Commercial vehicle industry entering next growth cycle: Satyakam Arya of DICV

The commercial vehicle segment has been showing better recovery trends than other vehicle categories in the past few months, with a sustained double-digit growth. The medium and heavy commercial vehicle (M&HCV) category has been an outperformer.

With the second half of 2021 expected to be a stronger period for the M&HCV segment, the CV industry appears to be in a growth phase. Satyakam Arya, Managing Director & CEO of Daimler India Commercial Vehicles (DICV), which sells BharaBenz brand of trucks and buses in India, spoke to BusinessLine about the CV recovery, scrappage policy and the company’s growth prospects. Excerpts.

The recovery so far has been very promising. Last year, M&HCV had a total volume of about 106,00 units. This year, by July, we had crossed this number as the industry sold about 107,000 units by the end of July 2021. August was not a great month as it is normally a slow period. We are expecting total volumes to be in the range of 180,000-200,000 units by the end of 2021. If there is a strong festive season, we will definitely touch 2 lakh units in 2021, almost twice the volume of 2020.

We see the growth coming. But it is still below the normal industry size. However, we believe that the industry will come back to its normal volume level. If current growth momentum continues, 2023 should be a strong year for the CV Industry. Overall, I strongly believe that we are facing the next growth cycle of the CV industry.

Well, there are a lot of structural changes happening right now. And we will see a full play-out of that in the next 10 years. Some of the structural changes had started even before the pandemic, like axle load norms. The second was BS VI. What happened due to the pandemic is, we are seeing e-commerce growing far stronger than other segments as more and more people are shifting to online buying.

Daimler India sees early recovery in volumes

There is 30 per cent growth in e-commerce business and that leads to strong demand pull for the CV industry. And we believe this will be a sustainable change and people will not go back to old ways of buying things when the pandemic is over. With this e-commerce boom, the last-mile transport segment has become more resilient and is growing faster. Also, people are trying to look at the lifecycle costs of a truck instead of the initial price.

Does DICV see benefits flowing out of structural changes in the CV industry?

The CV industry will get into different segments more and more. When we have Delhi-Mumbai expressway and when we have multi-modal logistics parks set up across the country, we will have more high-speed trucks running on the expressways. These trucks will come to multimodal logistics parks and then the cargo will be shifted to intra-city distribution through a medium duty vehicle or a small truck. So, high speed cargo movement on the expressways and then smaller trucks for intra-city distribution will be the new normal. Hub and spoke will be well-established then.

We at DICV are very much enthusiastic about these changes as our trucks, since the beginning, have been prepared for high-speed running for long hauls. We are becoming a preferred choice for e-commerce and construction segments and we may emerge winner again when expressways are ready.

Has there been any change in DICV operations due to global level restructuring of the Group?

Daimler AG has taken up the restructuring as it helps us to be more agile and focused. CV business is very different from passenger cars and as future mobility is developing it will be even more different. We talk of different mobility technologies for CVs and cars.

In future, there will be more and more partnerships and being together was actually preventing us from doing certain partnerships which could either be CV-focused or PV-focused. Therefore, we needed to be separate to remain more focused on what we need to achieve. What is the implication for DICV? Nothing. We will only benefit due to this restructuring. Earlier, DICV was a subsidiary of Daimler AG and now it is a subsidiary of Daimler Trucks AG.

BharatBenz appears to have a strong presence in the fleet segment. How about your presence in the owner-driven segment?

Yes, everyone believes that we are strong in the big fleet segment. Yes, we are. But we are equally strong in the small fleet operator category. In the small fleet segment, most of the time, the owner is also the driver. For their own comfort and safety, they buy BharatBenz trucks. They are willing to pay extra since the owner himself will be driving it. About 20 per cent of our sales come from small fleet or owner-driven segment.

Daimler’s BharatBenz trucks clock higher sales, market share in Q1

Also, in our truck sales, air-conditioned trucks account for 30-40 per cent. Fleet owners had initial concerns over fuel consumption. But they have actually seen better fuel efficiency in AC trucks than they anticipated. So, fleets have come back to buy more vehicles as drivers are happy and more productive with AC trucks. This has also helped fleet operators to retain the drivers. I believe this share of 30-40 per cent of AC trucks will grow to 60-80 per cent in the coming years as more people go for AC trucks.

We strongly believe that we transformed the CV industry in India with the kind of products which we brought, with the kind of localisation levels we achieved and with the kind of export potential we have realised. We had already announced that we will continue to invest in products irrespective of Covid-19 and we have kept that. We had application-based new launches in January 2021. We will continue to make new launches and also cover certain white spots which we have in our new portfolio, or we will come out with new offerings to create new segments in the CV market.