Following a sharp slowdown over the past two years, thanks to weak economic environment, sales of commercial vehicles have firmly bottomed out and are in revival mode, according to Vinod Aggarwal, chief executive officer of VE Commercial Vehicles.
"All segments in commercial vehicles have bottomed out," Aggarwal told CNBC-TV18's Sonia Shenoy and Reema Tendulkar in an interview. "In the last quarter, heavy-duty truck volumes grew 16 percent while buses grew 10 percent."
VE, a 50:50 joint venture between Sweden's Volvo and India's Eicher Motors, enjoys a 32 percent market share in light motor vehicles and a 15 percent market share in buses.
As sales revive, VE is increasingly focusing on launching a new range of products as well as boosting its exports – whose volumes were up 76 percent in 2014 – further, Aggarwal said.
In a sign of confidence, the company also chose to pass on the 4 percent hike in excise duty (which took place from January) to customers.
Recently, it also won an order for 1,500 buses from the government under the Jawaharlal Nehru National Urban Renewal Mission.
Also read: Ashok Leyland hits record high, up 8% on Dec sales data
Below is the transcript of the interview Vinod Aggarwal's interview on CNBC-TV18.
Sonia: Not just this month but even in the month of November, you saw a 24 percent growth. So you think the worst is over for the commercial vehicle sector and what kind of volume growth are you forecasting at least in the first half of the calendar year?
A: If you look at the entire commercial vehicle industry, I think all the segments of the industry now have hit the bottom. If you take heavy duty trucks, definitely it has hit the bottom and it is growing now. Heavy duty trucks in fact for the full year 2014 has grown by around 18 percent and last quarter Q4 heavy duty trucks have grown by 62 percent.
If you take light and medium-duty trucks, that is the industry five tonne to 14 tonne, that industry is still going towards the bottom. However, in last month we have seen that growth also. In Q4, overall light and medium-duty also has grown by 6 percent. So you can say that also has hit the bottom now.
In the last month buses have also grown and for the quarter buses have grown by around 10 percent. So overall I would say after the industry has started going up and in 2014, the CV industry five tonne and above has ended with a good note. Overall industry five tonne and above has grown by 5 percent including exports. Exports in fact if you see has grown by 52 percent. So I can say we are going to see good days ahead.
Reema: It is quite clear that in 2014, we have put the bottom and the worst behind for all segments of CV but what is 2014 mean for your company for the Volvo Eicher Commercial Vehicles? What can be the kind of total volume growth we can expect?
A: If you look at our company, we have sustained this difficult period with tremendous resilience. If you look at our first nine months results which were declared in October, we have remained reasonably profitable. Apart from that, we have continued to implement all our strategies without withholding any of the investments. For example, we have already started exporting Euro 6 compliant engines to Volvo group. Last year 2014, we exported 12,000 engines to Volvo group.
Apart from that, we have brought in a lot of focus in exports. Our exports volume has grown up by 76 percent in 2014 like from 3,300 in 2013, we have gone up to 5,800 in 2014. If you look at our new range of products, we have invested a lot in the new range of production in the last three years and we are ready with latest generation of products in 10-15 tonne million duty, in heavy duty and in 25-49 tonne we are ready with special and niche application heavy duty products in pro-8,000 series. So we have invested in new generation products, we have invested in engine plant, we have invested in exports. So with this, I think worst is going to be behind us. Hopefully, we should see better days.
Sonia: Just to get an indication of what exactly is happening in the industry, how much have inventory levels gone down by and what is the situation as far as freight rates are concerned?
A: If you look at the inventory levels, we have seen the excise duty hike of 4 percent from January 1. Now since everyone had anticipated that excise duty is going to go up, I think this has helped to reduce the inventory. There was a lot of pre-buying happening in December. Some of the growth that we have seen in Q4 maybe partly also was due to pre-buying. So I would say the inventory would have come down to a very low level after December.
Sonia: I wanted to ask you about the freight rates and not just that, you were talking about this aspect of the excise duty benefits being withdrawn, one where are the freight rates currently and two have there been any price hikes that the company has undertaken?
A: The excise duty hike we have already passed on, we have passed on 4 percent hike, as far as the freight rates are concerned, if you look at the diesel price, in last four months diesel prices had dropped by 11 percent. So because of that the profitability of transporters would have gone up because they may not have passed on the entire drop in price to the freight rates. So I would say indirectly the freight rates have gone up because the cost has come down.
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