Vinod Aggarwal, CEO, VE Commercial Vehicles, elaborates on his company’s plans to take the highway to growth
By MITALEE KURDEKAR
RIGHT FROM WELDING THE PARTS IN THE structure shop to the assembly line, the robotic painting processes and, finally, the bus shell and interior fit-outs, watching VE Commercial Vehicles (VECV) Limited’s Baggad bus plant in action is nothing short of a visual treat. That is, until one steps foot inside the Pithampur plant. Here, the word futuristic is given a whole new meaning.
And the face behind this vision belongs to Vinod Aggarwal, CEO, VECV, who has been instrumental in shaping the company into its current avatar. It has been seven years since home-grown Eicher joined hands with international automobile giant Volvo to create the hugely successful brand, VE Commercial Vehicles (VECV) Limited. Since its inception in 2008, the joint venture between the Volvo Group (Volvo) and Eicher Motors Limited (EML) has only grown in strength, prudently using Eicher’s ingenious, cost-effective methods and Volvo’s safety-driven, Swedish technology to set industry benchmarks in the commercial vehicles segment.
Capturing the journey thus far in tell-tale numbers, Aggarwal proudly relays, “Last year we had a gross turnover of more than Rs 6,000 crores. Our current capacity is 5,500 trucks and buses per month, which is 66,000 units per year.” However, it is imperative to note that the seeds of this success were sown almost three decades ago, when Eicher’s flagship plant in Pithampur, Madhya Pradesh, rolled out its first truck in 1986. Spearheading the company’s growth, that plant has, today, evolved into a state-of-the-art manufacturing facility that can rival the best in the world, and is the germination point for VECV’s ethos and innovations alike.
Speaking of the company’s culture and technology trends, many of these trickle down from Volvo’s processes, and are, in a sense, what define VECV as a company. It was therefore a cause for concern that, only a few months ago, Volvo sold its stake in EML, albeit choosing to continue with the joint venture.
But Aggarwal is quick to rubbish these concerns, stating, “The strategic partnership at the joint venture level is not only continuing, but going from strength to strength. There is no change in the governance structure or the shareholding pattern at the joint venture level. They (Volvo) had some financial investment at the holding company level in EML, which they have sold off, but that has no interference with their participation
in the joint venture. Their commitment to the joint venture and to all our strategic initiatives, as well as for VECV to become a large player in India, and in Asia, continues.” Volvo has a 45.6% equity stake in VECV, while EML holds 54.4%, yet the company is managed strictly on a shared partnership basis. An equal number of board members, three nominated by Volvo and three by EML, supervise the business affairs of the joint venture.
The organisation consists of five business verticals – Eicher Trucks and Buses or ETB (with plants in Pithampur and Baggad, Madhya Pradesh), Volvo Trucks India (exclusive distributors of Volvo’s Trucks in India), Eicher Engineering Components (powertrain components and gear boxes, with plants in Thane, Dewas and Pithampur), Eicher Engineering Solutions (design and engineering services) and VE Powertrain (plant in Pithampur). The company operates in three segments: light duty trucks (LDTs) and medium duty trucks (MDTs) in the range of 5-15 tonnes, buses from 22-60 plus seaters, and heavy duty trucks (HDTs) from 16-49 tonnes.
THE MANUFACTURING PROCESSES themselves are run from top-of-the-line plants, using the latest automation and Volvo’s trending technology. “We believe in relevant modernisation and don’t do it for the sake of automation. We have an optimum blend of automation and manual processes,” asserts Aggarwal. A visit to the bus plant in Baggad, and the truck & bus plant as well as the adjoining powertrain plant, both based in Pithampur, reveals a modern shop floor with a seamless connection to the top floor. At the main plant in Pithampur, a continuously running line works on the products, transporting them from the manufacturing floor to the second level for finishing work. Starting with a robotic welding shop, the line reaches a CED paint shop with an automated dipping-and-drying paint system, has integrated testing facilities, a 100% hot test facility for engines and a lean and scalable manufacturing set up. The most recent addition is a paint shop with superior paint finish. Showing me the quality of reflections on a bus parked outside the plant, B Anil Baliga, senior VP, Bus and Application, VECV, explains that this top coat paint finish is superior in terms of gloss, distinctness of image and corrosion resistance, when compared with anything available in the Indian market today.
BESIDES APPEARANCE, THE VECV product range competes on fuel efficiency too. “We have best-in-class fuel efficiency in all our products. We are known as ‘mileage ka badshah’ in LDTs and HDTs. We also offer the highest productivity, meaning that you are able to do more with the same product. With our comfortable cabins, you experience less fatigue and can spend more time on the roads too,” says Aggarwal.
With Volvo being synonymous with safety, VECV cannot be far behind. They use Volvo’s ‘blue audit’ to measure safety, besides incorporating safety pillars as defined by the Volvo production system. On the sustainability front, VECV supports the use of renewable energy and is using solar energy and wind power in an effort to rationalise their power requirements. A full-fledged research and development centre is in place at Pithampur, where a test laboratory uses advanced software to simulate road conditions inside the lab itself, thus ensuring that vehicles can be tested in house. In addition, the facility houses a brand centre, where clients and potential customers are given presentations and can catch a glimpse of the company’s history and the latest product range on offer.
The LDTs and MDTs segment is VECV’s strong suit, and the company is in the continuous process of steadily increasing their market share on that front. Their frontrunners are the nine and twelve tonne products, which constitute the maximum number of sales and offer a massive market share of almost 40%. Speaking about the LDTs and MDTs segment, Aggarwal declares, “We were at a market share of 26-27% when we started this joint venture. And this year, for the first eight months, our market share has been around 32.8%. In August this year, our market share reached 35%. So we continue to remain strong in that segment. We have introduced new products like the Pro Series, which we offer in 5-15 tonnes. Also, Pro 3000, a premium product in the MDTs segment, has been introduced in the 10-15 tonne range.” The company is already a strong player in some states, and is spreading their reach elsewhere, by focusing on the product range, product quality and customer satisfaction levels.
As for buses, they are making steady progress. From 6% at the start of the joint venture, they are now at 15% market share. A large contributing factor here is the new product launches and their strength in certain key areas, such as the school segment, where VECV enjoys a chunky slice of the pie, with around 28 to 30% of the market favouring the brand. They are also creating a stronghold in the staffing and the tourist segments. Inter-city coaches are another focus area, where they have big plans. VECV reports that with big plans on the part of the Indian
government to set up a number of smart cities, as well as more and more urbanisation taking place, the market that is currently at around 70,000 odd buses, is bound to grow manifold in the coming years. The third category is HDTs, which forms the largest market in the commercial vehicles segment, in terms of numbers and also value. “When we started the joint venture, we had just 1% market share. We have steadily improved and are currently at 3.6% of the market. Still, it is quite small. The potential for growth is greatest in HDTs. And that is where we will grow,” emphasises Aggarwal.
If one considers the rural markets, LDTs and MDTs seem to rule the roost here too, with many customers using VECV’s trucks to cart their produce to
the mandis. Most markets are catered to by dealerships, which are located in the cities and handle any leads in the rural areas as well. With more than 300 suppliers spread across the country, and almost 50 to 60 of those based adjacent to the Pithampur plant, they have a solid supply chain network in place. There are also dedicated ancillaries and others who supply not only to VECV, but other auto companies too. Sometimes, material is imported from China, Japan or Korea, but for the most part, it is sourced locally.
In order to promote transparent communication with suppliers, VECV organises a supplier conference, at the beginning of each year, where the entire business plan is shared with the vendor base. Regular updates and reliable demand forecasts follow, providing a realistic picture of matters. “We don’t believe in giving very high forecasts and then not meeting them. We don’t want our suppliers to suffer losses, since we treat them as partners. The entire forecasting is based on our market intelligence and dealer information, filtered through our sales team and sent to the head
office. That way, we collate material for the month and are able to adjust ourselves to the market needs very quickly,” points out Aditya K Shrivastava, senior VP/ head of manufacturing operations, VECV. This approach also assists in restricting the lead-time (from supplier to final product warehousing) to between 12 and 15 days.
When one talks of sales, it is important to note that VECV has a strong export market, mainly prospering in South Asian countries, such as Bangladesh, Nepal and Sri Lanka. In fact, they opened their own marketing firm in Sri Lanka around two years ago. In Bangladesh, they enjoy almost 20% of the market share, and have even launched country specific products for the Middle East, recently. Of course, a rise in exports calls for an even greater need to maintain impeccable quality standards. Volvo dictates these, with the head of quality management at VECV coming from Volvo. Key performance indicators are set and passed down the line. Fault frequency, manufacturing quality and durability quality are some of the parameters on which checks are held. “We have not only adopted these processes, but implemented them successfully,” says Baliga, who insists that the two-brand strategy idea of making a Starline and a luxury Skyline range of buses came from Volvo, in 2008, and is what has differentiated them from the competition so far. With other brands keen to jump onto the twin-brand bandwagon now, it is clearly a strategy that has paid off for VECV and left the others struggling to catch up. He is also particularly hopeful that with the implementation of new policies for buses, the local, unorganised sector will grapple to meet the stringent requirements, and OEMs will face tremendous growth prospects.
“Right now, we are selling 4,000 trucks and buses per month. So we are operating at 70% of our capacity. In the same plant, we can go up to 8000 units per month. So we can take the capacity to 1,00,000 vehicles per annum,” points out Aggarwal, explaining why Pithampur is, even today, spearheading the company’s plans. With their eye set on bringing the HDTs segment up to the level of LDTs and MDTs, they are definitely looking at expanding in India. Banking on a good after-sales infrastructure and dealership network, with a focus on customer satisfaction driven by high quality, Aggarwal is bullish about the coming months.
With commercial vehicles serving a core business need, instead of acting as a status symbol like passenger cars, the major factors for increasing sales and upping brand value are: performance, quality, reliability and after-sales service in case of any break-downs and repairs. While the first three can be controlled at the production level, service is highly subjective. “Over a period of time, everyone will provide technology and, at the product level, the differentiation will keep coming down. Service will become the differentiator, as far as the customer is concerned. That is how we plan to become number one in Customer Satisfaction, and nobody can stop us,” states Aggarwal, emphatically. Of course, there’s no reason
to doubt him. He’s walked the talk before. And there’s every chance that he will drive VECV to the numero uno position in the future.