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Chinese truck maker BeiBen eyes Indian market

NEW DELHI: BeiBen Trucks Group, one of the largest heavy-duty truck makers from China, is planning to introduce its vast array of vehicles here, hoping that the new government’s focus on infrastructure development will revive the domestic market after two straight years of decline.

The Chinese company has been eyeing the Indian commercial vehicle market — the second largest in Asia — after Beiqi Foton had set up a plant in Pune in Maharashtra, while another player,Jianghuai Automobile Co Ltd (JAC), is also planning to tap the potential of the commercial vehicle market.

An email sent to the Marion Wu, international business manager at Norinco Group, the holding company of BeiBen Trucks, on the finer details on the India strategy, remained unanswered.

For years, various Chinese auto companies have been vying for a slice of the Indian market.SAIC Motor Corporation Limited(SAIC), one of the largest automakers, is already selling its cars and vans in the domestic market with its local partner General Motors India, while another entity, Great Wall Motors, is planning to debut its sports utility vehicles Haval H5 with product clinics already under way for Indian customers.

With a fair acceptance for the SAIC products in India, other companies are also getting ready to take the plunge. Analysts say with growth tapering off in the home market, Chinese companies are venturing into fast growing overseas markets like India.

“China’s commercial vehicle market has already touched maturity and we see some sort of a stabilisation with almost no, or negligible, growth in the next 4-5 years. On the other hand, since India exemplifies a decent potential on the back of local consumption coming from planned urbanisation and infrastructure within the country, many Chinese truck OEMs want to set up shop in India,” said Amit Kaushik, principal analyst (Autos) at IHS Automotive, a global consultancy firm.

Chinese companies are increasingly focusing on the Indian market with the advantages of similar product range and affordable price options. Beiqi Foton, a government-owned automaker, is also setting up its commercial vehicles facility at Khed near Pune with a cumulative investment of Rs 1,676 crore, while Great Wall Motors, China’s eighth-largest carmaker, is planning to debut its contemporary sporty utility vehicle Haval H5 model, which is the fastest growing segment in India.

BeiBen is part of the Norinco Group of Inner Mongolia China and had emerged from its joint venture with Mercedes Benz many years back. Its vast range of heavyduty trucks, developed in technical collaboration with Mercedes Benz, are well known in China for sturdiness and reliability and have played a crucial role in the modernisation of the country.

According to its global website, BeiBen long-range trucks are widely used in industries and sectors such as aviation, railways, highways, harbours, petroleum, chemicals, water & electricity, forests, fire fighting, banks, and the company also exports them to emerging markets like South Africa, Kenya, Ethiopia, Libya, Turkmenistan, Kazakhstan and Syria.

Though not much has been revealed about the products scheduled for India, sources in the automobile industry say the company plans to undertake customer surveys in major Indian cities by showing details of its vehicles through computer generated slides.

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Heavy truck sales rebound on positive sentiment

If the demand pattern in the past five months is any indication, the troubled heavy truck segment might be coming out of the woods. India’s leading manufacturers of trucks and buses, such as Tata Motors, Ashok Leyland and Eicher, have reported substantial jump in volumes during this period.

Sales of medium and heavy commercial vehicles (trucks and buses) have grown nine per cent to 90,069 units in the past five months compared to 82,622 units in the same period last year, according to data supplied by the Society of Indian Automobile Manufacturers.

Better still are the sales of trucks in this segment that collectively reported a 15 per cent growth during the same period at 75,790 units. This is the first time the segment marked a growth, breaking away from the continuous downward trend, which started in April 2012.

According to a Tata Motors executive, big fleet owners who had decided to sweat their vehicle assets longer than usual have started replacing old trucks. Excise duty cuts, stable freight rates, a stable government at the Centre, new bus orders and relaxation of lending norms by banks have helped push retail sales.

Ravindra Pisharody, executive director at Tata Motors, said, “When the market drops 25-30 per cent, it means fleet buyers have stopped replacing their vehicles. (But) with lower excise duty, a new stable government at the Centre and all the announcements (made by the government), the sentiments have definitely changed. This is for the first time in 9-10 quarters that we are seeing improvement in demand.”

Tata Motors is India’s largest truck producer, with a domestic share of 55 per cent. The firm’s medium and heavy commercial vehicle sales marked a 30 per cent growth last month compared to the year-ago period.

In earlier months, falling demand as a result of near-complete withdrawal of smaller players (having five trucks or less) from the market forced companies to resort to plant shutdowns to avoid piling of inventory and costs at the dealer end.

As a result, discounts shot up and hit an all-time high, with some offering as high as 40 per cent of the value of the truck. According to Pisharody, discounts are still at unreasonably high but are stable. Tata Motors is working on ways to bring down the negative effect of discounts on its margins.

Mahindra & Mahindra, which entered the heavy-truck segment a few years ago, has also witnessed a positive movement in demand over the past few months.
Pawan Goenka, executive director at Mahindra & Mahindra, said: “We had a very good growth of 68 per cent in truck sales during the last quarter and we hope the momentum is sustained. Though the growth was on a small base, it is a good sign of a turnaround.”

Fleet operators are appearing more confident on their rates, especially after the reduction in diesel even though a reduction of three or four per cent in freight rates was expected on popular routes. Diesel price cut was made after a gap of four years.

According to the Indian Foundation of Transport Research and Training, kharif crop procurement of paddy, cotton, pulses, oil seeds and other cereal items in various states has led to continuous demand for truck fleet, enabling truck rentals to remain firm during October 2014 despite quantum fall in diesel price.

Rs While Tata Motors says its capacity utilisation at its manufacturing plants has improved, its factories still remain largely under-utilised. Manufacturers are quick to point out that although growth is happening, it is on a small base and importantly the economic improvement based on new investment and tonnage growth is yet to happen for the demand to sustain the upward pattern.

Erich Nesselhauf, CEO and managing director at Daimler India Commercial Vehicles, said: “Last month or so, we have seen demand coming back to the market but it is still far below where it should be. But compared to the previous months, it was a growth of 30 per cent but on a low base. Not much has changed on the ground, though, except for reduction in fuel price.”

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Iveco and American Paccar eyeing entry into India

NEW DELHI: Global truck makers are targeting India’s commercial vehicle segment with Fiat Group’s Iveco and American Paccar looking to enter the country to tap the potential of the world’s third-largest truck and bus market. Paccar, headquartered in Bellevue, Washington, already has a component sourcing and developing technology centre at Pune for its global operations, set up three years ago in partnership with local technology solutions company.It had also participated in the 11th Auto Expo in Delhi and showcased its premium trucks. According to two persons with knowledge of the development, the American truck maker has undertaken a feasibility study for the Indian market for its potential brands. Globally, Paccar designs, manufactures and markets light, medium and heavy-duty trucks under the Kenworth, Peterbilt and DAF brands.

The Nasdaq-listed $20 billion company also makes automotive engines under the Leyland brand. The same brand is also owned by the Hinduja Group that owns Ashok Leyland and sells its trucks, buses and light vehicles under the same brand in the Indian market.The Indian market has witnessed a spate of entries into the commercial vehicle segment. In the past few years, global giants like Volvo, Daimler, Scania, Navistar and Beiqi Foton have entered the Indian market and are competing with locally entrenched players like Tata MotorsBSE 0.11 % and Ashok Leyland. According to analysts covering the automotive industry, the underlying potential of the huge Indian market has made many global players vying for a share of it.

“In terms of the CV industry, India is all set to experience a perfect competition kind of situation going forward (and) the current duopolistic structure gets dislodged due to increasing choices in the market,” said Amit Kaushik, principal analyst, autos, at global consultancy IHS Automotive.

Another player eager to set up shop in India is Iveco, a member of the Fiat Industrial Group that has also started feasibility studies for limited-scale local operations to increase its global presence in important emerging markets. The passenger car division of the Italian auto major is already present in India. Iveco is in the process of evaluating the market for independent entry, a person close to development said.

“Three years back they tried to explore a possibility with (local vehicle maker) AMW to partnering strategically, but ended up with an understanding for exporting wheel rims for their European demand.

Now they are looking at staggered operations in India and to gain substantial operations as the market grows.”

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Truck operators hike freight charges by 15 percent

New Delhi: The All India Motor Transport Congress (AIMTC) on Friday said it has increased freight charges across the country by 15 per cent following the hike in diesel prices.
“We have decided to pass on the burden of increase in diesel price hike to customers. The freight charges will be increased with immediate effect by 15 per cent across India,” AIMTC spokesperson GP Singh told PTI.
He further said the transport industry was not in a position to absorb the price hike.

“The increase in diesel price will hit the common man as the cost of basic items will shoot up,” he said.
Asking for a rollback of the diesel price hike, Singh said the government has not heeded the transporters’ plea not to increase diesel price and AIMTC was keeping “all our options open” to press for its demand.
The apex body of truckers across the country, AIMTC claims to have around 80 lakh trucks under its aegis.
On Thursday, the government hiked diesel prices by a steep Rs 5.62 a litre. This was the biggest-ever hike in diesel prices excluding VAT or local sales tax following which the fuel is sold at Rs 46.95 per litre in the national capital as against Rs 41.32 a litre earlier.
Diesel prices were last hiked by Rs 3.37 per litre in June 2011.
Impact of diesel hike on CV makers
Commercial vehicle sales to bear the brunt:
Barring LCVs, CVs have been posting negative growth YTDFY13, down 13 per cent yoy.
Freight rates have been declining and a rise in diesel price (fuel constitutes major part of running operations) will impact fleet operators significantly. We expect fleet operators to eventually pass this increase on to customers, even though they may currently be playing the discounting game due to lack of cargo.

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