The Commercial Vehicle Market

Government of India has identified 35 product groups in the engineering industry as Thrust Sectors which have the maximum potential for exports. Commercial vehicles are one of these items.

The World Market:

In 1986, worldwide production of commercial vehicles stood at about 12.1 million units, the same as for 1985. The developed world produced 85% of this. While the East European bloc contributed 10%, the remaining 5% was accounted for by developing world.

In terms of broad characteristics, the world market for commercial vehicles falls into three easily distinguishable regions. These are:

1. The developed World – consisting of North America (US and Canada), Western Europe, Japan, Australia and New Zealand;
2. The developing world – consisting of South & Central America, Africa, and Asia excluding Japan and;
3. The East European bloc – consisting of eight countries viz., USSR, East Germany, Czechoslovakia, Poland, Bulgaria, Yugoslavia, Hungary and Romania.

The developed World:

Markets in the developed world are characterized by large levels of demand which, coupled with their free economies, invite intense competition. This in turn leads to a very high segmentation of the market and a high level of sophisticated of the products. All products sold in the developed world have to follow stringent and rigidly enforced regulatory requirements dealing with environmental, safety and standardization aspects. Product liability and consequent damages/losses have to be provided for.

While the markets of the developed world are very large, the cost risks of entering these markets are extremely high. The expenses include costs such as market research, product certification and approval establishment of marketing distribution and after sales network and advertisement and publicity.

The US is today the largest and fastest growing market in this region with annual new commercial vehicle registrations having more than doubled to 4.8 million units in 1986 compared to 2.2 million units in 1981. Nearly 94% of the registrations are for commercial vehicles below 4.5 tons GVW. For vehicles with GVW up to 6,000 lbs (2.7 tons) the units registered have virtually trebled to 3.22 million in 1986 as compared to 1.09 million in 1981.

The West European truck industry witnessed boom in the late 70’s as a result of the recovery in the European market and significant exports to oil-rich countries in West Asia and Africa. However, in the early 1980’s exports to West Asia and Africa started to decline, followed by a recession in Europe. BY the mid-1980’s, it was estimate that the West European commercial vehicle production capacity exceeded demand by as much as 50%. While commercial; vehicle sales in Western Europe improved by 10% in 1986 to 1.5 million units, forecasts of demand predict marginal growth.

The Japanese commercial vehicle market has been growing steadily over the last five years at an average annual rate of 3.5% to reach a figure of 2.56 million units in 1986. The entire demand was virtually met by Japanese, manufacture: only 769 units were imported into Japan in 1986, representing 0.03% of the total market.

The developing World:

The developing world today is characterized by a shortage of foreign exchange. This situation has resulted from the continuing low international prices of oil, coffee, cocoa, copper and other raw materials which are the principal foreign exchange earners for the developing countries. In spite of the current economic difficulties, there is a strong potential for recovery which would have its basis in the region’s vast natural resources.

The fall in oil prices has prompted West Asian governments to cut back drastically on project expenditures and government budgets. These measures have led to greatly reduced levels of purchases in the past few years. Recent studies of world oil reserves, however, show that the bulk of the remaining oil exists in the West Asian countries. While the World’s reserve to production is 40 years, that of West Asia exceeds 100 years. Perhaps these countries will re-emerge as significant purchasers of commercial vehicles sometime in the future.

The South and Central American market, on account of its long distance from India, relatively smaller size and presence of large and dominant manufacturing facilities in Brazil and Argentina would offer limited export possibilities to Indian manufacturers.

Now Suzuki, Nissan and Mitsubishi have set up their manufacturing centers in India making the country possibly the Auto hub of the world. These companies plan to export all types of automobiles including commercial from India to Europe, Africa, Russia, Brazil and many other countries.