07 June 2020

Industry Focus- Tipper Trucks

Tipper wars

 

Global brands are now driving in the Indian market for tipper trucks, and competition is roaring to a crescendo. Till a few years back the market was basically a duopoly between two local brands. All that has changed now and tipper OEMs are now jostling for Brand Visibility in a buyers’ market, triggering a price war among them, and the recent rollout of GST is making the war fiercer, finds Satish P Chavan.

 

After demand rolling downhill in the Indian tipper market last few years, a turnaround is finally occurring -- as the new Mining Ordinance opens up the mining sector and mineral extraction industries, and fast track rollout of EPC projects in the infra and urban infra sector – generating substantial demand for tipper trucks. While the mining and mineral extraction segment will demand higher capacity tippers, the infra sector –including transport (road, rail, airports, ports), and power -- will require big and medium capacity tippers, and the real estate and urban infra will demand medium and small capacity trucks. Demand is robust across all capacities, and flexible across the price spectrum. In fact an early indicator of this was the 40 per cent rise in tipper demand during April-August 2016, when overall medium and heavy truck segment reported a decline of five per cent in the same period, according to the Society of Indian Automobile Manufacturers (SIAM). Tipper OEMs later confirmed that the orders were not part of the replacement cycle but fresh demand from various sectors. That trend has amplified now as the traditional demand drivers witness increased activity in the mining and EPC infra sectors. According to Consultancy Race Innovations, the market remains largely duopolistic with Tata Motors and Ashok Leyland holding a combined market share of about 77 per cent. It also underlines a significant shift towards higher GVW (gross vehicle weight) vehicles, higher horsepower, and increased safety features.

 

 

FAST FACTS
  • Buyers shift to TCO
  • BS IV a Game Changer
  • GST triggers price wars
  • India global manufacturing base
  • CAGR projected at 8-10 percent

 

STEEP GRADIENTS

Although India’s tipper market may have opened up, it won’t be easy for OEMs to corner bigger market share. This is turning into a Buyers’ market and companies have to compete not just on technology and Aftermarket Services, but also on the price front. There is now a crucial shift in buyer behavior that is more focused on the Total Cost of Ownership (TCO) of a tipper. With each OEM featuring cutting edge technology on their trucks, the competition has now shifted to the pricing front. All OEMs offer competitive pricing on their various models, ranging from the high-end brands packed with latest technology to simple base models sans all the frill and fancies. The latest is pricing of BS IV compliant models and also passing on the GST benefit to the customer.

 

In April this year Daimler India Commercial Vehicles (DICV), Indian arm of global leader Daimler AG, launched its new range of BS-IV compliant trucks at the price of the now phased out BS-III trucks. The move will likely set off a price war in the value conscious market, giving the German truck maker an edge over its Indian rivals. “Maybe the best news for our customers is that the entire product portfolio of BharatBenz BS IV trucks comes at the price level of our BS III trucks,” informs Erich Nesselhauf, MD & CEO, DICV, during the launch ceremony. The launch coincides with India’s transition from BS III emission standards to the cleaner BS IV standards. The company has already handed over 1000 BS IV trucks to customers and intends to focus completely on BS IV vehicles from April 1.

 

Depending on the load carrying capacity, BS-IV heavy duty trucks (16 tonne to 49 tonne) command a higher price—around 8-11 per cent more as compared to BS-III models owing to technological advancements in engines and other areas. But DICV looked at its production process, supply chain, material costs, etc., and trimmed costs to price the new range competitively, which ranges between `16 lakh to `75 lakh.

 

Incidentally Bharat Benz is the only OEM which does not offer any kind of discount on their trucks. Bharat Benz has been driving in the Indian truck market last five years, selling its products at a premium of 15 per cent to rival offerings. The new emission standards and their aggressive pricing strategy may change that forever—not only now, but even in the future when Bharat Stage VI norms kick in come 2020.