Ecommerce companies drive CV demand post GST

Ecommerce companies are emerging a major driver of commercial vehicle demand, with online sellers and logistic providers consolidating warehousing solutions and opting for hub-and-spoke model under the unified GST regime.

Major CV makers, including Tata MotorsBSE -0.69 %, Ashok LeylandBSE 1.45 % and Mahindra Truck & Bus, report a significant surge in sales to transporters catering to the ecommerce sector.

Demand from ecommerce companies has traditionally been limited to smaller trucks and light CVs used for last-mile connectivity, senior industry executives said. However, in the past few months since GST and implementation of rated load regime, traction from the segment has started spilling over into heavier vehicles as well, they said. The country’s largest commercial vehicle maker Tata Motors’ sales to ecommerce transporters have increased 20% in the first eight months of the fiscal year.
Its rival Ashok Leyland, which has several logistics providers to leading ecommerce companies among its customers, said there has been a major surge in sales of 16T and 25T commercial vehicles used for transportation in the ecommerce, parcel and logistics and two-wheeler transportation sectors since September last year.

“All above applications put together, there has been a significant uptick in demand in H2 in comparison to H1of the current financial year,” said Anuj Kathuria, president (global trucks) at Ashok Leyland. “While GST has resulted in better turnaround time and longer operating leads, rated load regime has triggered off an increase in demand of higher GVW (gross vehicle weight)/horsepower vehicles,” he said.

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Vinod Sahay, chief executive officer at Mahindra Truck & Bus, said GST will impact and drive demand for CVs in ecommerce sector. “Growing inclination towards hub and spoke model is the driving factor for this segment,” he said.
According to Sahay while ecommerce sector has been preferring 25T long wheel base vehicles with modern technology, better fuel efficiency and reliability, “in the past few months, we have noticed a shift towards 31T long wheel base vehicles by this segment”.Ecommerce still accounts for a small part of the domestic freight industry. But the potential is significant. With the government recently approving 100% FDI in single brand retail and the number of online shoppers projected to increase to 175 million by turn of the decade, some industry executives said the revenue potential of commercial vehicle sales to the ecommerce industry could be $500 million, or Rs 3,195 crore, over the next 2-3 years.
“The logistics sector pertaining to the ecommerce industry in India stood at $460 million in 2016 and is expected to grow at a CAGR (compounded annual growth rate) of 48% to reach $2.2 billion (or about Rs 14,057 crore) by 2020,” said R T Wasan, head (marketing and sales), commercial vehicle business unit, at Tata Motors.
“Online retailers now deliver to 12,500-15,000 pin codes out of nearly 100,000 pin codes in the country. With logistics and warehouses attracting an estimated investment of nearly $2 billion by 2020, the reach of online retailers to remote locations is set to increase,” he said.
Analyst estimates on India’s ecommerce market vary, but all point to exponential growth with more Indians getting online to buy everything from groceries to highend gadgets and garments from Flipkart, Amazon, Snapdeal and other ecommerce sites. According to a report by the Retailers Association of India and the Boston Consulting Group, ecommerce market is expected to grow to $50-55 billion by fiscal 2021from $ 6-8 billion now. Commercial vehicle makers are therefore bullish.
“We are extremely confident of (growing in) the ecommerce segment,” said Shyam Maller, executive vice-president (sales and marketing) at VE Commercial Vehicles, a joint venture between Volvo and Eicher Motors.

Source:https://economictimes.indiatimes.com/jobs/ecommerce-companies-drive-cv-demand-post-gst/articleshow/62612814.cms

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