Mumbai: VE Commercial Vehicles Ltd, a joint venture between Eicher Motors and Swedish truck maker Volvo, has decided to go ahead with its plan of setting up a new 40,000-units-a-year factory in Bhopal, even as the Indian commercial vehicle market stares at its steepest decline in growth in a decade.
Vinod Aggarwal, managing director, VE Commercial Vehicles, told ET that the first two quarters of 2020-21 may not see a very steep decline on account of price hike.
“Dealers are defensive, financers are defensive and so are automakers. As a result, there has been hardly any pre-buy. We expect the same to continue in March. Hence, the demand should be much better in the next financial year than expected earlier,” said Aggarwal.
Sales in the 16-55 tonne truck segment plunged more than 50% year-on-year in February, as against the year-to-date decline of 45%, and it appears that the decline in March may be similar to that for other truck makers as they have stopped producing BS-IV trucks.
In April 2019-January 2020, VE Commercial Vehicles registered a decline of more than 23% year-to-year to about 39,000 units, with a market share of 6%.
The company’s BS-IV stock has come to down to just five days and much of its production is aligned to retail demand. Aggarwal said the company is insulated from Covid-19 and has its supplies secured for the month of March.
The company expects the market to rebound to low single-digit growth in the next financial year and outpace the market, said Aggarwal.
Unveiling the company’s Eutech BS-VI range of trucks in Pithampur on Wednesday, Aggarwal said that while the company is in the midst of severe cost-cutting plans and may defer some investment, it won’t stop strategic investments like expansion of the Bhopal factory, where production is set to begin from April 1.
The company has rationalised the number of shifts and controlled all discretionary expenses. It has deferred some capital expenditure but that is not impacting strategic investments like the Bhopal factory.
The company will invest about Rs 250 crore instead of Rs 400 crore in the Bhopal factory. The paint shop planned for Bhopal plant has been deferred and the company will utilise its Pithampur plant, also in the state of Madhya Pradesh, for the paint operation. The move will ensure that the excess staff from Pithampur can be utilised at the Bhopal plant and there may not be any job cuts.
The new BS-VI trucks are expected to come at a 7-15% price premium over the existing range and the experience of supplying more than 100,000 Euro VI engines to over 40 countries for Volvo will give the company an edge, said Aggarwal.