Market Report: India

From the March 2019 issue.

Fuelled by strong economic growth, India’s trailer manufacturing industry is currently undergoing the most fundamental structural shift since the advent of the diesel engine. But with progress comes a new set of challenges.

Home to one of the fastest growing economies of the past decade, navigating change has become a defining trait of India’s socioeconomic identity.

Ranked as the world’s 12th largest economy in 2007, it is now considered the seventh largest overall and third if adjusted for purchasing power parity. It is also the world’s third largest market for smart phones and the sixth largest for cars, and has recently announced a manned mission to the moon – a feat unthinkable even a few short years ago.

Responding to the nation’s inexorable rise – in 2018, the International Monetary Fund (IMF) likened it to an elephant falling into stride – India’s commercial road transport community is required to fast-track organisational development and brave decades worth of growing pains in record time.

“From a trailer manufacturing perspective, India is going through an unprecedented evolutionary process right now,” says Balasubramanian Natarajan, Executive Editor at Motorindia, a globally renowned publication focusing on commercial vehicles.

“In the past – and with that I mean merely a decade ago – quality management and safety simply didn’t play much of a role in Indian trailer manufacturing. It’s always been about price first and delivery time second. Spec always came last, and safety wasn’t even on the agenda. Today the industry is a very different beast compared to those days.”

Since international logistics firms started breaking into the Indian market, safety and reliability have become an inherent part of any sales discussion, Natarajan elaborates, forcing suppliers to “systematically question everything they thought they knew about business”.

According to the Chennai-based market expert, multi-national corporations not only follow strict corporate guidelines and refuse to compromise on proven safety standards, but also bring a new take on operational efficiency to the table. “International transport businesses have a classic hub-and-spoke mentality, so they require more volume on inbound routes and therefore push for more articulated vehicles on the road,” he says.

“Of course that’s interesting from a business perspective, but it’s also an incredibly complex operational challenge – different portfolio, different standards, different volumes. Not to mention that many want factory-new equipment for every new job, so the second-hand market will certainly see dynamics change down the track, too.”

However, it’s not just external pressures that are forcing change upon the industry. “Government initiatives such as 2017’s trailer code have also contributed to the situation,” Natarajan adds, hinting at new legislation aimed at improving safety standards and manufacturing processes. “It’s the perfect storm, really. On the one hand you have international customers insisting on globally proven procurement policies and standard procedures, on the other one you have local authorities pushing for improved governance from within. Without economies of scale and the right talent, anyone would struggle to adapt – even businesses that have learned to survive in an economy as volatile as India’s.”

Exacerbating the situation, according Natarajan, is India’s complicated econo-political climate. While booming car sales and a budding e-commerce market continue to spark demand for road transport services and fuel infrastructure investment, growing dissatisfaction among farmers and rising unemployment have prompted the Modi Government to schedule a federal election in May.

According to Bloomberg, the prospect of a ballot will freeze private and public investment until the next Government can come in with a mandate and make decisions about taxation and spending that have majority appeal.

“If you consider just how much change we’re seeing unfold at once, it’s understandable that business owners remain cautious – and that’s true for both manufacturing and the actual transport business side,” Natarajan says. “With a budget designed to keep official machinery running till the next election, but not much else, they could be facing severe issues right when they decided to upgrade and retool.”

That’s also true from a operational perspective, he adds. “Operationally, at the micro level, India has long been a rigid truck market. Of course there have always been big players, but the majority of vehicles available were owner-operated and often sub-contracted to someone.

“Now we see a lot of consolidation happening – both as a result of international competition and tightening regulations. Even if you can compete on price, you probably struggle to tick all the boxes when it comes to safety, training and documentation. Systematically speaking, the economy has to keep moving to support that evolution. An election isn’t very helpful for that.”

According to the Federation of Indian Automobile Dealers Association (FADA), the market has already started to cool down in December, with dealers widely reporting falling stock levels as they prepare for the imminent pre-election slump. Overall demand, however, is still expected to be “above average” as state governments continue to enforce a ban on overloading by impounding overweight vehicles, in turn fuelling new equipment sales.

From a technology perspective the evolution of Indian trailer building is likely to take on a distinct European feel, says local industry expert, Bharat Dhruv, a retired Tata executive-come-consultant. “When it comes to safety and environmental standards, the market is turning to Europe,” he says, referring to the rising influence of European suppliers like BPW and SAF-Holland on the subcontinent.

“But there are difference, of course. Trailer weight is a very important criterion in Europe, for example, mostly because the local road system is so well developed. In India, however, our rough roads require trailers to be built using heavy material and mechanical suspension. Cost is also a major concern in India, so the challenge will be to combine the best of both worlds.”

According to Dhruv, the Government’s much talked about Trailer Code might just help industry find the right balance, as it will standardize a series of critical components such as tyres, rims, brakes, landing legs and wiring. The Code will also mandate rear- and side-underrun protection, he says. “Manufacturers now have to be officially certified and have their equipment tested for manoeuvrability and braking performance before they can sell anything, which is a major step in the right direction.”

While value-added services like telematics and full service contracts may not suit the Indian taste for the time being, he adds that more “hands-on” innovations such as lashing belts with ratchets, collapsible roof covers and curtain-siders do resonate with the local audience and could become even more prevalent as the implementation of the Code continues.

Despite a general shift towards articulated vehicles, however, Dhruv remains sceptical about the true potential of multi-axle trailers in India – at least for now. “Trailers certainly offer a payload advantage, but as none of the OEMs have their own trailer manufacturing operations, they might not be too eager to move towards trailers and might prefer to continue focusing on multi-axle rigid trucks instead. It’s an interesting tug o’ war at the moment.”

According to Vinod Aggarwal, Managing Director of local truck OEM, Volvo Eicher, many a “top fleet” has already answered that question in favour of the articulated trailer and is actively working with the trailer industry to develop suitable equipment that is capable of meeting international safety and efficiency standards – regardless of whether or not they are associated with a truck brand.

The situation is not unlike China’s 10 years ago, he recently told the Times of India. Back then, the Chinese heavy-duty was only about 250,000 units strong but quickly rose to close to million – largely due to the success of articulated combinations. “India is going through that kind of growth right now.”

Fast Fact
Between 2019 and 2035, the world’s 10 fastest-growing cities by GDP will all be located in India, according to research institute Oxford Economics. Surat, a city in the north-western state of Gujarat that is renowned as a diamond processing and trading centre, is predicted to see an average annual GDP growth rate of 9.2% from 2019 to 2035 – making it the fastest growing urban economy in the world. In second place is Agra – home of the Taj Mahal – which will grow by 8.6% year on year, according to Oxford Economics. Bengaluru – also known as India’s Silicon Valley because of its booming tech and start-up scene – will grow 8.5% year on year by 2035, putting it in third place.

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