For the month of December, Eicher Motors saw a 44.3 percent improvement in its commercial vehicle (CV) sales to 5,068 units compared to 3,512 units in the year ago period. Speaking on the company's stellar performance Vinod Aggarwal, CEO-VE Commercial Vehicles, Eicher Motors told CNBC-TV18 that the company had planned for this growth on back of anticipation that the industry would grow. According to him going forward the CV industry growth will be led by expected investments in infrastructure, mainly road construction in 2016.So far heavy duty trucks have seen a growth of 36 percent, out of which only 5 percent is construction trucks but the percentage of construction trucks is likely to go up post increased activity in construction, said Aggarwal.The company plans to increase its capacity in the Pithampur facility from 5500 to 7500 units per month going forward, said Aggarwal.According to him heavy duty truck volume is also likely to touch a new high in 2016.Although the ban on older CVs in Delhi will see an uptick in demand, it would be difficult to quantify the demand, he said.Overall, 2016 would be a better year for CV industry than 2015, said Aggarwal. Below is the verbatim transcript of Vinod Aggarwal's interview with Latha Venkatesh & Sonia Shenoy.
Latha: You saw quite a jump in December, 5,068 vehicles compared to November's 3,639. Is this seasonal? We are normally told that things are bad in December but you have done excellently well. Is this a trend that we can continue in the Q1 of calendar 2016?
A: The month of December was as per our plan. We had planned this growth and we had anticipated very well that the industry is going to grow and in line with our expectation the industry has ended well in 2015. The overall industry, 5 tonne and above has grown by 25 percent and the industry growth is in line with our expectation and in anticipation of this growth we had planned these numbers and we have met our plans.
Sonia: What is the expectation for 2016? What kind of industry growth are you expecting?
A: 2016 growth will be lead by infrastructure investments, so I would say that construction boom, if the road construction sector specially, if that takes off we will see much more growth in the commercial vehicle (CV) industry because we should not forget that we are still less than our earlier peak of 2011, but within the CV industry the heavy-duty trucks are growing well and in 2015 they have grown by 36 percent overall and now they are at 90 percent of the earlier peak but within heavy-duty trucks, the construction trucks are still growing by 5 percent for the full year, so overall 36 percent growth and construction trucks only 5 percent. So next year if the construction sector takes off, we will see more growth in the truck industry.
Latha: Can you size up the impact of the Chennai floods. Does it open up opportunities for you because others are weakened or does it also weaken you because suppliers could be badly hit?
A: The situation is back to normal as far as the supply of components are concerned because we are largely dependent on Chennai for supply of parts and components and for us it has not impacted much because we had the adequate inventory, 5-7 days or 10 days for some parts and within that period we were able to get back to normal. We are not impacted by the Chennai floods in the trucks.
Latha: All the vendors are also back to normal; they are not facing labour shortages or anything like that?
A: No.
Sonia: Because of the ban on older commercial vehicles that we saw in Delhi recently. What would the incremental demand be in the replacement segment? How much do you think it could go up by?
A: That is a larger issue because the industry has been talking that more than 15 years old vehicles need to be replaced through good incentive schemes. And banning of more than ten year old vehicles in Delhi has lead to some increase in demand. Some people started buying new trucks because they want to do business in Delhi. So, this has led to some demand, but to quantify it that how much it is, that is difficult, but overall, this is the right move that we have to phase out the older vehicles which are not emission friendly.
Sonia: Will you be raising capacity anytime soon, because you do have a manufacturing facility at Jaipur which has a capacity of Rs 60,000 units per annum. At what point would you like to scale that up?
A: We have a capacity in Pithampur, not in Jaipur. Our capacity currently is 5,500 trucks per month which is 66,000. In last year, 2015, we sold 47,500. So, we are still less than our total capacity. However, to increase the capacity from 5,500 per month to 7,500 per month is not a big issue. So, we can increase it very easily. So, we can go up to 100,000 per annum.
Latha: You are already operating at probably 80 percent, so will you do that expansion in 2016?
A: No, that expansion will not mean any major investments, because we are already ready in our machine shop, in our engine capacity, in our paint shop. The only capacity that we have to increase largely is the assembly lines and assembly lines capacity can be increased by adding more manpower or by adding the shift. So, that is not a big issue for us.
Latha: What is your sense then in 2016, you will be crossing 5,500?
A: Let us hope. I cannot give the number but we are very optimistic. 2016 will be better for CV industry, definitely it will be better than 2015 and that is what our call is because if you look at within the CV industry, the light and medium duty trucks, they are still at 70 percent of the earlier peak, they are still at 68,000 units per annum, 5-15 tonne whereas earlier peak was 100,000. So, we are expecting more growth to come from 5-15 tonne segment.
Similarly, in buses also, the bigger buses, they are still down. The 15 tonne buses which are largely used by the State Transport Undertaking. So, we are expecting more buying programmes from the State Transport Undertaking. So, we will see good growth coming from buses, we will see good growth coming from the light and medium duty trucks and we will see good growth coming from heavy duty trucks based on the construction boom, roads sector construction.
Sonia: A two part question. One on buses, your market share has actually gone up to almost 15.5 percent. Where do you think it can go to by the end of next year and second, can you give us any indication of what the industry growth could be in 2016? Will it be 20 percent, 25 percent?
A: I can tell you segment by segment, for example, in the heavy-duty trucks, the earlier peak was 240,000 and last year is 210,000. So, we are expecting that 2016, the heavy-duty trucks should touch the new peak in 2016 based on the demand coming from the infrastructure led investments. As far as the light and medium duty trucks are concerned, the growth always lags from the growth in the heavy-duty trucks and we are expecting more growth to come in because only in the second half of 2015 we have seen the growth in the light and medium duty trucks. So, as we go more and more into 2016, you will see more recovery coming in the light and medium duty trucks. However, buses, of course, it will continue to grow based on more buying programmes from the State Transport Undertaking, plus the growth in the schools’ led demand that will continue. So, we are expecting good growth in all these segments.
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