Tata Motors plans to double export of commercial vehicles in two years.

Mumbai: Tata Motors Ltd is planning to push exports of commercial vehicles (CV) in a big way in a bid to cushion itself from the cyclical nature of the home market.

The market leader in trucks exported 50,000 units in the year ended in March 2016 and is now looking to double the overseas sales in the next two years, Ravindra Pisharody, executive director, commercial vehicles at the firm said in an interview.

“Besides defence, exports is an important pillar to hedge ourselves from the cyclical swings in the domestic market,” he said.

The plan, he added, would include a two-pronged strategy of consolidating presence in markets like Vietnam, where it has entered three years ago, and also eyeing newer ones like Tunisia in north Africa.

Tata Motors exported 54,029 units of commercial vehicles, including light commercial vehicles, in fiscal 2015-16 against 46,413 units in fiscal 2014-15. “We are looking to do 65,000 units this year and 100,000 in the next two years,” said Pisharody. “Our target market is everywhere except Europe and North America,” he added.

Traditionally, neighbouring markets like Sri Lanka and Bangladesh have been the sweet spots for CV makers from India but lately, encouraged by the opportunity and a fluctuating home market, Tata Motors and others like Ashok Leyland Ltd Eicher Motors Ltd are pushing the boundaries.

Newer markets strategy for Tata Motors would include making deeper inroads in to the Middle East, Africa and Latin America.

In order to hedge itself from the currency fluctuations and economic uncertainty in Brazil, which was it’s lead market once, Tata Motors has expanded itself in “fringe markets” like Chile and Venezuela, he said. It has added Bolivia three months ago to the list of such markets. “These are small markets but still promising,” said Pisharody.

Eastern Europe is another focus market for the company while Asean has been one of the big volume drivers.

Over the next two years, Tata Motors plans to have local presence in seven to eight markets. These will include existing ones in Thailand and Bangladesh.

“At any time we are looking at traditional and new markets.” The plans to have a local presence in markets like Africa, the Middle East and Vietnam have been driven by local regulations and levy of duty tariffs,” said Pisharody. He pointed out that it would include tying up with a local distributor to setting up a company-owned assembly facility.

Sudarshan Shrinivas, director, corporate, at India Ratings and Research Ltd, said the strategy to push exports is a function of the cyclical swings particularly in medium and heavy commercial vehicle (MHCV) segment, seen in the domestic market. “They (Tata Motors) have no option but to export,” said Shrinivas.

He cautioned exposure to a market like Africa will involve the risk of repatriating the earnings owing to the currency volatility facing the region.

After expanding briskly for nearly two years, sales of medium and heavy-duty trucks are moderating as replacement demand—one of the key drivers of growth so far, has started to wear off.

Weak freight rates and lower demand for cargo trucks too have dented volumes.

Sales of such vehicles have been sliding since the last three months. It skidded 10.76% to 20,537 units in August against a year ago period, according to Society of Indian Automobile Manufacturer (Siam).

“It’s an aberration as sales usually pick up after April. If this continues in the months ahead, it will be an indicator of the beginning of a down-cycle,” said India Ratings’s Shrinivas. But Pisharody is not much worried and is not reading much into it.

“It’s too early to call it a trend,” he said adding that “pipeline is robust and inquiries still high. There’s some impact of monsoons. From the macro side, it’s all good.”

He expects it to rebound from October when pre-buying owing to a change in emission norms next year kicks in. It will also be aided by the festive season and a good monsoon.

He, however, added that a better view on truck sales will emerge after the date for implementation of the goods and services tax is announced. If the government does stick to its April deadline, it will lead to postponement of purchases as the prices will come down after GST.

Source : livemint.com