‘Smart trucks’ will give us competitive advantage: VECV

Automakers across segments are racing against time to meet the April 1 deadline to make their product range compliant with the greener Bharat Standard VI emission standards. With more than six years of experience in Euro VI norms, Volvo Eicher Commercial Vehicles (VECV) is ready with its BS VI portfolio.

The joint venture between Eicher Motors and AB Volvo—which saw a 19.1% drop in December sales from a year ago—plans to expand its foothold in other developing markets in South Asia, Africa, Middle East, South Africa, and Sri Lanka. In an interview with Fortune India, Vinod Aggarwal, MD and CEO, spoke about VECV’s BS VI readiness, the tech advances in the commercial vehicle segment, and the slowdown crippling the industry.

Edited excerpts:

How has the Euro VI experience helped you in BS VI transition?

We are the exclusive manufacturing hub for Volvo’s automotive requirement for their medium-and heavy-duty trucks. So, we have a lot of experience in handling Euro VI technology. And then we also have a lot of learnings from their customer feedback. For example, it’s a very complex technology. It has to go through a lot of tests so that there are no faults when it runs on the road. We were able to incorporate a lot of those learnings at the design stage itself. We had a great advantage over our competition as far as BS VI is concerned.

What is the synergy between Volvo and Eicher Motors when it comes to the sharing of technologies like BS VI?

We take a lot of help from Volvo but product development, design, and adoption is Eicher’s responsibility. We do it ourselves but under the advice and guidance of Volvo’s technology experts. Not only in engines, but we have also incorporated their technology in the cabin, driveline and telematics, etc. The biggest thing is that India is a very price-sensitive market and you have to compete against very strong incumbents. So, you cannot simply copy the technology from the Volvo group here. You have to adopt these technologies in a frugal way. So, we’re basically providing world-class technology at ‘India price’.

The commercial vehicle segment is seeing a lot more innovation in terms of the technology within the vehicle. What can we expect from VECV going forward?

‘Smart trucks’ are going to be our big competitive advantage. Our telematics and connectivity are going to be very advanced. We are going to offer timely services based on connectivity. We have already set up a control centre in our plant where we can take control of all our vehicles whether at the dealers’ workshop or on the road. This will enable us to give real-time guidance to the technician, over-the-air upgrades in software and predictive maintenance. We have very advanced analytics that can guide us about the problems with the functioning of our trucks on a real-time basis about driver and engine behaviour. We have already started doing this on a pilot-basis. With BS-VI there’s going to be a lot more electronics in the vehicle based on which you can get a lot more productivity and leverage the technology like never before.

Do you think CNG is a better intermediate technology for the Indian market when compared with electric?

CNG is a better technology but it cannot be used for long-haul applications. First is because it’s very voluminous so you have to carry very heavy cylinders and that impacts the overall weight of the truck which affects the payload. We’re already giving CNG in the 14-15 tonne trucks which are good enough for 200-250 km. But the distributed [of CNG fuel stations] has to be better. For long-haul applications, LNG is a better technology. Here, the fuel is the same but it’s stored in more pressure so the volume comes down. For that, again the infrastructure is not available. We are ready with that technology as well. For electric, if we get the right kind of demand we’ll put our money into it. Right now the numbers are very small. But we’re there wherever there’s demand.

Eicher plans to increase its market share by 10% in the forthcoming year. What’s your roadmap for that?

Last year, the market size in heavy-duty trucks was 2,95,000. This year that market has dropped by about 45%. In that market size our current market share is 5%. So, the potential of growth in this segment, where we have the entire product range, right from 18-and-a-half tonne till 55 tonnes. But the challenge there is strong incumbents with a very tough price-positioning. This is where we have to change the customer mindset on the total cost of ownership instead of just looking at the initial acquisition price. The cost of ownership is the total cost including the initial cost, the cost of productivity and maintenance, and the operating cost. The fuel is about 45% of the total cost of ownership. So, if you get better fuel efficiency and productivity, it’s a better deal for the customer. The psychology is still that the customer looks at the initial cost. We have to change that.

The slowdown has affected the commercial vehicle segment by 22%. How much has it affected you and when do you see a revival?

A drop of 20% if including smaller vehicles. The actual drop is much more than 20% because the drop in the smaller trucks which is around 2 tonnes, there the drop is only 12%. Whereas the drop in the heavy-duty truck is actually 45% where the value of the truck is ₹25-30 lakhs. Now, how are we going to come out of it? Trucks are basically B2B products where the entire thing is linked to the economy with the movement of goods and services. If the economy is doing well, there is more production requirement, more goods will be moved. The foremost thing is that the economy has to grow much faster than the current growth rate. The government is talking of large infrastructural investments to the account of ₹100 lakh crores. If that starts happening, it will give a boost to consumption and the economy starts growing. The second is the recapitalisation of the banks. They are trying that more and more money is made available to NBFCs. The financing has affected us as NBFCs are not able to lend. The customers that are not financed by banks are financed by NBFCs as they take more risks. The third thing that can boost the industry is the new scrappage policy that the government is working on. I would expect that they come up with an incentive-based scrappage policy.