Eicher draws plans for foray in M/HCVs - Views on News from Equitymaster

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Eicher draws plans for foray in M/HCVs

Dec 20, 1999

Eicher Motors, light commercial vehicle (LCV) manufacturer is planning a break in the medium/heavy commercial vehicle (M/HCV) segment. Eicher Motors is the third largest LCV manufacturer in the country with nearly 10% market share in September 1999. The company is also engaged in the manufacture of tractors and has cornered approximately 7% market share.

According to news reports appearing in a leading financial newspaper, the company will roll-out its first batch of medium commercial vehicles (MCVs) on a new platform by January 2000. The heavy commercial vehicles (HCVs) launch is slated for March 2001.

Mr Rakesh Kalra, managing director of Eicher Motors, disclosed that the MCVs will be priced in the region of Rs 500,000-525,000. The company will have a plant with a production capacity of 10,000 units of HCVs. It will invest Rs 1 bn in this facility. The MCVs are being manufactured at the company’s Pitampur plant. The plant has a manufacturing capacity of 12,000-15,000 units p.a.

The M/HCV segment is currently dominated by TELCO and Ashok Leyland. Eicher will draw its competitive edge from its indigenously developed, Euro norms compliant engines.

Analysts are of the opinion that Eicher’s move to branch out in M/HCVs is attributed to the robust demand in that segment. LCV sales have not picked up as much as M/HCVs, and Eicher will be looking to reap the benefits of strong M/HCV demand. It will look to leverage its LCV brand (Canter) and extensive distribution network. However, until its M/HCV operations break-even, its investments in this venture will have negative impact on profitability.

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