Abdul Majeed has been pictured here in a Q&A session with the team at Commercial Vehicle Forum 2016.

This Q&A session with Mr. Abdul Majeed (Automotive Lead – PwC) sheds light on some of the burning topics of the commercial vehicle industry. This forms part of the “Knowledge Series” and offers a preview of the thoughts participants can expect to gain insights from during the Commercial Vehicle Forum, scheduled to take place on 24th of November 2016 at The Westin, Chennai.

1. With the industry starting to feel a shift in thought from upfront cost to total cost of ownership of a vehicle – how will this change the game play for premium players?

Developing markets such as India work very differently from developed markets. In India, customers are mostly concerned with costing. Therefore, upfront cost will continue to play an important role in India.That is not to say that the premium segment will not grow. However, players operating in the premium segment will have to think of a different strategy developing low budget trucks.

Premium segment works very differently in India compared with more developed markets as customers in India are not willing to pay more for freight.There has been a slight shift in thinking but the market is still clearly driven by mass market products. Premium segment is still a niche play.

There are two kind of OEM’s in the Indian market– one is obviously the premium European and American truck makers (such as MAN Truck, Daimler Trucks, Scania, Volvo etc.) and the other Indian players (such as Mahindra, Tata etc.). The Indian players are very aggressive in terms of their pricing and this strategy suits the Indian market well, which is very cost conscious.

Players focusing on the premium segment need to tailor their product offerings to the Indian market and bring the costs down. As product features such as driver comfort, telematics etc. are not of primary concern to the Indian customer. Pricing comes first, everything else is secondary.

2. With the brand lines (product ranges) going deeper and deeper to satisfy the differing needs of consumers, how does this impact the business model from a cost perspective?

It is necessary for any player competing in today’s market to cater to all the segments – LCV, Medium, Heavy etc. Otherwise a player won’t be able to survive as it would be difficult to gain the volumes.

Each customer has different needs which need to be served differently. Hence it is important for a player to have a strategy around platform. It is important for manufacturers to ask themselves questions such as:

How can we introduce technology/innovation to reduce costs?

How can we make our operations nimbler?

How can we look at costs at a very granular level and drive cost efficiencies wherever we can find them?

3. What innovative process engineering techniques should be followed to keep a check on cost as well as the meeting the desires of consumers (i.e. more and more variety)?

Players in the sector need to have the most optimum cost structure.

They need to fix variable costs – in terms of platform strategy, product development (for e.g. raw material, technology etc.).

Really cut down on fixed costs, wherever possible look for cost efficiencies and outsource. For example, let’s say you are a foreign player and you are importing all your components, such a strategy won’t work in the Indian market which is extremely price conscious. One needs to localize wherever possible and save costs without compromising on the quality.

Technology and innovation also need to be looked at closely to run nimbly and save costs whereever possible

4. How is digital impacting the commercial vehicle industry? Is there anuber like disruption waiting to happen in CV industry? How will it impact the CV players?

In a large and very unorganized market such as India, there is a huge scope for digital. Especially, in case of cargo/freight aggregation, since there are lot of similarities between these industries and the taxi services. There is definitely a need for a platform such as uber, ola etc. wherein a truck can be used more efficiently. No robust process is currently in place for matching demand and supply. This will definitely have a positive impact on the CV industry as I expect this to boost CV sales.

5. How important is after market in the overall game play, especially in a country like India? Should this be one of the critical pieces to be answered/assessed while the product is still on the drawing board?

Aftermarket is very important, if a player wants to have a decent level of profitability they need to pay attention to their aftermarket strategy. The relationship between a CV manufacturer and an aftermarket player has changed from a vendor relationship to that of a partner. This change has been brought on by the need to make sure that parts and services are available in every nook and corner and that too at affordable prices. It is critical for a truck operator to have their downtime reduced to a minimum. In such a case, a partnership strategy is the one that makes most sense, since it may not always be profitable for the aftermarket player to be present in every remote corner of India. Therefore, as partners these decisions can be motivated more by strategic considerations than commercial ones.

6. Supply chain has always been considered extremely important in this space. What recent changes has the supply chain process been undergoing, keeping changing product lines and consumer preferences in mind?

For OEM’s there have been two major strategic changes:

One is at a product level, wherein players are working towards reducing costs through technology, innovation and localization

The other is on the distribution side wherein it is not only important to ensure that components and parts are available throughout India but also mobile service provisions need to be made and truck repair facilities need to be provided. If such concerns of the customers are ignored,then they won’t be interested in your product.Therefore, it is imperative that a component supplier be a key stakeholder from the product development stage only.