Factors putting the brakes on MHCV growth

Commissioning of DFC to restrict road freight growth and hence CV sales

The DFC is intended to help the Indian Railways regain lost freight share by cutting turnaround times between
importing and consuming destinations, influencing several industries to realign their logistics strategies. The DFC
and associated logistics parks can significantly reduce plant-level inventory, enabling huge savings in working
capital. Not only will the DFC bring about faster freight movement, but it will aid the economy by decongesting
major highways owing to the increased shifting of freight to rail. It will also allow for faster evacuation of cargo
from ports, improving efficiency. Thus, roads, which have outperformed rail over the past decade, will lose some
share to rail once the DFC is commissioned.

Tractor trailers (T-trailers) will be the most vulnerable to competition from the railways, following completion of
the eastern and western DFCs. These routes account for over 20% of pan India primary freight in billion tonne
kilometre (BTKM) terms. Container traffic (~65% of the western corridor) and bulk commodities (~89% of the
eastern corridor), which dominate the freight carried on these routes, are expected to shift to railways, thus
impacting sales of MHCVs, especially T-trailers.

In fiscal 2022, partial commissioning of the western DFC will connect Gujarat to North India; complete
commissioning of the DFC is expected by fiscal 2023. Movement of fertiliser from Gujarat to north India would
drive rail share from fiscal 20Y 22, affecting T-trailer demand.

ICVs to drive MHCV demand after GST implementation

After implementation of the GST, companies are transporting goods directly from manufacturing units to
consumption centres to a greater extent as central sales tax for interstate movement is no longer levied. This is
expected to increase the demand for ICVs in the long run as the typical load for such movement favours the use
of ICVs.

 

Segment GVW FY15toFY FY 20toFY FUT er eS
(tonne 20 Py
s)___Growth(%)__ Growth (%)
ICVs 75- | 7% 5-7% Warehouse consolidation translating into higher demand for
12.0 ICVs for movement of goods from warehouses to consumption

centres. Demand to be aided by e-commerce industry
purchases and improvement in consumption expenditure

 

MCVs 12.0- | (1) % 46% MCVs to be cannibalised by ICVs at spokes and MAVs at
(ex- 16.2 hubs.
tippers) Consumption sectors, such as FMCG/FMCD and e-commerce,

to be key for next 1-2 years, Auto carrier segment may start
gradually inching up post fiscal 2022. MAV tippers to grow at
a higher pace than MCV tipper

 

 

 

MAVs S162 | Gi% 15-17% Increasing popularity of hub and spoke model, and improved

(ex- road infrastructure to drive demand for higher tonnage MAVs;

tippers) owing to shift to higher tonnage MAVs and efficiency gains
due to removal of check posts and higher average speed

Tippers. [>125 [5% 10-12% Improvement in mining and construction over the long term to
prop up sales. Growth to appear higher due to low base in
FY20

Turailers | >16.2 | 5% 5-6% Increasing need for higher tonnage vehicles along with better

road infrastructure is expected to boost demand. However,
DFCs, once commissioned, would impact sales

 

 

Total 575 | % 8-10%

MHCVs

MHCV [>75_ | 0.4% (-1% ‘The segment may need over two years to recoup the lost
buses volume in fiscal 2021. While short-term demand is currently

driven by STUs, bulk of the new demand over the long term is
expected to arise from private operators, as STUs are
financially constrained and customers prefer private buses
because of better quality of service

 

 

 

 

 

 

 

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