Indian Cv Market

INTRODUCTION
Commercial Vehicle Market in India

The Indian commercial vehicles (CV) industry has a long history, possibly dating back to
the passenger vehicles industry. Telco, the first entrant in the segment, continues to be the
largest till date, with a market reach unrivalled by its competitors. Telco pioneered
production of commercial vehicles in the country with technical collaboration with
Daimler-Benz of Germany in 1954.

The industry has made a significant contribution to the country’s industrialization and
progress. In fact, India achieved self-sufficiency in commercial vehicles, except in the
high-tonnage classes, where the demand has nonetheless been limited. The entry of Ashok
Leyland, with technology from British Leyland, marked the beginning of competition in
the truck and bus segment.

The substantial rise in petrol prices in 1976 lead to conversion of almost all CV to diesel
engines. The continuous increase in petrol prices since then and the subsidy provided to
diesel increased flavor for diesel commercial vehicles continued till date.

The next major change in the industry came about in late eighties, when the superior
Japanese Light Commercial Vehicles (LCV) made their debut in India. The Japanese
invasion, however, fizzled out very soon as the new entrants ran into losses as a result of
the rising yen. This brought to the fore the critical role of indigenization as a means of
ensuring steady growth and survival during difficult times.

However, Telco was the biggest beneficiary of the fiasco. Telco soon upgraded its products
to match the Japanese in style and finish, nonetheless with much the same aggregates, with
the result that it emerged as the main contender by cornering more than 50% of the LCV
market.

The marginal players in the commercial vehicle industry like Hindustan Motors, Premier
Automobiles Ltd and Standard Motors Pvt Ltd withdrew from LCV market in late eighties
due to stiff competition in passenger car market and their inability to compete in the CV
market.

Prior to 1985, CVs were available only in two categories i.e. 2 ton and 8 ton and above.
The second-hand down rated vehicles were used to transport low weight for short distance.
But with the entry of Japanese players fuel efficient vehicles filled the gap between 2 and 8
ton.

The commercial vehicle (HCV and LCV combined) sales have increased from 68,392 in
1980 to 141,098 in 1990 at a CAGR of 7.5%. The industry witnessed a drop in sales in
1986 because of economy slowdown. The commercial vehicle sales witnessed a drop in
1991 and 1992 as a result of severe credit crunch and recession in the economy. But with

1 MBA MARKETING MANAGEMENT, IMS DAVV

the revival in economy it zoomed back in 1993 and witnessed an above average growth till
1997.

The slow down in demand was again seen, in FY98 and FY99, later followed by a robust
growth in FY2000. The earthquake in Gujarat, followed by drought like conditions
persistent in Rajasthan and Madhya Pradesh etc. and the mounting fiscal deficit lead to
decline in the overall demand in FY2001.

Industry structure

The commercial vehicle sector can be broadly classified as Light Commercial Vehicles
(LCV) and Medium & Heavy Commercial vehicles (M&HCV) based on the Gross Vehicle
Weight (GVW) of the vehicle. The HCV segment can be further classified into three
segments based on gross vehicle weight as follows -

ICV: Intermediate commercial vehicle with GVW of 8 to 10 ton.

MCV: Medium commercial vehicles with GVW of 10 to 15 ton.

HCV: GVW of 16 ton and above.

M & HCV can also be classified into two categories depending on their usage as trucks
and buses. Buses are passenger carriers. Trucks include goods carriers along with
specialized vehicles like dumpers, tractor-trailers etc. The ICVs fall in the load category of
8 to 10 ton GVW and are often substituted for medium or heavy commercial vehicles in
trunk routes and cities. Eicher Motors and Swaraj Mazda are two manufacturers operating
in this segment.

The composition of truck sales as a total of HCV sales fluctuated between 67% and 80% in
the nineties. This wide variation in composition of HCV sales is due to the cyclical nature
of truck sales compared to steady sales witnessed by buses. Therefore, during a downturn


in truck demand, the contribution from buses, though steady in volumes, increases in terms
of percentage of total HCV sales.

The contribution by bus sales to total M&HCV sales has increased from 18.5% in FY97 to
33.16% in FY2001. In terms of truck sales, Telco commands a leadership by cornering
77.1% of the total truck sales with the rest taken up by Ashok Leyland. Hindustan Motors
also account for about 0.7% of total sales but it exports all its products. In the bus segment,
Ashok Leyland had a market share of 48.3% in FY2000 with the rest being taken by Telco.
As indicated in the table below, sales of LCVs kept pace with HCVs from FY94 to
FY96.The volume differential between M&HCVs and LCVs has been widening since
FY97. In FY2001 this gap has been on a decline as the LCV sales increased by 4.4% but
the HCV sales dropped by 21.3%.


In the last twenty years or so, the sales of the LCVs in relation to M&HCVs has increased
its share from 27.4% in FY81 to 71.7% in FY2001 which was up from 54.1% FY2000.
However during the current fiscal 2001-02 the total commercial vehicle sales declined by
6% y-o-y in April- August especially in the LCV segment indicating mixed fortunes for
different players in the industry.

Region Wise Sales Breakup (till FY99)

If we compare region wise sales data for two years (CY99 and CY98), we find some
interesting changes. In 1998, sales were maximum in the western region with Maharashtra
leading the pack. However, in 1999, the northern region just managed to inch ahead of the
western region with Uttar Pradesh beating others to the post. The southern region came in
third in both the years. The industrialized states in the west have traditionally seen higher
truck sales.

Truck Sales Break-up By Region

Sales %age of Sales %age of
Region
(1999) total sales (1998) total sales
North 24,839 29.3 14,168 27.7
East 14,686 17.4 9,041 17.6
West 24,160 28.5 16,453 32.1
South 16,701 19.7 8,049 15.7
Exports 4,296 5.1 3,516 6.9
Total 84,682 100 51,227 100

Source : SIAM

Interestingly, southern India leads in sales of buses. This is because of a) the presence of
Ashok Leyland and other private sector players in the region and b) the region as a whole is
not well developed in terms of being connected by rail. In 1999, sales in all the regions fell
except that in the west.

Bus Sales Break-up By Region

Region
North 4,962 20.3 5,515 21.4
East 2,579 10.5 3,066 11.9
West 6,971 28.5 5,408 21.0
South 7,057 28.9 9,219 35.8


Exports 2,889 11.8 2,561 9.9
Total 24,458 100.0 25,769 100.0

LCV Sales Break-up By Region

Region
North 15,746 19.5 13,668 18.2
East 7,118 8.8 7,588 10.1
West 27,207 33.8 27,622 36.9
South 24,606 30.5 18,240 24.3
Government & Exports 5,876 7.3 7,816 10.4
Total 80,553 100.0 74,914 100.0

Source : SIAM

Note: For sales of LCV and HCV, refer Appendix A2

Government Policies

The liberalization of government policy with respect to foreign, technical and financial
collaboration lead to a sudden spurt in technical collaboration in LCV segment. For
example: Toyota Motor, Mitsubishi and Mazda entered the commercial vehicle segment in
collaboration with DCM, Eicher and Swaraj Motors respectively.

The liberal foreign technology policy, lead to substantial improvement in technology of
commercial vehicles. But at the same time the import bill jumped at a rapid pace as these
vehicles were having high import content.

The broad banding introduced in 1984, has helped producers to optimize installed capacity
and adjust the product mix to market demand. This in turn helped in obtaining economies
of scale for larger players like Telco and M&M.

The automobile industry is a major contributor to the GOI exchequer in the form of excise
duty, customs and other levies. But the government expenditure for development of roads
is just 25% of the total contribution to the GOI exchequer. For example in FY95, the GOI
spent just Rs3.5bn on roads compared to automobile industry’s contribution to GOI
exchequer of Rs16.62bn.

The Commercial Vehicle sector is controlled by GOI policies on depreciation norms, diesel
pricing and Motor Vehicles Act. The change in depreciation norms for CV in the finance
bill affects the demand for vehicles, as they are purchased by companies to obtain tax
shelter along with utility.


In the past, the GOI changed the depreciation norms to control the tax collection from
corporations. For example: The decrease in depreciation rates from 33% in 1989-90 to 20%
in 1990-91 lead to drop in MUVs and CVs. During fiscal 2001-02 the depreciation rates
hiked from 40% to 50% in a move to reduce the taxable profit in transport business.

The Motor Vehicle Act came into effect from July 1989. It was intended to streamline laws
related to emission norms, maximum age of vehicles, restriction on payloads and other
safety measures.

But the law was never implemented with full heart, leading to laxity of norms in all aspects
of automobile industry. For example: over loading of vehicle by three times, usage of very
old vehicles to carry lower loads for shorter hauls etc.The cut-off life of vehicles and
overloading are governed by Motor Vehicles Act. Therefore any change in cut-off age
fixed for scrapping of old vehicles affects the number of vehicles available to carry the load
in the country. For example: The Supreme Court order to scrap more than 15 year old
commercial vehicles in the capital, will lead to reduction of 15,000 vehicles. This will lead
to increased demand for new commercial vehicles as the transport tonnage drops
substantially.

Until 1986, trucking was a regulated activity with truck operations restricted to short-haul
intra-state transport. Multi-state trucking permits were issued by states, subject to certain
ceilings. The ceiling on national permits was removed in 1986, resulting in adequate
availability of trucking capacity in the economy.

The availability and prices of diesel is controlled by the GOI through restriction on
distribution and imports. The road transport was paralyzed during Gulf war due to shortage
of diesel in the country, since it heavily depends on oil imports. The total dismantling of
Administered Price Mechanism (APM) latest by March2002 and subsequent reforms has
resulted in the diesel prices in the country being linked to international crude prices. In
1999-2000 budget, one rupee cess was imposed on per liter diesel and has been in place for
last two years for funding the rural road sector and the National Highway Projects.

The corpus of Rs9620 mn from the cess fund has been made available to States during
FY2000-01. The total plan outlay for roads in the budget 2001-02 is Rs87270 mn.The
pricing of the vehicle to a large extent depends on the excise duty charged by the GOI on
ex-factory price. After the rationalization of excise duty in the budget 2001-02 ; the special
excise duty for CVs is levied at 16% and total duty is pegged at 32%.The differential in
duty structure also affects the demand for respective segments e.g. differential duty
provisions between 8-seater and 10-seater changed the demand for each of the segments.
Over and above state governments charge sales tax and octroi to effect the final price to
customer. In the current year, uniform sales tax to the tune of 12% has been levied in all the
states across India. This has in turn affected significant increase in the final prices of
commercial vehicles specifically in the northern India.


Technology and usage of commercial vehicles

Transport sector consists mainly of rail and road segments. Railways carry long distance
heavy cargo such as fertilizer, steel, grain, salt etc. HCVs complement and compete with
railways for such cargo.

M&HCVs are used for transport of heavy commodities such as steel cement, fertilizers etc.
LCVs are preferred for high volume low bulk cargo such as consumer goods, textiles, for
short distance haulage.

A LCV is defined in the Motor Vehicles Act as a vehicle with GVW of not more than 6
ton. A HCV is defined as vehicle with GVW of more than 6 ton.

Gross vehicle weight is defined as vehicle weight plus rated payload. Rated payload is the
maximum weight permitted to be loaded on the vehicle under Motor Vehicle Act.

The payload determines the earning capacity of the vehicle, since freight rates are charged
on the basis of ton/ km transported. The payloads in the Indian market range from 0.675
ton to 40 ton.

However in India, overloading ie loading the vehicle with weight in excess of its rated
payload is the norm, although it is a punishable offence. For overloading, the size of
platform and power of engine play a major role.

The important factor for evaluating production or demand will be vehicle ton produced/
sold, rather than number of vehicles. For example: for a requirement of 6 ton payload the
transporter can purchase either 3 vehicles with 2 ton payload or 2 vehicles with 3 ton
payload.

The CVs are compared, based on price per payload vice-versa operating cost of the vehicle.

On the basis of fuel used, vehicles can be classified as diesel or petrol driven vehicles.
Diesel vehicles are economical and more popular in India. Petrol vehicles have strong
niche in hilly/ cold areas where vehicles require a cold start.

In India, trucks and buses have the same chassis and other features, with only the body
being different. Elsewhere in the world these two differ in terms of suspension, steering
systems, number of axles etc.

As India lacked expertise in vehicle manufacture, technology had to come from outside the
country. Telco had a collaboration with Mercedes-Benz for some time, however it was
discontinued later.


Oligopolistic conditions in the commercial vehicles segment prevented technology
advancement. The truck segment is still dominated by single or twin axle vehicles. Very
low prices and low labor costs favored small fuel-inefficient units.

Further, the over loading possibility with single axle trucks in comparison to multi axle
vehicles (MAV) nullifies the financial advantages resulting in subdued demand for MAVs
in the country. To make matters worse for MAVs, congestion at truck terminals in urban
centers virtually rule out the entry for them.

Commercial vehicles business is characterized by strong entry barriers of high initial cost,
requirement of strong distribution/ after sales service network, vendor/ ancillary network,
long gestation period and technological adaptations to peculiar Indian conditions etc. Due
to these barriers, commercial vehicle sector, unlike passenger cars, does not face any
significant immediate threat from new MNC ventures.

Product life-cycle for CV has become shorter as players have accelerated new product
launches to retain market shares. New products that cater to niche consumer segments have
also increased the market segmentation.

High ancillarisation is an integral feature of the industry. Typically 60-70% of the
components are sourced from third party vendors. Development and upkeep of an ancillary
network is one of the most crucial tasks.

On the face of balance sheet, material cost accounts for about 70-75% of total cost for CVs.
This however should be interpreted keeping in mind that typically, about 60-70% of
components are sourced from outside. These components, treated as material cost have in-
built overheads (which are fixed cost) of the vendors.

Emission Norms: India is implementing emission norms in two phases. The Euro I
norms were implemented in 1996 and Euro II norms have become applicable wef 1
April, 2000.

As both ALL and Telco have technical collaboration with Hino engines and Cummins
respectively for producing engines meeting Y2K emission norms, the CV segment will not
be facing any major threat. But it is leading to increase in prices of CV in the near future.


Demand-supply, import-export

Demand

Both passenger carrier (bus) and goods carrier segments have a predominant customer
segment each. The passenger segment derives its major portion of sales from STUs
(approximately 80%) and private bus operators. But for goods carrier major portion of sales
is from fleet operators and transport companies (approximately 80%) and the rest from
government institution and private bodies. The total demand for CVs comprises both
private as well as the public sectors.

Since 80% of CV's are purchased on credit, the availability of credit is a major factor
influencing demand. The credit squeeze affects the demand negatively. For example, the
demand dropped in 1983, 1991 and 1998 mainly for this reason. The cost of credit affects
the operating margins of transport operators, by way of raising the break-even point of fleet
operations. The other important factors influencing demand of CV are depreciation norms,
diesel prices and changes in the Motor Vehicle Act.

As most of the CVs are purchased by corporate entities (institutions, companies,
partnerships etc) the depreciation norms provide tax shelter and affect the purchase of CVs.

The availability and price of diesel plays a key role in operating profits of the vehicles
about 45% of the cost goes towards buying the fuel. An increase in diesel prices causes
imbalance in economics of fleet operators as they will not be able to pass on the increase in
cost to end-users.

Market expansion for freight availability for trucks is largely a function of economic
growth and shortfall in railway's haulage capacity. The increase in economic activity helps
in increased freight availability and hence has a positive impact on demand for CVs. Over
and above the shortage in competent mode of transport, railways help the road traffic to
increase freight movement through CVs and in turn increase demand for new trucks.

Demand for buses is largely dependent on allocation of state budgets as almost 90% of the
buses are purchased by the state transport undertakings. Thus, the State budget allocation
for purchase of new buses by state transport plays a key role in demand for buses.

The demand for CVs has exceptionally mixed trend on account fluctuating M&HCV and
the LCV sales, which have not been moving in tandem with each other. As indicated in the
table above, the industry has seen a wide fluctuation in sales volumes over the past decade.
The sales for CVs has increased from 131,668 in FY91 to 171,319 vehicles in FY2000 at a
CAGR of 3%.After posting a positive growth in FY91 and FY92, the segment witnessed a
downturn in FY93 mainly due to a credit squeeze, but bounced back in late FY94 to record
a y-o-y growth of 32% in FY95. After high double digit growths in


the years FY94, FY95 and FY96, cyclicality again raised its head and from H2 FY97
onwards, the sales of CVs started dwindling, leading to a drop of 33%yoy in FY98. This
downtrend continued well into FY99. However, things bounced back in FY2000 with sales
recording a growth of 22.4%yoy.The demand in FY2001 fell by 12.2% due to overall
economic sluggishness. During FY2001, the overall demand dropped as the M&HCV
segment recorded a 21.3% decline in sales though the LCV segment grew by 4.5% y-o-y.
In the half year ending 2001-02 , the M&HCV sales increased by 20.7% y-o-y and the
LCV sales dropped by 10.5% y-o-y.

Note: For trends in the sales of CV, LCV and HCV, refer Appendix A2

Supply

Market Share For M&HCVs :-

Company FY2001 FY2000 FY1999
Ashok Leyland 36.4 33.6 34.9
Telco 63.4 66.2 64.7
HM 0.1 0.2 0.4

Source : SIAM

The M&HCV sector is an oligopoly with the control resting with Telco and Ashok
Leyland. Hindustan Motors is a marginal third player with a market share of 0.1%. Telco
commands a market share of 63.4% of the total M&HCV sales in the country.

Ashok Leyland has seen a slight decline in its market share in FY2000 to 36.4% as
compared to 33.6% last year. The company has attributed this to the fact that it has gone in
for restructuring of its dealer network in the north and eastern regions of the country, which
meant that sales were affected for around five to six months.

Market Share In LCV Segment :-

Company FY2001 FY2000 FY99
Ashok Leyland 0.8% 0.8% 1.0%
Bajaj Tempo 5.2% 7.5% 6.5%
Eicher 13.4% 11.5% 9.4%
M&M 9.5% 10.8% 9.0%
Swaraj 8.1% 6.6% 5.3%
Telco 62.9% 62.8% 68.7%


The LCV segment is populated with six players with Telco being the traditional market
leader by a wide margin. Telco launched its fully indigenous Tata 407 (GCV-4T,70HP) in
1986 followed by Tata 608, 207, 609, 709E and 713. Telco has been continuously
introducing new models in the LCV segment in the last seven years. Its LCVs have a wide
range of applications as minibuses, trucks, vans and ambulances. However, since the last
four years, Telco is continuously been losing its share of the market as more aggressive
players like M & M, Swaraj Mazda, Eicher Motors and Bajaj Tempo have come to cater to
the market with their new models. Eicher Motors, for e.g., has come to occupy the
intermediate range CV segment and has succeeded to create a niche for itself by rolling out
ambulances, egg/broiler carriers, school buses etc, which cater to specific customers.
Swaraj Mazda, too, has improved its market share to 8.1% in FY2001, against 6.6 % in the
previous year.

Demand Supply In CV Segment

FY99 FY2000 FY2001 FY2002 (P)
Demand
M&HCV 79,124 106,106 82,017 87,758
LCV 50,698 55,301 54,602 58,424
Domestic demand 129,822 161,407 136,619 146,182
Exports 10,108 9,912 13,779 13,503
Total demand 139,930 171,319 150,398 159,685
Supply
Capacity 330,000 330,000 613,000 613,000
Over capacity
Volume 190,070 158,681 150,452 168,506
As % of capacity 57.6 48.1 24.5 27.1
yoy Growth %
M&HCV (10.8) 34.1 (22.7) 7
LCV (8.6) 9.1 (1.3) 7
Domestic demand (11.6) 24.3 (15.3) 6.2
Exports (28.2) (1.9) 39.1 (2)

Source : SIAM & INDIA INFOLINE


Key Earning Drivers

Economic Activity: The availability of freight depends on the economic activity in the
country. Therefore, an increase in economic activity broadly represented by growth in GDP
helps in increasing the freight availability.

Government policy: The GOI policy towards depreciation norms, excise duty sales tax etc
will have a bearing on the demand for MUVs and CVs. The levy of 12% uniform sales tax
already has and may in the near future play a role in the performance of the industry.

Implementation of infrastructure projects: The implementation of infrastructure projects
will have a positive impact on demand for CVs & UVs as they are extensively used in
transportation of material and people requirement of the projects. Therefore the mega
projects like National Highway project, Dhabol power project-II will trigger the demand
for segment.

Freight rates: The freight rates determine the revenue component of fleet operators. The
improvement in freight rates consistently, over a period of time will improve operating
profits and build confidence measure for operators. The increasing operating margins
combined with improvement in fleet capacity utilization will help in boosting the demand
for commercial vehicles. Presently, where on one end, the diesel prices have shot up
considerably, on the other end, freight rates have come down substantially due to lack of
business. This has in turn affected the operating margins of the fleet operators. If this
continues, the fleet operators will not be in a position to extend their operations, thus
ultimately pulling down the commercial vehicle sales.

Movement in diesel prices: The diesel prices are controlled by the GOI notifications. As a
measure of phased dismantling of APM, diesel prices have been linked to international oil
prices. This along with drop in oil prices to a decade low, led to drop in diesel prices. This
has helped in improving operating margins for operators. But the imposition of one rupee
cess, to be used for building road infrastructure, has nullified the effect. Therefore, changes
in the GOI policy have to be traced as it has a strong bearing on operating margins of
operators. The recent hike in diesel prices have imposed immense pressure on the transport
companies and fleet operators, as they are also suffering from lower freight rates.

Policy on scrapping of old vehicles: The recent notification by judicial body to ban
commercial vehicles above 20 years in age in New Delhi will lead to a demand for at least
15,000 vehicles to be satisfied in short period of time. If similar measures are implemented
in other parts of the country will boost demand for new vehicles.


Outlook

The M&HCV segment depends much on infrastructure sectors like steel, cement as well as
transportation. The infrastructure industry growth index has fallen to 3.4% in November
2001 from 7.4% in November 2000. The cement and coal sectors reported the highest
growth rates of 12% and 7.9% respectively whereas the steel grew by mere 0.7%.However
the agricultural sector is projected to grow by remarkable 6.9% resulting in the GDP
growth during 2002-03 , though on a low base of drought –affected harvest and low food
production. Since CV sales have a linkage with industrial growth and diesel prices, the
demand may fall on account purchase deferment due to prolonged uncertainties in respect
of fuel prices and uniform sales taxes. The crude oil has grown by 0.6% in the current
fiscal and the sustained increase in the global crude oil prices has led to a hefty increase in
the diesel prices. The railways have absorbed this price increase without hiking the freight
rates and this might further exert downward pressure on the profitability of truck operators
leading to decelerated purchases of new trucks. However with the GDP growth rate
estimated to be around 4.5-5% in 2002-03 , with the industry growth expected at the rate of
4% ; there seems to be some recovery in the CV sales in the next fiscal.The CV sales can
grow by 7% if the economy grows by around 6.4% which was the earlier projected growth.
The growth of medium and heavy trucks and buses would be relatively slower due to better
railway efficiency with which trucks compete for moving bulk cargo, higher diesel prices
and the poor quality of road infrastructure. The demand for HCVs will depend on
replacement demand by the fleet operators, good monsoon implying god agricultural
growth. The HCVs sales was up by 20.7% and the LCV sales dropped by 10.5% by the
year ending 2001-02.

In the long term, the market will slowly shift towards medium and heavy multi-axle
vehicles as is the worldwide trend at present. Already, vehicles made by Volvo are being
recognized for their better performance in terms of lower turnaround time and lower driver
fatigue. This would require large investments in highways which is expected as the
government of India continues with its reform agenda. The entry of high tonnage vehicles
will contribute towards changing the structure of CV segment in the long run. This will
also improve the technology of vehicles available in the country.


EICHER MOTORS LTD.
ABOUT EICHER

Eicher Motors, was founded in 1982 to manufacture a range of reliable, fuel-efficient
commercial vehicles of contemporary technology. The unit manufactures and markets
commercial vehicles with Gross Vehicle Weight (GVW) ranging from 5-25 tons.

Today, Eicher Motors is one of the leading manufactures of commercial vehicles in India
with a 33% market share in the 7T-11T segment. The success and growth of this unit is a
result of various customer-driven strategies. The manufacturing facility is situated in
Central India – Pithampur, Madhya Pradesh. Eicher Motors has stepped into the Heavy
Commercial Vehicle segment with its state-of-the-art HCV, the quot;Eicher 20.16quot;, the first
commercial vehicle designed and developed indigenously.

Eicher Motors functions through a strong three-tier service network consisting of
authorised distributors, service centres and company trained private mechanics. The
vehicles are sold and serviced through a network of over 576 Authorized Contact Points all
over India, supported by service centres and over 4500 company trained private mechanics,
who are close at hand on all major highways throughout India to provide initial quot;first aidquot;
to the vehicles if required.

In 1986, Eicher Motors entered into a technical and financial collaboration with Mitsubishi
Motor Corporation of Japan to manufacture the Canter range of vehicles. The technical
assistance agreement with Mitsubishi ended in March ‘94 after successful transfer of
technology and on achieving total indigenization with only a few parts sourced globally.

Eicher Motors has acquired formidable expertise in designing and developing commercial
vehicles. It has a world-class R&D centre manned by a team of brilliant engineers and
equipped with latest Computer Aided Design (CAD) and Computer Aided Engineering
facilities like NASTRAN, FEM analysis packages. Leveraging its in-house expertise, this
unit has successfully developed a wide range of commercial vehicles to meet varying
customer needs. The product range includes Trucks : Eicher 10.50, Eicher 10.75, Eicher
10.90, Eicher 11.10, Eicher 20.16 & 30.25; Buses: Eicher Skyline, Eicher Cruiser and
Eicher School Bus range of buses. Besides the basic models, it offers over 85 models of
ready-to-use custom-built vehicles for various specialised applications. Eicher Motors’
products have been well accepted in the market. This is also demonstrated by significant
sales of its commercial vehicles in export markets where the company competes with
reputed international brands.


Brief Background
Eicher Motors Ltd. is one of the leading engineering companies in India engaged in the
following businesses:

• Commercial Vehicles

• Engineering Components

• Engineering Services

• Motorcycles

The Group was established in 1959 with the roll out of India’s first tractor.

Diversified company engaged in the business of commercial vehicles, motorcycles,
automotive gears and components, engineering solutions.

Significant player in automobile sector having turnover of more than INR 22000 Million
(USD 549 Million) for the year ended 31st March 2007.

Having 4 manufacturing facilities with more than 2600 permanent manpower.

State of the art manufacturing facilities and lean management systems
Recently acquired Design Intent Engineering and Hoff Associates Inc. - engineering design
companies based in Michigan, USA

Sold Tractors and Allied Divisions in FY 2005 -06 to focus on current businesses.


Eicher Motors Businesses


COMMERCIAL VEHICLES
The Commercial vehicle division was established in 1986 in collaboration with Mitsubishi
Motors Japan and is one of the leading manufacturers of commercial vehicles in India
having capacity of manufacturing 38,000 Commercial vehicles.

The Product range includes 5 ton, 7 ton, 9 ton, 11 ton, 16 ton & 25 ton GVW categories
trucks, tipper, trailers; Bus range includes City buses, School bus, luxury coach,
Intercity CWC, Nova 200; Ready-To-Use application vehicles - Around 85 RTU built
vehicles to suit a diverse range of applications.

The manufacturing plant equipped with state-of-art facilities with stringent quality control
norms - practices like Kaizen, Just-in-time, TQM and TQC etc. and State of the art R&D
set up helping the commercial vehicles unit to serve their customers better.


EICHER’S CV BUSINESS

Eicher is the third largest player in the Indian Commercial Vehicles market:

– It leads in the LCV segment with 27% market share in domestic 5-12T cargo segment in
FY 07.

– It is gaining momentum in the HCV segment with successful launch of 16T, 25T, Tipper
and Passenger segments and 1.8% domestic cargo market share in FY 07 implying a
growth of 32.9% in sales volume over FY 06.

Eicher’s CV business is well positioned to tap the incumbent growth in the CV industry
owing to its:

–Established track record and stronghold in LCV segment

–Strong brand equity, an established Marketing and Distribution Network and cost
competitive R&D and manufacturing base providing a ready platform for foray in HCV
segment.

Eicher – the third largest player in the industry – is well set to leverage its dominant
presence in LCV segment to gain significant market share in the fast growing HCV
Segment

With the introduction of new products and upgrading of existing products across the range,
Eicher poised for higher volumes.


EICHER CV BUSINESS – AN OUTLOOK

Industry on Fast Track

• CV industry (5T & above) has grown by 25.4% with 355,761 vehicle s sold in FY 07
over last year.

• Improving road infrastructure creating market opportunities for high performance
products.

Strong Position in LCV Segment

• Strong position in LCV segment with market share of 27% in 5 -12T domestic cargo
segment.

• Absence from Sub 5T category leaves significant room for further expanding the product
portfolio.

• Established track record and Brand Equity, recognized for superior product
quality/specifications.

Ready Platform for Successful HCV Foray

• Successfully launched 16T, 25T, Tipper and Passenger segments wi th an indigenously
designed product range.

• Various success stories in segments and geographies, that would be replicated pan-India
with expanding sales & marketing infrastructure and focused marketing push.


• New products on the verge of being launched, providing significant opportunity to
capture wider spectrum of the market and expanding customer segments.

• Incumbent Brand Equity to facilitate successful foray into lucrative HCV market.

Sales and Marketing Infrastructure

• Strong dealer network in West, Central and South India

• Strengthening the dealership network, primarily to increase geographical coverage

• Sales & Marketing setup was historically more focused on LCV. Significant progress
made to gear up the same to cater to HCV segment

Low Cost Manufacturing and Product Development

• Established R&D infrastructure and proven skill set.

• Proven capability to develop new products in short timeframe and at minimal
development cost, giving crucial time to market and cost advantage.

• Constantly evolving supply chain management with robust supplier base.

• Optimized manufacturing set-up with a good mix of “Make and Buy”.

Management and Engineering Skill Set

• Qualified and motivated management with established track record of change
management, business integration and new product development.

• Strong engineering and product development skills.


BOARD OF DIRECTORS

S. No. Name Designation
1 Mr. S. Sandilya Chairman & Director
2 Mr. P. N. Vijay Director
3 Mr. Priya Brat Director
4 Mr. M. J. Subbaiah Director

Bankers

State Bank of India
State Bank of Indore
Canara Bank
State Bank of Mysore
Centurion Bank Limited

Registered Office, Factory & Marketing Head Office

102, Industrial Area No.1
Pithampur, District Dhar,
Madhya Pradesh – 454775

Group Office

Eicher House, 12 Commercial Complex,
Greater Kailash - II (Masjid Moth)
New Delhi - 110 048

Official website: www.eicherworld.com


PROMOTORS/OWNERS

Statement showing Shareholding of persons belonging to the category
quot;Promoter and Promoter Groupquot;

Shares as a percentage of
total number of shares
Name of the Number {i.e., Grand Total (A)+(B)
Sr. No
shareholder of shares +(C) indicated in
Statement at para (I)(a)
above}
1 EICHER ltd 9279835 33.03
EICHER
2 GOODEARTH 6950429 24.74
LIMITED
EICHER
GOODEARTH
3 56388 0.20
HOLDING PVT
LTD
EICHER
4 INVESTMENTS 13200 0.05
PVT LTD
MITSUBISHI
5 MOTORS 1000000 3.56
CORPORATION
SIDDHARTHA
6 3240 0.01
VIKRAM LAL
TARA VIKRAM
7 13000 0.05
LAL
SIMRAN
8 13120 0.05
VIKRAM LAL
EICHER
9 HOLDINGS PVT 21720 0.08
LTD
TOTAL 17350932 61.77


Statement showing Shareholding of persons belonging to the category quot;Publicquot; and holding
more than 1% of the total number of shares

Shares as a
percentage of
total number of
Name of the Number shares {i.e.,
Sr. No Category of shareholder
shareholder of shares Grand Total (A)+
(B)+ (C) indicated
in Statement at
para (I)(a) above}
ARISAIG
PARTNERS
(ASIA) PTE
1 LTD A/C 2376503 8.46
ARISAIG INDIA
MUTUAL
FUND
RELIANCE
CAPITAL
TRUSTEE CO.
2 LTD A/C 300000 1.07
RELIANCE
REGULAR
SAVINGS
FIDELITY
TRUSTEE CO.
3 PVT. LTDA/C 443543 1.58
FIDELITY
EQUITY FUND
RELIANCE
CAPITAL
TRUSTEE CO.
4 LTD.A/C 1659957 5.91
RELIANCE
TAX SAVER
FUND
TOTAL 4780003 17.02


Financial Performance

EICHER MOTOR LTD. is the 3rd largest Commercial vehicle manufacturer in India and
the leader in Light Commercial Vehicle (LCV) Segment. The growth of EICHER MOTOR
LTD. can be observed the way their profit has increased since last 10 years.
By analyzing EICHER MOTOR LTD. annual reports since 1996-97, the growth of the
organization can be analyzed from the following graph showing the Profits (After Tax) in
millions:

Financial Year Profit after Tax
1996-97 116.793
1997-98 37.98
1998-99 78.23
1999-00 158.759
2000-01 235.3
2001-02 184.75
2002-03 374.6
2003-04 336.2
2004-05 588.5
2005-06 2168.8

Source: Annual reports

Note: For Chart showing growth, refer Appendix A2


Market Share Analysis


Source: SIAM and other sources

By analyzing the above figures, TATA MOTORS has undoubtedly been the leader in
Medium and Heavy Commercial Vehicles with an average of 50 – 57 % of market share.
And Eicher is not far behind having a market share of approx. 8 – 20 % in HCV segments.
However, as far as LCV segment is concerned, according to the sources, the leader by far is
EICHER MOTOR LTD. with a share of 27%.

Eicher’s market share in Domestic 5-12T cargo segment has increased from 23.7% in FY
2006 to 27.0% in FY 2007.


Eicher enjoys the dominant position and high market share in 5 – 12 T cargo segment.

Analyzing the market for LCV segment in India:

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007
INDUSTRY 8740 9745 12166 18129 20339
EML 980 1716 2088 2017 2619

Note: For the market share chart refer Appendix A2


COMPETITIVE STRUCTURE

The major players in the Commercial Vehicle Segment are Ashok Leyland Ltd, Hindustan
Motors Ltd, Telco, Volvo India Pvt. Ltd, Bajaj Tempo Ltd, Eicher Motors Ltd, Mahindra &
Mahindra Ltd, Swaraj Mazda Ltd with almost half of the M&HCV players also being in the
LCV segment.

ASHOK LEYLAND LTD.

Ashok Leyland Ltd (ASL) was initially known as Ashok Motors. With participation from
British Leyland in 1954, it was renamed Ashok Leyland. In 1987, the Hinduja group took
over controlling stake from Rover. It is based in Chennai and is the 2nd largest truck and
bus manufacturer in India.

The company is in the business of manufacturing Commercial vehicles (CV). The company
also manufactures vehicles for defense and special applications and engines for industrial,
Gen – set, Marine requirements and automobile spare parts. It also makes double – decker
bused in India. The major part of the revenues comes from the M&HCV segment.

In the FY 2007, ASL had a total Domestic sales of 77,069 (both CV Trucks and Buses
included) which is 36% more than previous FY 2006. ASL also observed an increase in its
Exports from 6025 to 4879 an increase of 24% as compared to last FY 2006.

The company has a strong presence in the south. It has been successful in improving its
market share in the north by 3.7 percentage points in FY04. New models were introduced
by the company that enabled it to improve its market share by 2.7 percentage points in the
multi-axle segment that constituted about 38% of the total M&HCV trucks.


SWARAJ MAZDA

Swaraj Mazda Ltd. deals with the manufacturing of Light Commercial Vehicles. They
mostly manufacture buses, trucks, police personnel carrier, ambulance, water tankers and
special vehicles. The company was formed in 1983 and production started from 1985.

Promoted 1984 in technical and financial collaboration with Mazda Motor Corporation and
Sumitomo Corporation, Japan for manufacture of Light Commercial Vehicles (LCVs),
Swaraj Mazda represents two powerful brands:

Swaraj-Symbolizing best Indian technology and engineering.
Mazda- Symbolizing R&D and innovation edge on global scale.

Presently manufacturing vehicles for goods and passenger applications. Over the years it
has built up a wide product portfolio covering regular as well as niche segment needs.
Swaraj Mazda Vehicle population today stands over 1,00,000.

Note: For growth chart of Swaraj Mazda, refer Appendix A2

TATA MOTORS

Tata Motors is one of the most important fore runners of the Indian automobile industry.
They believe in focus and state-of-the-art facilities. They probably have the best
infrastructure required for the assurance of manufacturing quality vehicles. They deal with
M&H Commercial Vehicles, Intermediate Commercial Vehicles, Light Commercial
Vehicles, Small Commercial Vehicles, Utility Vehicles Etc. In the Commercial Vehicles
segment, they mostly manufacture buses and trucks. They even have a good range of
passenger vehicles as well.

TATA Motors dominates over 60% of the Indian Commercial Vehicle Market. It is also the
world’s 5th largest medium and heavy commercial vehicle.

HINDUSTAN MOTORS LTD

Hindustan Motors Ltd is one of the oldest car manufacturing company of India. It was
founded in 1942. It manufactures a wide range of vehicles from cars to trucks to school
buses to trekker to porter. However, it is more popular for one of its particular car model
called the Ambassador. But, at the same time it does manufacture a lot of Commercial
Vehicles as well. It was one of the leading players in cars till the early 80's but could not
maintain its position after globalization came into effect and the markets were opened. It
has its manufacturing plants in Uttarpara- West Bengal, Pithampur- Madhya Pradesh,
Thiruvallur- Tamil Nadu and Hosur- Tamil Nadu.


TELCO

Telco deals with Heavy Commercial Vehicles, Light Commercial Vehicles, Multi-Utility
Vehicles etc. Telco was set up in 1945 to manufacture steam locomotives. Now it's the
largest private sector company in Commercial Vehicle manufacturing. The four
manufacturing plants of Telco are located in Jamshedpur in Jharkand, Pimpri and
Chinchwad in Pune ( Maharashtra) and Lucknow in Uttar Pradesh. It has a market share of
31.2% in Multi Utility Vehicle Segment.

FORCE MOTORS LTD. (PREVIOUSLY KNOWN AS BAJAJ TEMPO LTD)

Force motors Ltd. (Previously known as Bajaj Tempo Ltd) is a promising company in the
Commercial Vehicle segment. The company is now working on the project of introducing
state-of-the-art range of trucks. The company has different technological collaboration with
many international giants. Hence, it has an upper edge with new and modern technology.
They are also working on eco friendly CNG bus engines. They are the only company to
have a full range of Commercial Load carrying vehicles.


ENVIRONMENT ANALYSIS
COMMERCIAL VEHICLES – INDUSTRY DRIVERS

Growth in CVs is fuelled by Several Drivers:

1. Favorable Demand Supply Scenario

• Total available capacity in the road freight industry grew at 12 % CAGR over FY02-06 to
1486btkm (billion tonne km), with the total freight movement by road growing at 12.4%
CAGR to 921btkm.

• Consequently, there has been an increase in capacity utilization level over the last few
years – inching up from about 60% in FY02 to 62% in FY06.

2. Freight Outlook remain Buoyant

• CV sales are correlated with the state of the freight industry, with growth in CV sales
(MHCV trucks) closely tracking freight industry changes.

• Strong economic activity in the country, especially in sectors like cement, mining, steel
production, automobiles, consumer durables, food processing and food grain production,
leads to in creased demand for freight movement by road.

• This is likely to lead to an 11.5% CAGR in total freight transport and a higher 12.5%
CAGR in road freight transport.

3. Improved Profitability of Fleet Operators

• Truck operators’ profitability is most sensitive to freight rates and fuel price s (60-65% of
the total cost).

• Continued strength in freight rates in the last 12 -15 months (up ~5%) and the 12% cut in
fuel prices since Nov -06 have adequately compensated for increased cost pressures owing
to inflation and rise in interest rates

• Continued profitability is expected for truck operators with dem and for freight transport
expected to remain strong and freight rates holding strong.

4. Favorable Regulatory Environment

• Regulations discourage the use of old, polluting and uneconomical vehicles

• The SC ban on overloading has lead to incremental volumes (~700,00 units since the ban
was imposed) and a transition to more economical MAVs and Tractor Trailers.


• Proposed phase-out of CST by 2010 will boost the organized logistics players and in turn
the CV manufacturers.

5. Shrinking Replacement Cycle

• The proportion of trucks under five years of age rose from about 34% in FY02 to nearly
45% in FY06.

• Strong freight availability, changes in emission norms, introduction of more economical
and fuel -efficient vehicles, the Supreme Court ban on overloading and strict restrictions
impose d by cities on vehicle age.

6. Improving Road Infrastructure

• Indian Government’s initiatives to significantly improve the road infrastructure, including
the Golden Quadrilateral, the NSEW corridors and port connectivity projects, will allow
more efficient Cargo movement thereby driving CV demand

• Indian Railways has proposed several initiatives like dedicated freight corridors and
introduction of new high capacity wagons to re-capture the market share it is losing
steadily to road transport. However, these initiatives would likely take at least five years to
get implemented and hence do not offer any significant threat to the fleet operators in the
medium term.

Several Factors are expected to boost CV demand both for New as well as Replacement
demand resulting in Sustained Growth in coming few years.

NEW DEMAND + REPLACEMENT DEMAND  SUSTAINED GROWTH

New Demand due to:

- Higher Freight Rates
- Strong Economic Growth
- Easy Availability of Finance
- Thrust on Development of Road Infrastructure

Replacement Demand due to:

- Availability of more rated payload and profitable vehicles
- Faster Replacement
- One Time Factors (ban on overloading, emission norms etc…)


Commercial Vehicle market in India is growing in a furious pace.

Analyzing the volume growth over last few years in CV Industry:

- CAGR for LCV (5 – 12T) is about 12.6%
- CAGR for HCV is about 26%
- CAGR for passenger = 17%
- CAGR for Total = 20 – 22%

• HCV segment has been growing fastest in overall CV industry with the following sub-
segments fuelling this growth:

– 25T segment has grown to 102,828 vehicles sold in FY 2007 implying a growth of
68% over last year
– Tipper segment has grown to 44,362 vehicles sold in FY 2007 implying a growth of
41% over last year
– Tractor/Trailer segment has grown to 25,079 vehicles sold in FY 2007 implying a
growth of 107% over last year


Commercial Vehicle Industry growth is also aided by India’s High Economic Growth.

• Macro economic factors indicate that India is at the verge of a high growth period

• India’s growth is driven by an interplay between three important Macro-Economic
factors, viz.:

– Demographics – wherein proportion of dependent to working age population is falling
rapidly

- Steady stream of Economic Reforms undertaken by the Government

– Globalization

• Approach Paper for the 11th Plan (2007/8 to 2011/12) has set a target of 9% GDP
growth


Aggregate consumption in India is likely to increase 4 times in the next 20 years owing to
increasing disposable income of burgeoning middle and upper income classes.

• India is emerging as the largest contributor to growing working population

– This has and would continue to aid India’s growth, making it the second fastest
growing economy after China.

• In order to meet the 11th Plan growth estimates, the Committee on Infrastructure has
estimated an investment requirement of Rs 2,620 bn over 2012 on national highways,
airports and ports
• Engineering and construction sector is expected to be key beneficiary (amounting to
65% of Infrastructure spend) of the Infrastructure Growth
• Infrastructure improvement would foster economic growth, thereby increasing cargo
Availability; Allow more efficient movement of cargo over roads.

Thereby driving growth in the CV volumes.


A Good Freight Outlook

• Over the past few months, fleet operators’ costs have risen, due mainly to increases in
vehicle prices by OEMs, rising tyre prices and rising interest rates.

• However, a decline in diesel prices as well as rising freight rates have more than
compensated for the incumbent cost pressures resulting in increased operator profitability

• Interest rates have more or less peaked

• Further, crude prices are expected to remain stable or decline over time

• Decline in interest rates and crude prices will further aid profitability of fleet operators,
boosting CV demand.


Summarizing the Environmental Scanning

• Structural changes in the underlying economy such as improvement in the road
infrastructure, and strong growth in the Indian economy have fueled and expected to
continue to drive growth in the CV Industry owing to:

– Increased freight availability aided by investment surge in key sectors - manufacturing,
construction, mining & increased foreign trade boosting containerized freight movement
– Strong growth in non-bulk commodities which is leading to an increased share of freight
transportation by road which is the preferred mode for non-bulk commodities

• Improved profitability of fleet operators will boost overall CV demand:

– Decline in diesel prices as well as rising freight rates have mo re than compensated for
the incumbent cost pressures owing to increases in vehicle prices by OEMs, rising tyre
prices and rising interest rates resulting in increased operator profitability

• Increased replacement demand as well as shift towards heavy tonnage CVs owing to:

– Strong freight availability, changes in emission norms, introduction of more economical
and fuel –efficient vehicles, the Supreme Court ban on overloading and strict restrictions
imposed by cities on vehicle age.
– The proportion of trucks under five years of age rose from about 34% in FY02 to nearly
45% in FY06.

• Significant improvement in road infrastructure will allow more efficient Cargo movement
thereby boosting CV demand

– Indian Railways has proposed several initiatives to arrest its steady decline in market
share. However, these initiatives would likely take at least five years to get implemented
and hence do not offer any significant threat to the fleet operators in the medium term.

• Passenger vehicles are also expected to show significant growth with increasing demand
due to rise in consumers ’ affordability resulting from strong growth in disposable income,
increasing urbanization, improved road infrastructure and consumer preference for
comfortable rides


The EICHER’s Advantage
Analyzing the EICHER MOTOR as an organization, the advantages/strengths can be
summarized under following heads:

a) The “PRODUCT” advantage

- Leveraging product differentiation to consolidate market share in LCV segment
- Expansion of product portfolio in the HCV segment and leveraging existing brand
equity to gain meaningful market share.

b) The “ESTABLISHED NETWORK” advantage

- Marketing and Distribution Strategy incorporates a further enhancement of the
existing Distribution Network
- Focused marketing team for HCV segment

c) The “LOW COST MANUFACTURING AND PRODUCT DEVELOPMENT”
advantage

- Established R&D infrastructure and proven skill set
- Proven capability to develop new products in short timeframe and at minimal
development cost, giving crucial time to market and cost advantage
- Constantly evolving supply chain management with robust supplier base
- Optimized manufacturing set -up with a good mix of “Make and Buy”

d) The “INDEGENIUS SKILL SET” advantage

- Qualified and motivated management with established track record of change
management, business integration and new product development.
- Strong engineering and product development skills


PRODUCT ADVANTAGE

• Eicher has predominantly focused on the LCV (5-12T) segment, where it is one of the
strongest players.

• Eicher has increasingly started focusing on the HCV segment.

• The Company is confident that its brand image and existing relationships would enable it
to successfully seed the market in a relatively short period and its product performance and
competitive advantages would ensure customer acceptance, resulting in a meaningful
market share in near future.


Note: For complete Product Portfolio, refer Appendix A1


ESTABLISHED NETWORK ADVANTAGE

• The sales and marketing network is continuously being upgraded.

• Specific HCV focused dealerships being added

• A very strong secondary service network created with Star Garage locations (51 nos.) and
private Mechanic Trained locations (966 nos.)

Eicher Motors Limited

On comparing the Network Distribution of all three major players: TATA, Eicher, Ashok
Leyland

Eicher has 142 dealers and TATA and Ashok Leyland 176 and 178 resp.


As seen from the figure above. EML has primary Service Network which includes
Dealership, Service dealership, Spare parts Distributors and retailers total 631 in nos.

Secondary Service Network which includes Star Garage and Privately trained mechanics
1017 in nos.

Expansion of dealer network and specific focus on HCV segment is expected to facilitate
high growth in volumes. Currently EML is strong in West, Central and South India.

Key Products Strengths of EML can be summarized:

• Provides the best value in each segment

– More fuel efficient (5 to 10% better), more payload (over 15%)

• Low operating cost and high resale value

• Ready –to use fully built-up vehicles

• Higher top speeds / Faster turn around

• Comfortable cabin – less fatigue while driving


• Creating differentiation and positioning on the basis of higher value delivery to the
customers through regular product up-gradation.

• Enhanced focus on safety and comfort features offering better value than competition.

• Eicher products offer distinct advantages:

– 10% more Fuel Efficiency
– About 10% more payload
– Strong and Sturdy Aggregates with better life
– More engine power
– Faster turnaround
– Factory built cabin and cargo body with safety features

STATE OF THE ART MANUFACTURING FACILITIES ADVANTAGE

Eicher Motor has one of the best manufacturing facilities in India. Some salient features of
EML manufacturing facilities can be observed as under:

a) State Of The Art plant at PITHAMPUR strategically located at Central India.
With approx. 375,000 square meter land area, the plant is the best example of
Optimal Investment for Maximum Productivity.
b) Integrated Manufacturing Facilities for Assembly Lines, Cabin Weld Shop with
Robotic Welding, Cabin Paint Shop…
c) Lines with multi model roll out capability
d) Strategic Ancillaries located around PITHAMPUR


ENGINEERING SKILL SET ADVANTAGE

Eicher’s indigenous engineering and product development skill-set provides it an
advantage in competitive Indian CV Market. The salient features that Eicher’s R&D
focused Engineering Skill Set shows can be summarized as under:

a) 140 Engineers and support of Engineering Design Division with further 200
Engineers
b) Eicher owns first successful Cabin development in India meeting ECE norms
c) In-house capability for Electrical & electronics integration. Complete Bus
Structure, Shell & Interior trim design
d) Complete Virtual vehicle integration & different simulations to carry out DFA,
DFS & failures simulations


Key Strengths for EML can be summarized as:

a) Product Advantage
b) Established Network Advantage
c) Low Cost and Manufacturing Facilities
d) Engineering Skill Set and R&D focus


CORPORATE SOCIAL RESPONISIBILITY CSR IN EML

The genesis of CSR at EML began with the growth of business. The management
communicates and demonstrates support for CSR at EML. Business Units and managers
are required to incorporate economic, social and environmental objectives into their
business plans. The understanding of CSR is very well articulated under “Corporate
Values” and thereby the actions are guided accordingly fron those values of the company.
The core values are being secular, apolitical, fair, trusting, empowering of employees and
adopting ethical practices. The CSR at EML is more than philanthropy. It takes care if all
its stakeholders, which can be very well understood by a corporate initiative under e –
motion.

The CSR principles of the company are found mostly in the areas of environment,
employer – employee relationship, ethics and community investments. EML is committed
to be the environmental leader and puts a great deal of emphasis on environment as a
priority CSR program. Company environmental commitments are reflected in its EHS
policy and its environmental management system, Environmental management plan EMP
at Eicher Motor is the logical conclusion of Environment Impact Assessment EIA.

The EMP includes following four stages:

1) Conceptualization: Existing environmental scenario
2) Planning: detailed study of environmental impact and identifying the necessary
control/mitigation measures
3) Implementation: Implementation of environmental control measures.
4) Operation: Monitoring the effectiveness of existing measures and those proposed in the
EMP

Some Environmental related issues initiated by EML are:

a) Rain water Harvesting
b) Energy Conservation – promoting non conventional green energy; natural draft
cooling towers; Automatic Switch off the Power of press motor; energy efficient
pumps and motors
c) Fuel efficient and environmental friendly vehicle etc…

Apart from environmental commitments, EML also takes a good care of its employees –
providing welfare schemes for them like PF, scholarships, education to their children.
Eicher as a company is committed to serve the community in its broadest sense. This
commitment takes many forms with special attention to education and quality of healthcare
facilities in our country.
In the city of Indore, EML has taken the responsibility of road safety. The company has
provided Traffic equipments and is responsible for their maintenance.


Testimonials from few of EML’s clients will strengthen their commitment to serve their
customers better.

a) BHORUKAS TRANSPORTING SOLUTIONS


b) ABC TRANSPORT CO.PVT.LTD


c) RAGHUNATHAN TRANSPORT

And many other clients of EML are much satisfied with their commitments to serve better.
The company’s senior managers always meet and greet a new mechanic or new a dealer
personally making the intermediaries realize they are also a part of EML.


MARKET INITIATIVES

- Improvement in customer and dealer engagement levels
- Reach the Customer – Target Fastest service response
- Vehicle Delivery Quality enhancement
- Nurturing Trained Private Mechanics through dealership salesmen


EML FUTURE OUTLOOK AND CHALLENGES AHEAD

EML has created the platform with strong potential for growth in HCV segment. The HCV
segment is Lucrative yet Challenging. The HCV is a large size market, currently
dominated by two players – TATA Motors & Ashok Leyland.

EML found the HCV market very lucrative but the company found it difficult to penetrate
owing to:
- Highly price sensitive market
- Requires India specific products
- Large loyal customers with strong reliance on trust and track record of
product performance.

Eicher has created the platform with strong potential for growth in HCV segment. The
company has successfully entered in 4 large segments:

- 16T, market size 38,000Nos.
- Multi – Axle, market size 100,000Nos.
- 4X2 16T Tippers, market size 25,000Nos.
- Passenger vehicles, market size 24,000Nos.

In the process of launching:

- Tractor Trailer, market size 25,000Nos.
- 6X4 Tippers, market size 20,000Nos.
- 16T variant with 4 cylinder engine.

EML started the HCV foray by launching the base 16T product (comprising about 35% of
HCV market) in Dec 2002. The company launched 25T products during following 2 -3
year period.

Note: For the growth of EML HCV product portfolio, refer appendix A2


FUTURE OPPORTUNITY IN MARKET – EICHER POSITION

Discontinuity in Market
emission norms would force upgrade
Overloading likely to go
Built up trucks and buses to become the norm
Increasing focus on life cycle economies

Growth in 7 – 11T

Industry Growth Opportunity in new segments
rapid growth in 7 – 11T HCV, Passenger
passenger segment to
boom Global Opportunity
shift from 16T to 25T Global Norms met

EICHER MOTOR LTD. Product Strength
Reputation for higher quality/better economic
Good response to HCV
Strong in 7 – 11T


CONCLUSION

Commercial Vehicle Industry in India is been growing with Compounded Annual Growth
Rate of approx. 21% with Light Commercial Vehicle growing at 12.6% and Heavy
Commercial at 26%.

Seeing the growing prospects of Commercial Industry in India specifically in Heavy
Commercial Vehicle segment, one could say EML has done justice to their business. With
leadership in Light Commercial Vehicle segment having a Market share of approx. 30%,
EML has proven its core competency in LCV segment.

The Product Portfolio offered by EML itself proves to be the Core Competency of the
company. The fuel efficient, good resale value products available all across the country via
a well Established Network makes EML a very strong player in Commercial Vehicle
segment in India.

Although in HCV segment, major players like TATA and Ashok Leyland has got majority
of market share – TATA is the leader with a whopping 60% market share in HCV segment.

Seeing the growth prospects in HCV segment – CAGR by which HCV segment has been
growing is approx. 26% which is even higher than the Total Commercial Vehicle Industry
as a whole – EML has decided to foray into HCV segment.
However, it will be very difficult to curtail the growth of TATA and ASL. The market
share of EML in HCV is just 8% as compared to TATA’s 60%.

For EML to have a growth in HCV segment, company need to understand the pulse of the
market and what exactly is the requirement. They have to cash their LCV leadership image
in HCV segment as well.

EML need to widen their Network which is a bit poor as compared to TATA and ASL.
(EML has got approx. 140 dealers as compared to 178 dealers from TATA)

EML must focus on their Core Competencies – Product, Network, Low Manufacturing
Facilities, R&D and skilled Engineering and Management employees – to have a global
presence in Commercial Industry.


Higher Freight Strong Economic Easy Road
Rates Growth Finance Infrastructure

NEW DEMAND

SUSTAINED GROWTH

REPLACEMENT DEMAND

Availability of One Time Factors
Faster Replacement
profitable vehicles (norms and
overloading ban etc.)

This shows what EML should focus on to gain leadership in HCV segment.


However, EML should try and enhance their network in HCV segment as compared
to TATA and ASL.

The figure above explains the Service Dealer Network scenario for EML. One can not
even compare the TATA and EML in service dealer network.

Eicher Motor Ltd. presence is very strong in Central and South India. The company
should try to enhance their network across India equally if they want to be the leader
in HCV segment as well.


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