Indian auto firms chase mini-truck market boom

Mumbai : India's automakers are chasing rapid growth in the small truck market as roads improve, cities clamp down on larger vehicles, and demand grows to shift people and goods around quickly and cheaply.

Top truck maker Tata Motors has launched a passenger variant of its Ace, a popular sub-one tonne truck, and Mahindra & Mahindra is working on a multi-purpose utility vehicle that can carry people and cargo.

Number-two truck maker Ashok Leyland is keen to make a small truck, and motorbike maker Bajaj Auto has said it would develop a small, multi-application vehicle.

"There's an increase in demand for mobility for people, for modern retail, express delivery and other last-mile transport needs," said Ashutosh Goel, analyst at Edelweiss Securities.

It is difficult to gauge how big the market is for these vehicles as the sector ranges from utility vehicles and motorised three-wheelers to small pick-ups and carts attached to souped up motorbikes.

Goel reckons sales of four-wheel mini-trucks or vans that can transport goods or people could top 500,000 units a year.

Three-wheelers, made largely by Bajaj and Piaggio, have traditionally been used to shift goods in cities, with passenger variants in rural areas that lack public transport.

The segment grew 12 per cent in the year to March to more than 400,000 units, while light commercial vehicles - which make up about 40 per cent of the commercial vehicle market - grew by a third to nearly 200,000 units, with Tata's Ace a clear winner.

"Tata's a first mover in the segment, but everyone recognises the need to be there," said Mohit Arora, a director at J.D. Power Asia-Pacific in Singapore.

Demand cycle

"For makers of cars and two-wheelers, margins on these vehicles are higher, and for makers of heavier trucks, it helps them cut some risk, as they are not as vulnerable to the cyclical nature of demand for commercial vehicles."

Ace sales are booming at a time when high interest rates are slowing demand for bigger trucks.

Analysts expect commercial vehicles will expand at just over 10 per cent this year, down from an average 22 per cent in the previous three years.

But mini trucks are expected to outpace that growth, and Tata Motors, Mahindra and Bajaj will have an edge over smaller rivals Force Motors, Eicher and Atul Auto.

"Tata Motors already has a platform for Ace, which is more economical than developing an entirely new platform," Goel said.

"Mahindra has the experience of selling utility vehicles, and Bajaj has the motivation, as its three-wheeler is under threat." he added.