Mahindra and Mahindra (M&M) launched Gio

Mahindra and Mahindra (M&M) launched Gio end-October, the excitement was palpable. Priced at around Rs 1.65 lakh, the company claimed boldly that the 0.5 tonne light commercial vehicle (LCV) will create a segment in itself, just above three-wheelers, and at a reasonable price point for a four-wheeler goods carrier.

So, why is M&M so excited? The reason is in the numbers. While the commercial vehicles (CV) segment went through a painful patch, hit by 0.5 per cent degrowth in April-September 2009, the LCV segment grew by a robust 19.5 per cent. Commercial vehicles— goods or passenger carriers — below 5 tonne capacity constitute the LCV segment and this is currently dominated by biggies Tata Motors and Ashok Leyland. Read More



Tata Motors, which has 65 per cent market share of the CV market, recorded LCV sales growth of 16 per cent at 18,454 units in September 2009, while CV sales grew just loper cent. Again in October, LCV sales were up by 57 per cent at 18,625 units. For Ashok Leyland, while sales of medium and heavy commercial vehicles fell 17.3 per cent to 16,979 units in the September quarter, LCV sales grew by 11.4 per cent in the period.

According to Supriya Khedkar, analyst, ICICI Securities, the LCV segment is expected to grow at 16-17 per cent y-o-y as compared with 5-6 per cent for other commercial vehicle segments.With the success of Ace, its 1 tonne LCV,Tata Motors is said to be looking at a 50 to 60 per cent growth in production of LCVs this fiscal. In line with this plan, the company recently introduced three new vehicles — Tata 407 Pickup, Tata Super Ace and Tata Ace EX. Last year the company produced about 80,000 units of Tata Ace and 37,000 units of Tata Magic.

Now, even foreign players, like Japanese auto major Nissan, are eyeing the LCV segment in India. Nissan is looking to sell the vehicles in India and the US by 2010, after its partnership with Ashok Leyland for LCVs was deferred.

The two key reasons for the growth in LCVs, says Piyush Parag, associate vice-president of Religare Capital Markets, are the price point and the hub-and-spoke model of development. “LCVs are very helpful when it comes to infrastructure development within city limits. As economic activity picks up and more infrastructure development takes place, more movement of goods will happen within the city. In such circumstances, an LCV is more useful than medium and heavy commercial vehicles.This will further the growth in the LCV segment,’ says Parag.