homeauto NewsVE Commercial Vehicles faces export challenges amid South Asian market pressures, says MD & CEO
VE Commercial Vehicles faces export challenges amid South Asian market pressures, says MD & CEO
Vinod Aggarwal, MD & CEO of VE Commercial Vehicles, provided valuable insights into the challenges faced in the export market, the resilience of the CV industry, and the impressive growth exhibited by Eicher Motors in August. Despite the pressures from South Asian markets, the company remains optimistic about its international expansion and is poised for continued success in the commercial vehicle industry.
VE Commercial Vehicles Ltd, a joint venture between Swedish auto giant Volvo Group and India's Eicher Motors, has been facing certain growth challenges in the export markets, especially, from the South Asian markets. However, the company has set its eye on achieving a double digit growth in certain targeted segments. Vinod Aggarwal, the Managing Director and CEO of VECV, said in an interview with CNBC TV 18, that the company expects a robust double digit growth to continue overall and from the heavy duty truck segment in particular. Edited excerpts from the interview:
Q: It was a strong 30 percent growth this time, what led to that? Is it because of a low base of last year or is demand genuinely picking up and across which segments did you see the maximum traction this time?
A: I think it is fundamentally due to the industry doing very well and we are continuing to do better than the industry in all these segments. If you look at the overall industry, overall industry year to date (YTD) growth now is around 5 percent. And we have grown on YTD basis by 12 percent. For the month, the industry has grown by 20 percent and we have grown by 29 percent. Now, if you break up into the segments, the heavy duty trucks, the industry has grown by 20 percent and we have grown by 50 percent. In light and medium duty trucks industry has grown by 12 percent and we have grown by 30 percent. So overall, we are doing better than the industry in all the segments. And this growth in the industry is in spite of still a very big decline in exports. Exports numbers are down currently, but overall domestic industry doing very well.
Q: Give us a couple of details, year to date you have grown by around 12.2 percent till the month of August. For the year what kind of growth will you be looking at in comparison to what you deliver in FY23. And since you're growing at a faster clip than the industry, give us the updated market share numbers.
A: As far as the year is concerned, it is very difficult to predict. But overall we are very positive about the industry because the economy is doing well. And of course there are investments happening in infrastructure, which is leading the growth in the CV sector and there are still a lot of replacements to happen. So therefore, overall we are very positive about the industry growth and we are expecting that the industry will continue to grow. And based on that, we are expecting that we will keep on growing faster than the industry based on our strong strategic initiative.
Q: What's the updated market share?
A: As far as market shares are concerned in heavy duty trucks, we are now at 9 percent. Last year we were at 8 percent and in light and medium duty trucks, we are now at 33 plus percent and last year YTD we were at 31 percent.
Q: So hopefully you will get to double digits in the heavy duty segment, are you looking at that mark, double digit market share in the heavy duty truck segment by the end of this fiscal?
A: That is the plan.
Q: Can you tell us in terms of margins, is the scope to increase the overall margins further for the business? I think it's been in this range of 25-26 percent but now that the most segments are improving quite a bit I think discounting has also come down. Is there scope to increase margins further?
A: Our EBITDA margins in quarter one were around 8 percent And last year, it was 6 percent. Of course the margins on the Royal Enfield side are much higher. So we have improved the margins in the first quarter. Let's hope based on the control in discounting, let's hope these margins should get better.
Q: So EBITDA margins in the commercial vehicle segment you said you closed at 8 percent in quarter one, what is your target by the end of the year double digit margins in the CV space?
A: Normally, we don't talk of these specific numbers, but if the volume grows, we will also get the leveraging benefit and if the discounts remain controlled, then we will see better margins and in any case, it is right now stable so therefore we are not expecting costs to go up significantly.
Q: As you mentioned, that exports continue to be under pressure though on a year-on-year (YoY) basis in august it didn't degrow at least double digits, year to date, it's still down close to 40 percent. How do you see that shaping up? Do you think that for exports, gradually, you'll see a recovery from hereon?
A: Exports of commercial vehicles out of India, it used to be around 5,000 units per month average. Nowadays, it is 2,000 units per month. So that's the type of situation in the industry and it is largely due to the South Asian countries, specifically Bangladesh, Nepal and Sri Lanka. All these three markets where India has been very strong, these markets are down by 70 percent YoY. So therefore, it has significantly impacted the exports out of India.
On the other hand, we have not been very strong in Middle East and African countries or Southeast Asian countries. So we have grown our shares in the Middle East, in African countries, but those markets are still very small. The large impact has come from the South Asian markets, Bangladesh and Nepal. Hopefully, this situation should get corrected.
For more details, watch the accompanying video
(Edited by : C H Unnikrishnan)
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