Tata Motors' Vinay Pathak states that consumption, or per capita income, rather than the GDP, as in the case of trucks, drives the small commercial vehicle and pickup segment.
05 Dec 2023 | 6128 Views | By Shahkar Abidi
The small commercial vehicle segment, which experienced modest low single-digit growth in CY23 due to a K-shaped recovery, is expected to see strong growth next year, with low double-digit expansion.
According to Vinay Pathak, Business Head, SCV & PU, Tata Motors, consumption, or per capita income, rather than the ...
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The small commercial vehicle segment, which experienced modest low single-digit growth in CY23 due to a K-shaped recovery, is expected to see strong growth next year, with low double-digit expansion.
According to Vinay Pathak, Business Head, SCV & PU, Tata Motors, consumption, or per capita income, rather than the GDP, as in the case of trucks, drives the small commercial vehicle and pickup segment.
In economic parlance, the average income that people make in a given area is known as per capita income. On the other hand, GDP (Gross Domestic Product) measures the total value of all goods and services produced within a country's borders during a specific period, usually a year.
Pathak highlighted that the small commercial vehicle segment has experienced a K-shaped recovery, with larger category vehicles seeing a rise in demand, whereas the smaller ones have struggled to find buyers. This divergence in performance can be attributed in part to a decline in rural demand.
However, there have been some positive developments in recent months, as non-urban areas have shown signs of improvement with an increase in demand for entry-level two-wheelers. Pathak noted that these green shoots are indicative of a potential turnaround in the sector.
According to him, the government has taken cognizance of the situation and is working on facilitating the affected population by way of introducing several schemes that will help boost demand. He expects the SCV demand to become robust over the next few months. "It would lead to low double-digit growth in the coming year," Pathak noted. He spoke on the sidelines of the company launching the all-new Intra V70, Intra V20 Gold, and Ace HT+ range of small commercial vehicles.
Pathak’s remark should be considered within the broader context of industry reports indicating a projected growth in demand for the small commercial vehicle market. According to one such report by Research and Markets, the small commercial vehicle segment in India is expected to expand at a compound annual growth rate (CAGR) of 15.14% during the forecast period of FY2023–FY2027, reaching a market value of $ 4256.93 million by FY2027. Increasing demand from logistic services, government initiatives, financial support, and increasing investments from manufacturing companies are some of the key drivers of growth in the segment.
Talking about the replacement demand, which so far has been on a weaker footing, the top executive highlighted a visible trend post-introduction of BSVI emission norms, which ended up spiking the ticket price of the vehicles. During this time, the demand for used vehicles that were BSIV-enabled, witnessed a jump in demand, as some of the prospective buyers were attracted to the lower upfront costs and a simpler manner of vehicle functioning and maintenance.
However, Pathak further highlighted that now the demand for such BSIV-equipped vehicles is going down, as customers are realising the benefits of better efficiency that comes with BSVI-equipped vehicles. "It (replacement demand) will start kicking in about six months from now," he remarked.
Pathak went on to say that close to 60% of their sales are from customers who have not been in the business before. "We (read a small commercial vehicle) are the first step for people to come into the logistic business." The fleet owners, on the other hand, are much more organised players and are involved with the e-commerce or logistics industry, bringing a certain level of structure to the SCV segment. "It will grow in a similar manner in the coming years," Pathak concluded.
Girish Wagh, Executive Director, Tata Motors, said, "In addition to providing optimal solutions for a variety of applications, our small commercial vehicles and pickups are known to provide livelihoods and improve the quality of life of our customers." He added that these vehicles have been developed based on specific inputs and demand from a large segment of actual users. They are engineered to optimise fuel efficiency and carry higher payloads over longer distances. "Fuelled by rapid urbanisation, booming e-commerce, an increase in consumption, and the rise of the hub-and-spoke model, the significance of efficient and effective last- and first-mile transportation in logistics management can't be emphasised enough,” he added.