Commercial vehicle (CV) makers are chalking out cumulative investments to the tune of ?5,000 crore for the next two years due to favourable growth outlook and BS VI norms.

Vehicle makers and industry analysts project a low double-digit growth for the CV market in the next two years, supported by increased infra spending and curbs on overloading.

They have also commenced work on a new range of engines and other parts in preparation for the BS VI norms that will come into force by 2020.

Tech upgradation

Over the years, CV makers have substantially increased their investments towards new product development and technology upgradation. In the next few years too, more than 50 per cent of annual capex of OEMs will be towards these areas.

"CV OEMs are investing primarily in new platforms, BS-VI emission norms and EVs. But there are no major investments in greenfield capacity expansion as industry capacity utilisation levels are around 60-65 per cent. However, there are some investments in setting up bus body plant etc," according to Shamsher Dewan, Vice-President, ICRA.

Leading truck and bus makers Tata and Ashok Leyland have planned significant investment plans for the next two years. VE Commercial Vehicle and Mahindra & Mahindra are also investing in ramping up product portfolio.

Tata Motors, which made a strong turnaround in medium and heavy commercial vehicle segment in 2017-18, has planned to invest about ?3,000 crore in the next two years in new product platforms and some debottlenecking. After losing market share in the last five-six years, Tata Motors is getting its act together by strengthening its product portfolio, enhancing customer engagements and boosting focus on dealer profitability. "A robust product planning process is in place," the company said in a recent investor interaction.

Ashok Leyland is investing ?1,000 crore over the next two years. This investment will be spent on debottlenecking its factories and in development of new products. The company is also establishing a bus body plant at Vijayawada in Andhra Pradesh.

VE Commercial Vehicles has planned a capex of ?500 crore for 2018-19 and is keen on steadily growing its share in the heavy truck segment. The company is a significant player in light and medium truck segment with a market share of more than a third of the market.

Mahindra & Mahindra is also planning to strengthen its presence in the CV segment and is expected to invest significantly in new product development as it is planning a new range of light and medium trucks.

Heavy vehicles

CV makers are also expected to devote higher share of investments in developing heavy truck portfolio as there has been a greater preference for higher tonnage trucks due to the superior economics of higher tonnage models, shortage of experienced drivers and stricter implementation of overloading norms.

Also, GST-led consolidation of warehousing network across industries is to provide a further fillip to higher tonnage trucks, said Dewan.

Domestic medium and heavy truck and bus sales are expected to grow at a three-year CAGR of 9.5 per cent to four lakh units over FY18-FY20 and over the same period light commercial vehicle sales are expected to grow by about 14 per cent to eight lakh units.