The commercial vehicles (CV) segment, which was badly hit by the Covid-induced slowdown, is expected to see a volume growth of over 30 per cent in the next fiscal on the back of the double-digit GDP growth projections for the 2021-22, as well as the low base of the current year, said Girish Wagh, President, Commercial Vehicle Business Unit, Tata Motors.
While there are headwinds such as the rise in commodity and fuel prices and pricier tyres persist, the tailwinds appear to be stronger, especially with the uptick expected in infrastructure and already happening in consumption, Wagh told BusinessLine .
Price hike
However, owing to the increase in commodity prices, Tata Motors will have to undertake another price increase in CVs from April, he said. It had raised CV prices in January by 1-1.5 per cent. “Steel and other commodity prices have been increasing, and it has necessitated us to increase prices although we have also increased efforts on cost reduction. The cost reduction outcome is certainly not equivalent to the steel price increase. And, since we have seen a steep price increase happening even on January 1, we are actually forced to increase on April 1 also,” he explained.
The extent of the price hike will depend on CV products/segments, and Tata Motors is yet to decide on the extent of the increase, he said.
The overall CV industry saw a decline of 90 per cent year-on-year in the first quarter, said Wagh, followed by a decline of 24 per cent year-on-year in Q2 and a decline of 3.5 per cent y-o-y in Q3. In Q3, while the bus and van segment posted a de-growth of 74.5 per cent, segments medium and heavy commercial vehicles, small CVs, and intermediate and light commercial vehicles posted a growth of 13 per cent, 4.5 per cent and 17-18 per cent respectively.
“The overall CV volumes, therefore, have mirrored the economic activity in the country. If one sees the GDP graph as well, in Q1, we saw a massive decline of almost 23.9 per cent and it tapered down in Q2. And in Q3, the results were announced just recently, where it was in the positive territory and it is expected to be so even in Q4,” said Wagh.
While the CV industry has seen a degrowth of 31 per cent so far in this fiscal, Tata Motors’ decline has been slightly more at 32-33 per cent due to the supply constraints faced by the company, said Wagh. By the end of this year, Tata Motors expects to be on par with the industry growth rates.
Network expansion
Tata Motors will also be expanding its network strength, both in terms of service outlets and sales touch points.
Tata Motors is eyeing new, upcoming demand centres and plans to come up with smaller dealership formats in those areas. These small dealership outlets will only sell Tata Motors’ light and small CVs, he said.
“These are smaller dealers with a lower breakeven point in number terms...” This will add over a hundred such small dealerships next year.