty engines. These engines would also be adapted for Euro III and
Euro IV emission requirements and the same will be used for VECV heavy duty
trucks also.
According to VECV’s
business model, the sales and distribution of all Volvo truck brands (and not
buses) in India is routed through Eicher. But when will Volvo begin to
distribute Eicher’s products in countries where the Indian firm does not have
presence? And is Eicher planning to distribute the Swedish company’s buses too?
The Volvo Group has a very strong distribution network
in South East Asia, Middle East and Africa. We are currently present in India
like export markets with strong presence in South Asia and some countries of
Africa and Middle East where our current product range is suitable. We need to
develop more and more country specific products to make inroads into other
markets. We are currently working on these products and once these products are
ready, we can participate in new geographies and then we will also use the
distribution network controlled by
Volvo Group. As far as distributing Volvo buses in India is concerned,
we have no such plans under the JV.
Don’t you think the Indian
CV market is getting tougher with well-entrenched players like Tata Motors and
Ashok Leyland as well as competition coming in from the likes of Daimler, MAN,
Mahindra and Scania?
Definitely, the Indian CV market is getting more and
more competitive. We welcome competition as it is in the larger interests of
the customers.
Volvo’s presence is largely
confined to tippers assembled at its Hoskote plant near Bangalore. So are you planning to launch more products
in other segments? If yes, what are they?
Volvo is already there in tractor trailers, pullers,
special application vehicles, etc. We will continue to come out with more
vehicles with different applications to meet the market requirements as we move
forward. Recently, Volvo Trucks launched the innovative, all new Volvo FM480
10x4 Dump Truck in India, built specifically for deep opencast mining. Keeping
pace with the dynamics of the industry for over a decade and a half, this truck
is an innovation that will set new benchmarks in the mining industry. Built on
the powerful, reliable & proven Volvo FM13-litre platform, the FM480 10x4
Dump Truck is slated to be the next big ‘Game Changer’ in the mining
application business. The Volvo FM 480 is the first 10x4 dump truck concept in
the Indian market for mining applications. The Volvo 10x4 benefits the
customers with higher productivity and lower overall operating costs. The
higher capacity rock body enables the customers to derive the best-in-class
productivity; thereby reducing their fleet size and helping them achieve
increased profitability and higher operating efficiency.
VE Powertrain (VEPT), which
is essentially a division of VECV, was reportedly in talks with Volvo Group for
supply of various automobile components to Volvo’s global manufacturing plants.
So what is the status on that? And what kind of components would you be looking
to ship out?
VEPT has just initiated the supply of engine gears to
Volvo and we are still in the early phases. Likewise, we are in talks with other
Volvo Group companies for supplying other parts from India. I would say that
there is a huge potential for VECV to supply automobile parts to Volvo’s global
manufacturing plants in the near future.
How many units did VECV
sell during the last fiscal? And what is your sales target for FY 2012-13? And
do you have any wishlist in mind for the CV industry per se?
Last year, we have sold 48,262 units of Eicher branded
trucks and buses and 569 units of Volvo.
The total number of units sold in CY 2012 comes out to be 48,831 units.
This year, our sales target will be in line with overall growth in the market.
Right now, the CV market per se is having a tough time. From an industry
perspective, I would like to see our government contain the fiscal deficit, provide
the necessary impetus in facilitating large-scale investments in the
infrastructure sector and remove bottlenecks in the mining sector to provide
the necessary fillip to the CV sector.
Lastly, what is your vision
for the company in terms of numbers and market share?
Our aspirational target for 2015 is to
achieve sales of 100,000 units of trucks and buses (for both the brands). Out of that, a sizeable growth will be
derived from heavy-duty trucks and buses.
We would definitely like to sustain the growth momentum with additional
penetration in the domestic market and entry in new overseas markets riding on
the development of new and modern products.