All you need to know (#3/4) - Automobile OEM's - Commercial Vehicles and 3W

Your one stop shop to understanding the automobile sector in India

All you need to know is a series focusing on sectors and themes -

The first part of the series focuses on Automobile OEM’s, the tailwinds, the disruptions and how and where are the listed companies placed

Let’s start with the basics -

OEM’s can be broadly classified into sub-segments i.e. -

• 2W – Scooters / Mopeds / Bikes

• 4W – Small (Hatchback and Sedans) and Large Cars (SUV’s and Van’s)

• 3W – Goods and Passengers Rickshaws

• Commercial Vehicles (CV’s) – Tempo’s, Trucks, Buses etc. (LCV / MHCV )

• Agri-Equipment – Tractors, Tillers etc.

• Construction Equipment – Cranes , Backhoe loaders, Excavators etc.

In the first part we focused on 2 Wheelers (Refer link) - OEM 2 wheelers

In the second part we focused on 4 Wheelers (Refer link) - OEM 4 Wheelers

The third part focuses on CV and 3 Wheelers -

Commercial Vehicles (CV’s) -

CV’s are broadly classified into Light Commercial Vehicles (LCV’s) and Medium and Heavy Commercial Vehicles (MHCV’s).

LCVs include vans, pickup trucks, and small delivery trucks, while MHCVs include large tractor-trailers, dump trucks, and heavy-duty delivery trucks.

Broadly CV market is ~2,00,000 crores market with MHCV is ~1,30,000 crore market whereas LCV’s being ~70000 crores market.

Both MHCV and LCV are ~5% and ~3% lower than peak levels.

MHCV Market Share -

MHCV is a larger segment with 3 large players, Tata Motors (~47% MS), Ashok Leyland (~31%) )and Volvo-Eicher CV (~8.2%).

MHCV have smaller players in sub-segments such as SML Isuzu (buses), Mahindra, Olectra Greentech and JBM Auto (e-buses)

Tata Motors over past 10 years has lost ~800 bps primarily to Ashok Leyland and VECV (~600 and ~200 bps respectively)

LCV’s on the other hand has 2 large players i.e Mahindra (~43% MS) and Tata Motors (~34% MS), with Ashok Leyland and Force Motors being the smaller players. M&M has overtaken Tata Motors to be the largest LCV player in India.

E-CV’s -

ECV’s have the lowest penetration at 0.4%, the only sub-segment which has grown faster has been E-bus due to government bus and E-bus penetration has been higher than E-4 W.

How has the year been for CV’s in FY25 so far ?

CV has seen a de-growth of 1% for first 9M, and most companies expects similiar performance in Q4.

LCV’s has de-grown by 3% whereas MHCV’s have been flat.

Conclusion - Broadly CV has seen de-growth in FY25 so far, No material outliers have been identified across segments in CV. Growth in CV’s is likely to be muted over the near future. Interest rate cut can materially aid CV cycle.

Broadly, there are 6 listed CV players which can disproportionately benefit depending on CV scenario.

Ashok Leyland - Benefits largely on account of strong MHCV Cycle

Tata CV - (will list on stock markets soon post demerger of Tata Motors) - Benefits from strong MHCV and LCV cycle.

Mahindra - Benefits largely on account of strong MHCV Cycle

VECV - Benefits largely on account of Strong MHCV cycle. VECV is ~15% for Eicher Motors.

JBM Auto and Olectra Greentech - Can benefit disproportionately if E-bus penetration increases materially and companies garner higher incremental market share

SML Isuzu - Bus portfolio doing well

Force Motors - Benefits largely on account of strong LCV cycle and particular categories such as ambulances.

3 W -

• 3 wheeler Indian market is ~20000-22000 crore market with domestic 3 wheeler market being ~15000 crores and Export market is ~7500 crores.

• 3 wheelers are primarily goods and passenger rickshaws. Bajaj Auto is the largest player in India, followed by Piaggio and Mahindra. 3 wheeler volumes are 7% below it’s all time high volumes in 2020.

  

  Bajaj Auto is the largest 3W player in the country followed by Piaggio and Mahindra. Other smaller players include Atul Auto and TVS domestic

  

  EV -

• 3W has the highest EV penetration with ~15.6% on conventional 3W. If you include low voltage E-3W, (found in Delhi / Jaipur among other cities) EV penetration is already a ~56%

  

  There are a lot E-3 W companies who have raised private capital (below list with last round valuation) and may get listed in the future

  • Mahindra LMM - ~6600 crores

  • Altigreen Propulsion system - ~2500 crores

  • Euler Motors - ~1300 crores

  •Atul Greentech – 983 crores

  How has 3 W performed -

  • 3W growth has been decent at 6% for first 9M.

    

    Companies and exposure to 3W -

  • Atul Auto is the only pure-play 3 W listed player currently.

  • Bajaj Auto and TVS derives ~15% / 5% of revenues from 3W.

    Conclusion - 3W market evolution is a great primer for how auto-sector will evolve in electrification over the next few years and a lot of opportunities will develop and evolve in 3W space.

    If you want to read about Agri and Construction equipment (Tractors, Tillers, Cranes) - OEM - Agri and Construction Equipment

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