A recent article outlines the factors driving India’s booming mini-truck market. The introduction of the Tata Ace mini-truck in 2005 established a new sub-segment and marked the beginning of a long-term growth trend in India’s Light Commercial Vehicle (LCV) market. These sub one-tonne vehicles along with 2-3.5 tonne pick-ups form the Small Commercial Vehicle (SCV) sub-segment of the LCV market (up to 7.5 tonne) accounting for an estimated 90% of the LCV goods segment and 75% of the total LCV market. Since 2005 sales of SCVs have grown at a compounded annual growth rate (CAGR) of 22%.
The growth of the four-wheeled SCVs have come at the expense of three-wheeled vehicles which saw their share of the LCV market decline from 71% in 2005 to 23% in 2012. The four-wheeled vehicles offer more payload capacity, more range, improved safety, better emissions, lower costs and greater social status. Besides three-wheel vehicle replacement sales are being driven by increased consumer spending and more widespread use of the hub and spoke model to deliver goods. In addition, regulations are limiting the use of large trucks in cities and low capital costs and operating expenses are enabling entrepreneurs to purchase the vehicles.
The growth trend for the vehicles is expected to continue at a 17-18% CAGR over the next five years as the underlying factors such consumer spending, more sophisticated retailing, regulatory trends, expanding rural and semi-urban markets and growing entrepreneurism are forecasted to continue. Not surprisingly the success of the Tata Ace and strong market growth has attracted other market entrants such as Mahindra’s Maxximo offering more power and payload, and vehicles from Force Motors, Piaggio and a joint venture between Nissan and Ashok Leyland. More competition is expected. Learn more: mydigitalfc.com