AMW (Asia MotorWorks) Group was founded in 2005 and has made a huge mark in segments of the Medium and Heavy Commercial vehicle industry in India. AMW’s vehicles are manufactured at its sprawling 600-acre complex in Bhuj, Gujarat.
Currently, the company has a network of over 49 dealers, 132 service stations and 450 authorized service centers across India.
Mr. A Ramasubramanian, President - Commercial Vehicles, AMW told Sandeep Menezes that as an emerging market India will need trucks with better features and safety – but this can happen only in a market where price is secondary and value is more important.
Excerpts from the interview:
How different is Indian truck user requirements in construction, mining segments when compared to other nations? Tell us about the challenges you faced to cater to such requirements?
India has recently moved into the modernization of heavy commercial vehicle segment, while in South East Asia or West these modern trucks have already existed, even China is well ahead of us.
We as an emerging market will require better features and safety – I mean a more modern truck. This type of modernization is slightly difficult to come into a segment that is mainly sold on price like the mass market and highway type of trucks. It can come in a market where price is secondary and value is more important.
With higher infrastructure quality, better roads – the utilization and turnaround time etc will start to become more important.
What are the recent trends in India's heavy commercial vehicle market?
The Indian heavy commercial vehicle market had a peak in 2007 and then in 2008 and part of 2009 the industry hit a recession.
Most part of last year was bad – but it did start to pick up in second half on relative platform although not in full. The industry has been galloping this year since the first quarter – but we have yet not reached the pre-economic slowdown growth rate. I am really conservative about industry growth and think that reaching the pre-economic slowdown growth rate will take some time because it was really very high then. It may take around three to five years to reach the pre-economic slowdown levels of growth.
But the current growth rate is also quite good because the industry dropped so heavily in recession.
Growth is a very relative context, just last year after the recession the first half was very bad compared to that this half is absolutely galloping. The second half of this year is expected to be better. Going forward, one should expect somewhere around 10 to 12 per cent growth.
The recent union budget allocated a whopping 46% towards infrastructure. How will this have a cascading beneficial impact on heavy commercial vehicle manufacturers?
It will basically have two types of impact, one is short term while the other is medium to long term.
Short term means the development of infrastructure for which there will be an immediate need for construction, infrastructure trucks - also demands for mining trucks due to demand for raw materials – all this will start to go up.
Anything that is related to construction & infrastructure, their demand will go up. The demand for tippers, trailers and transit vehicles for road, airport construction etc have started to grow significantly. The GDP movement is directly linkable to transportation and if we have good monsoons then road transportation will also grow.
In the long term we expect a positive effect on the economy and consequently the industry is expected to grow on the basis of an already established infrastructure.
Therefore in short term period trucks will be needed to build infrastructure while in long term the established infrastructure will need trucks.
What are the various challenges faced by Indian heavy vehicle industry? How can these challenges be eliminated?
The challenges involve showing enough resilience to cope with any future downturn and then revive again.
The other challenges involve meeting expectations of better quality and technology especially in terms of construction and mining trucks. Also raw material cost is another concern, when the industry was growing earlier the raw material prices were galloping, then during the recession it fell – now again raw material prices have started to rise again.
With new international players entering the segment leading to increasing competition, there are new cost pressures on the manufacturing side and selling pressures on the price side. The consequence is that the margins get squeezed.
In the meantime, all unnecessary items and processes need to be thrown out of the window and one has to become more efficient. Cutting cost has to become a religion as this is the only way one can deal with this margin squeeze.
Isn’t the Indian heavy commercial market crowded?
The Indian market for heavy commercial vehicle is huge with lot of potential but there are hardly any players – there are some players who have nearly 70 per cent marketshare.
This is not a crowded market and big enough market for few more players to come in. Many of the new players coming in are into the construction and mining vehicle segment which is an emerging segment; these new players are not really entering the mass market – but I think they do have plans to enter the mass market later at some stage. This increased competition will move from pure price to price-to-value concept.
How does AMW handle the increasing prices of raw materials, components?
We have reduced the cost of buying and thereby keep production cost under control. We build higher value trucks and in our segment higher value is appreciated thereby we get slightly higher prices compared to competition. But if you look at margins there are always under pressure due to price rise of raw materials which we try to keep under control.
With highly fluctuating fuel prices, there has been an increasing trend towards fuel efficient heavy commercial vehicles. Comment?
In all segments of Indian industry fuel efficiency is very important. For example in the mass market type of trucks the most significant value addition is fuel consumption.
Fuel consumption is an extremely important component for saving cost – we all need to work for cutting down fuel consumption. Instead on standardizing trucks, there is a need of customizing them for basic applications in order to ensure that for particular applications it gives the best fuel consumption.
Our vehicle on a relative platform are better fuel efficient being more modern therby giving more earnings.
Therefore even if the owner has to pay a slightly higher price for buying an AMW truck – they still make more money.
AMW has already made a mark in niche segments of medium, heavy commercial vehicle industry. Any plans to expand your focus?
Right now we are concentrating on the heavy commercial vehicle segment – we still have to fill our portfolio to take care of the entire segment. With infrastructure growing, the need for heavy commercial vehicles of higher quality even on highways will increase.
We will be concentrating on the heavy trucks to start with but that does not mean we will not get into the medium and light commercial vehicle segment. We will get into the medium commercial vehicle segment in the short term, while in the entire range in medium to long term.
Right now we want to ensure that our entry into heavy commercial vehicle segment is converted into significant presence.
Currently AMW’s vehicles are manufactured at its 600-acre complex in Bhuj Gujarat. Do you have any plans to increase production capacity or geographically spread manufacturing activity to other locations?
Our Bhuj facilty has adequate manufacturing capacity to take care of the foreseeable future. The Bhuj facility has infrastructure capability to manufacture around 50000 trucks per annum – but we have not manned it to that extent at the moment. The mechanical and other infrastructure can manage production capacity of upto 50000 trucks per annum.
We currently produce around 600 to 700 trucks a month – but we have capacity go significantly higher. We intend to reach our full manufacturing capacity in future – this is the reason we are expanding our truck range.
The same facility can also produce medium range trucks with little tweaking of facilities. We should fill up the 16 tonnes and above category in a year or so. In near future, we will be in full range of heavy commercial vehicles and in the medium term we will be present in medium and light commercial vehicle segment.
What is AMW’s long term vision across India?
We want to be a significant commercial vehicle manufacturer who is considered to produce vehicle of high value while being customer oriented.