AMW Trucks makes a foray in the heavy vehicles

By Shruti Chakraborty

Trucks are rolling out of a production facility in Bhuj as Asia Motor Works Ltd’s (AMW) Chief Executive Officer Anirudh Bhuwalka, works on the launch of a few more models in his office in Mumbai. He is rather young and comes from a family that has produced some big entrepreneurs. Bhuwalka’s booming voice greets you as he walks in, an hour after he is scheduled to meet us. He’s clearly busy with all the activities that his young heavy vehicle manufacturing company is planning.

In 2002, Bhuwalka was looking to start a business. While raising money wasn’t a problem for him, he has built his `2000 crore business from scratch, much like any other startup.

Starting up
“My uncle, Shashi Ruia [of the Essar Group] was doing a road project in Karnataka, and I had gone with him.We were talking about the project when he said it would be useful to have trucks with air conditioning. He called up the truck makers in the market then and said he would like to buy a few trucks with air conditioning and was willing to pay a higher price for it,” Bhuwalka says, explaining the origin of AMW’s journey.

“No one back then had thought of the idea and no such trucks were available. So he bought Volvos instead at a higher cost,” recalls Bhuwalka. This is when AMW was conceptualized.

“We spotted an opportunity and thought that if I could produce trucks that had the quality of the international manufacturers at a price point that attracts Indian customers, then I could build a robust business,” he adds. However, Bhuwalka had no background in the automobile industry and knew nothing about manufacturing trucks. So like a startup, he started his business using the least amount of resources, from a garage in Nashik in Maharashtra.

Bhuwalka cites his company’s journey as one that is filled with examples of frugal innovation, or a term that is getting popular for it lately –jugaad. He says that while working out of the garage, he had brought on board someone who knew more about trucks and for the rest of the knowledge and expertise they waited till the Mahindra plant shut down at seven every evening. They would then take the assistance of the workers to build their first truck. While building it, one of the things they needed, Bhuwalka remembers, was a front axle. Not knowing where to find one, Bhuwalka tried to get it from big companies and from retailers.

“I found out soon that no one sells a front axle to an individual. They only sell it in bulk to large vehicle manufacturers. Someone then gave me the idea of going to the Kurla market (in Mumbai) and buying a second hand truck, cutting off the front axle and using it,” he says, recounting the story of how AMW’s first truck was built.

A decade later, Bhuwalka’s company has 21 models of trucks that are used for different applications and produced in a manufacturing facility in Bhuj, Gujarat, with a capacity of producing 50,000 trucks.

The Kutch connect
“The manufacturing facility came about much later. Our first trucks became available commercially in 2008,” says Bhuwalka. The company began setting up its factory at the same time as well. It took two years and the 600-acre facility in Bhuj was ready by 2010.

Why Bhuj, one may wonder, while most automobile manufacturers are based out of the Pune-Nashik belt and a few other parts of the country. “Gujarat Chief Minister Narendra Modi had announced the Kutch incentive scheme and we applied for that and took up the place. It came with a number of concessions,” he says. The company’s proximity to the Kandla and Mundra ports has worked out well as it plans to export its trucks in 2013 to the Middle East and Africa. The company is already exporting to Nepal, Bhutan and Bangladesh.

The company also has a 200-member Research and Development setup now. In fact, AMW also manufactures auto components for other vehicles.

Not the cheapest
“Until the point that we planned to enter the market, trucks in India were very basic. We felt that with the road network coming up, a quantum jump in the technology requirement of both buses and trucks would arise,” Bhuwalka says. “While technology in cars had leapfrogged, we felt that technology in trucks in India had not really matured,” he adds.

Sadique Shaheedi, DGM, Marketing of AMW shares that the aim was not to create trucks that are priced
the lowest.

There are trucks available at a lower price point, he informs. But he claims that as far as services and technological advancement go, there is no other company that offers the same.

“Trucks and heavy vehicles are not an impulse buy, it’s a practical and rational decision of a customer made in the best interest of their businesses. So instead of giving them the cheapest trucks, we create enough value that they know if they spend a marginally higher amount, their businesses can benefit significantly,” he adds.

Bringing in the style

But how does AMW bring quality at a low cost? “When we got into the industry, anyone putting up a truck plant was setting up an engine plant, a gear box plant, an axle plant; basically you had to put in a lot of capital, had a longer gestation period, and profits were based on building economies of scale,” Bhuwalka explains. “When we came, we created a new business model where we partner with a gear box company, an engine company and an axle company and do the rest of the manufacturing. So you don’t end up making a large investment, keep capex low and focus on the integration model, on distribution and aftermarket which is what this business is all about,” he adds. AMW uses engines produced by Cummins, a global manufacturer of engines. It gets its gearboxes from ZF and Eaton.

AMW also began segmenting the market and creating products for each segment separately. “Trucks that are used for iron ore mining cannot be the same that are used for road construction. Earlier there was no segmenting in applications. We created different trucks for different applications.”

Comfort factor
Another concept that AMW brought to the industry was creating comfortable work conditions for the driver. Typically in India, most trucks were designed in a way that the capital cost would be kept low, Bhuwalka says. Harsh conditions of mining and construction areas cause fatigue for drivers and that results in lower productivity.

The AMW trucks have air conditioned interiors, AM/FM radio, sleeping berth facility etc. to create a better experience for the drivers, thereby increasing productivity of the trucks. Another innovation that AMW brought in was in terms of service. “We found that trucks being deployed in road projects faced a challenge of getting serviced. Road projects in remote areas had a problem because no dealership would want to go and set up shop there. We then started the concept of on-site service through container workshops,” Bhuwalka shares. The company sets up a kind of movable infrastructure by setting up a workshop inside a container that can be transported to sites where road construction is underway.

AMW’s customers seem to be happy with these improvisations. Nilesh Kikavat, MD, Mahavir Roads and Infra Pvt. Ltd says that since he began using AMW trucks he has had better service and an improvement in productivity. He was earlier using trucks from Tata Motors, he says. “The AMW trucks and the MAN trucks [from the global truck maker] are the only ones that can climb upward slopes comfortably. They have a 9-speed gear box, which the other lower cost trucks don’t have,” he adds. The value proposition that the company offers seems to be helping out well with the company’s growth.

“We have an average growth rate of almost 60 percent year-on-year. We have more than 123 dealerships around the country and more than 30,000 trucks on the road since 2008,” Bhuwalka informs. “We are also finding that our market share in construction mining, which has been our major focus, has become the second largest after Tata Motors. We beat Ashok Leyland over the last one year. We have 25 percent of the market share in that category and in the overall industry we have become number three in the heavy duty truck category,”

Speeding forward
The company broke even last year and is profitable now. The investment to date has been `1500 crore, raised from internal sources and banks. While news reports suggest AMW was looking to raise money through private equity earlier this year, Bhuwalka says the company doesn’t need additional funds right now. His current plan is to make the best use of the resources the company has.

“When we built the factory, we planned it to service us over a five-year horizon. So there are no plans on expanding that right now; also demand is slow,” Bhuwalka says.

Not surprisingly, Bhuwalka’s biggest challenge is the sluggish state of the economy, which is growing at a lower-than-expected 5.3 percent and pinching Corporate India hard. The slow economy has impacted construction and other activities which have been faltering. He hopes this will turn around soon. And with that turnaround will come the next phase of AMW’s growth.

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