Decoding the integration of Volvo Buses India and VE Commercial Vehicles

In the past week, Mr. Vinod Aggarwal, the Managing Director & CEO of VE Commercial Vehicles (VECV) announced that VECV has signed a definitive agreement to integrate the Volvo Buses India (VBI) operations into VECV. The agreement will cover the manufacture, assembly, distribution, and sale of the Volvo Buses in India, and other rights forming part of the business. Consequently, the bus manufacturing facility at Hoskote, Bengaluru, and all employees of VBI will be transferred to VECV. VBI is currently a division of Volvo Group India Private Limited (VGIPL).

Volvo bus
Eicher Bus

We are also given to understand that post the completion of the transaction, VECV and VBI will consolidate their bus businesses into a newly formed bus division within VECV. This division will offer Volvo and Eicher branded buses, and will maximize synergies to capitalize on market opportunities. This strategy will be extended to exports, wherein the new bus division will offer products and services that are complementary with Volvo Buses’ core product portfolio in selected international markets. Akash Passey will join as President designate of the newly formed VECV Bus Division. He will repatriate to India for this role and report to Vinod Aggarwal.

So why now? As India is reeling under the impact of Covid, no segment has had to face the wrath of the pandemic worse than the mobility segment. Commuters have put safety above all other considerations and have been avoiding public transport altogether. Within this segment, the impact in the premium mobility segment has been worse than others. Most IT companies have extended their Work from Home policies and a large number of commuters for Volvo Buses typically come from this segment. To add to their woes, there have been significant quarantine restrictions for interstate travel which has also severely impacted the interstate premium bus transport. This will have a negative impact for the demand for Volvo buses in the short term.

As we scramble to find a vaccine for Covid, we believe that the fortunes of Volvo buses will turn around in the medium to long term. VE Commercial Vehicles is looking at this integration over a long term horizon. Mr. Aggarwal is both an astute leader and a master integrator. He was instrumental in bringing the Volvo Group and Eicher Motors together and has been the CEO of the JV since its inception. He has successfully integrated the Volvo Trucks India operations which is already part of the JV. With the integration of Volvo Buses India into the JV, he is looking to build a market leader in the Indian Passenger bus segment. There is tremendous respect and trust between the Volvo Group and Eicher Motors and this integration further builds on that trust.

We believe that the integrations can bring many benefits for VECV. A few of the advantages include the following:

  1. Brand positioning: The addition of the Premium Volvo bus brand immediately elevates the position of Eicher Trucks and Buses in general and their Bus division in particular
  2. Optimisation opportunities: This integration will throw open many opportunities for optimisation including:
    a. Lower input costs: VECV is one of the largest CV manufacturers in India. Volvo Buses will benefit from lower input costs leveraging the deeper supply chain and procurement expertise of VECV
    b. Integration of facilities: VECV can explore options to integrate bus body building into a single facility over the medium term which can bring significant synergies and cost savings
    c. Larger distribution network: VECV has a deep All India sales network of 143 touchpoints that can be leveraged by Volvo buses to increase penetration in the market
    d. Strong spare parts business: Volvo Buses has a strong aftermarket business. VECV can leverage their expertise in the Eicher Genuine parts business and try to replicate this success for Volvo bus parts making this part of the operation even more successful
    e. Deeper customer support team: VECV also has an extensive service network of over 294 workshops that can be leveraged to support Volvo buses, significantly increasing their support reach
  3. Innovative new products: Eicher buses is a strong player in the Light and Medium duty bus space. Volvo buses is a strong player in the Premium Heavy-Duty bus space. As indicated by Mr. Aggarwal, VECV will focus on developing new products in the Mass – Premium segment to take on Ashok Leyland and Tata. A few segments that will be of focus will be the Sleeper segment, inter city segment and electric buses,
  4. State Transport Unit (STU) business: Volvo buses has been a partner of choice for all STUs in the premium bus segment. They pioneered premium mobility in the Indian market and have very deep relationships with the STUs and influencers in the urban mobility segment. VECV will look to build deeper relationships with the STUs armed with a larger portfolio of products to become a major player in the STU business.
  5. Visionary Leadership: Akash Passey, who was previously Senior Vice President, International for Volvo Buses will join VECV as the President of its newly formed Bus Division, reporting to Mr. Aggarwal. He is a visionary leader with extensive experience building a brand from scratch and was instrumental in building Volvo Buses into a powerhouse in the premium mobility segment in India. He is also an expert in the mobility space and can instantly make VECV a strong contender for market leadership in the Bus segment
  6. Exports: VECV has built a strong business exporting trucks and buses to South Asia and the Middle East. The addition of Volvo buses to VECV can help augment their portfolio of products in the export market. VECV is currently exporting Euro 6 engines to the Volvo Group in Europe. We believe that this integration will give them opportunities to export fully built buses to the rest of the world

In summary, we believe that this integration will offer much-needed short term support for Volvo Buses as they try to navigate through the challenges thrown up by the pandemic. With an extensive network, a wide portfolio of products from mass market to premium and synergies from the integration, VECV is looking towards a bright future in the bus segment in the mid to long term horizon.

We hope that you enjoyed this article by Leaptrucks. We are one of the largest marketplaces for selling trucks and buses in India with operations in Kerala and Karnataka. To buy or sell a used truck, please visit us at www.leaptrucks.in.

This article was also published on MotorIndia Magazine at https://www.motorindiaonline.in/buses/decoding-the-integration-of-volvo-buses-india-and-ve-commercial-vehicles/.

In-depth coverage of Small commercial vehicle (SCV) sales in India, July 2020 – Commercial Vehicle Insights!

Leaptrucks is happy to bring you a new series titled “Commercial Vehicle Insights”. This week we are bringing you a detailed analysis of the sales performance in July for SCVs. In every economic downturn, the recovery is usually led by SCVs and we will be looking very intently towards indicators in this segment that may point towards a recovery in the overall segment in the coming months.

Small Commercial Vehicles going from green shoots to recovery
Small Commercial Vehicles

CV Sales July 2020
SCV Sales for July 2020

Overall sales results from July 2020 were promising. Maruti Udyog posted an impressive growth of 29%, while Mahindra posted a small drop of 13%. Bajaj Auto posted a large decline of 81%, primarily due to the challenges faced in the passenger transportation segment. AL, which reports sales for both its SCVs (which includes its Flagship Dost product) and LCVs together, posted a drop of 32%.

Leaptrucks is of the opinion that the market has now reconciled to the new and higher BS6 prices for diesel SCVs like Bolero Pickup and AL Dost. Customers are also open to trying out petrol versions of Tata’s Ace and Maruti’s Carry in BS6 where price increases have been nominal. The fear of trying out new technology is also disappearing from the mindset of customers as demand grows in this segment. We anticipate that all 4 products highlighted here will see an uptick in sales in the coming months.

From our interviews with customers in this segment, we understand that the uptick in sales is driven by Rural India, Last Mile Distribution and E-Commerce. An impressive agricultural output, better rains, better prices for their produce have all led to a resurgent Rural India. We anticipate that Rural India will continue to spearhead the Covid recovery. Last mile distribution has expanded both in urban and rural India. Urban India via Ecommerce and Rural India via new business models (we will delve deep into this phenomenon in one of our upcoming articles). Ecommerce is also seeing a spike in demand, especially since people are preferring to stay indoors while the Pandemic surges with new record cases every day.

We also believe that passenger transportation in India will never be the same again. The Pandemic has made a significant impact on the psyche of the average passenger and the industry will have to work hard to meet the expectations of the consumer. The resurgence in 2 wheeler and car sales reflect this change and we anticipate that a large segment of the population will have very different expectation from mobility solutions, 3 wheeler transportation and bus transportation post the Pandemic.

Does this mean that things will be rosy go forward? The short answer is no. We will continue to see some good and some bad months for the SCV segment in the coming months. Demand will fluctuate with local lockdowns. Supply constraints will become bottlenecks when plant shutdowns or supplier shutdowns are necessitated by a surge in Covid cases. The sentiments of the customers may become negative and impact the purchase decisions.

However, at Leaptrucks, we are confident that this segment has started strongly on its road to recovery. This is a precursor to a recovery in the LCV and M&HCV segments which are a few months away. The results from July showcase the positive and undying spirit of the Indian entrepreneur and we believe that the Indian Tiger will roar again very soon!

This article was also published on MotorIndia Magazine at https://www.motorindiaonline.in/industry-news/green-shoots-of-recovery-in-commercial-vehicle-segment/.

8 factors that negatively impacted the Commercial Vehicle demand in Q1 2020

Commercial Vehicle sales Q1 2020
Parked trucks during lockdown

Commercial Vehicles (CVs) continued to face a challenging quarter in Q1 2020. Overall volumes for the quarter stood at 35,104 units against last year’s sales of over 2,83,191. The drop was a steep 88% year on year. Commercial vehicles posted the steepest drop in overall volumes as against 2 wheelers, cars, 3 wheelers, tractors and construction machinery in Q1.

Mahindra was the best performer in the segment with a drop of 70% in sales year on year. This was led by their small commercial vehicle segment. With the exception of Mahindra, all other manufacturers dropped by 85% or more.

Commercial Vehicle sales Q1 2020

The industry is battling many wars across multiple fronts while trying to improve volumes:
1. Lower demand:  There has been a significant drop in demand for trucks due to Covid.
2. Excess capacity:  The increase in Axle load norms and availability of idle trucks coupled with lower demand has caused excess capacity in the industry
3. Challenges in interstate transportation:  Quarantine rules across states have posed a major challenge in operating interstate trucks. Most of these trucks currently remain idle
4. Availability of drivers:  A large number of drivers have moved to their hometowns. Many of them also plan to stay back until Covid 19 numbers get under control.
5. Passenger transportation:  Both school and passenger transportation have been suspended indefinitely across the country
6. Price increases:  The BS6 technology upgradation in diesel trucks has led to price increases of 10% to 20% across products. With freight rates showing no improvement, it will be very challenging for customers to operate these trucks profitably
7. Tighter financing norms:  It is becoming more challenging to get financing for customers due to the tighter credit environment
8. Supply constraints:  Lockdowns across supplier bases, sourcing from China and other countries and Covid cases in assembly plants are all causing significant challenges in delivering trucks from OEMs to dealers

We anticipate the recovery in this segment to be led by Small Commercial Vehicles in Q2 2020 followed by LCVs/ICVs in Q4 2020. With Covid 19 numbers surging across states, we anticipate that Commercial Vehicle numbers will continue to remain under pressure throughout the year.

Leaptrucks will be bringing you an in-depth segment wise analysis in the CV industry based on 400 customer interviews across segments. We will give you an overview into the current customer sentiment by segment, challenges and opportunities they face along with some insights based on our customer interviews. If you would like to join this session, please call us at 8971185459 to be added to the invite list or check our blog in a week for an invite. You can see our assets at www.leaptrucks.in/listings.

BS6 – A high level overview for Banks & NBFCs

BS6 introduction for financiers
BS6 training for financiers

Leaptrucks recently organized a training sessions for our major partners supporting financing of Commercial Vehicles in South India. The technical details were simplified without diluting the important technological changes in BS6 for our audience.

The webcast ran for over an hour and a half and covered the reasons why an emission norm change was necessary. It focused on the impact on the environment along with the regulatory aspects.  It covered major changes in technology from BS3 to BS4 emission along with the transition from BS4 to BS6. We also discussed impact across major stakeholders including manufacturers, dealers, fleet operators and most importantly truck drivers.

Over 683 participants joined the webcast across 10 sessions. Participants gave excellent feedback on the content and the delivery of the presentation. Attendees included Cholamandalam Finance, Sundaram Finance, HDFC Bank, ICICI Bank, Kotak Mahindra, Shriram and Indostar.

If you or your organization would be interested in an overview session, please get in touch with us!