AMW banks on mine openings, cargo trucks to recoup sales
Gujarat-based truck maker AMW Motors Ltd is banking on the revival of the mining sector and its own diversification into new categories to script a turnaround and reduce debt.
AMW banks on mine openings, cargo trucks to recoup sales
The Supreme Court’s ban on mining in Odisha, Karnataka and Goa, and slowdown in the construction sector hit AMW, with sales falling from a peak of 10,000 units in 2011-12 to 4,606 units in 2013-14.
In a bid to tide over the cyclical nature of the business, the Bhuj-based firm plans to reduce dependency on tipper trucks and strengthen its presence in the cargo trucks segment.
“AMW also plans to participate more actively in government’s defence projects and increase exports,” said Anirudh Bhuwalka, managing director and chief executive in an interview last week.
Analysts, however, say it will be difficult to make a mark in the segment dominated by Tata Motors Ltd and Ashok Leyland Ltd. It’s also critical that the company first recovers volumes it has lost in the last two years, and puts in greater efforts in enhancing its sales and service reach, a critical factor in the truck business.
After declining for 33 consecutive months, sales of trucks with 16-49 tonne gross vehicle weight started recovering in July 2014, albeit on a small base, as freight rates rose and the economy showed signs of revival. However, sales continue to decline for AMW, which entered the truck market in 2006. In the 10 months to January, AMW Motor sales dropped 32.7% to 2595 units compared to a year ago, under performing the broader market for such vehicles which rose 19% to 153,706 units, according to industry body Society of Indian Automobile Manufacturers Association or Siam.
“They are down to fifth position from the third. Clearly, the challenges for them are manifold,” said S.P. Singh, senior fellow at the Indian Foundation of Transport Research and Training (IFTRT), the Delhi-based think-tank
Bhuwalka, however, is optimistic and expects the company’s efforts in deepening its sales and service network and diversifying into cargo trucks in the last two years will pay off.
“We are now catering to 85% of the addressee market against 50% earlier,” said Bhuwalka. It has also been expanding its after sales and service network to 123 dealers and 1,500 service stations now, from 67 dealers and 400 service touch points.
“We are confident that our volumes will start picking up from the second quarter of next fiscal and we shall be able to reach the 2012 levels by end of fiscal 2016,” he said. This he added, will primarily be driven by the cargo trucks, a segment the company entered in 2013. Sales of tippers in the truck market which used to be 4,000 units per month till fiscal 2012, dropped to 1,500 units in fiscal 2014. “It has now improved to 2,200 units a month,” said Bhuwalka.
IFTRT’s Singh said in an intensely competitive truck market and cargo truck segment in particular, where Tata Motors and Ashok Leyland together account for 90% of the market and where others like Daimler India Commercial Vehicles and Eicher Motors Ltd have been struggling to make inroads, It would be extremely difficult for AMW to break in.
“Moreover, both Daimler and Eicher seem to be making far greater efforts in terms of reaching out to the market and in bringing newer models,” he said.
Bhuwalka is unfazed and blames the tepid sales to the long gestation period required for a new truck model.
“Typically, it takes around 24-36 months for any new truck model to establish itself in the market,” he said of the new range of haulage trucks launched in 2013, re-affirming that the new generation of existing truck models that will start rolling out from middle of next fiscal and comply with higher emission and safety standards, will help the company “get back in the game.”
Moreover, with the company also tapping into the defence sector more actively besides entering newer geography, will hold it in better stead during a weak cycle. Around six months ago, AMW got into a technical collaboration with a South African firm to address the defence sector.
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