Across the globe, the commercial vehicle sector continues to pull ahead — seemingly avoiding the bigger bumps in the road that have damaged other vehicle industry segments. 

The sector comprises light commercial vehicles (including motorcycles and small vans), medium and heavy commercial vehicles (such as trucks and HGVs), buses and coaches. China, Japan, India, the US, Brazil and Russia are major demand-generators globally, followed by other prominent regions including South East Asia and Eastern Europe. 

The overall market saw marginal sales growth of more than 3 per cent during the past few years due to weakening global crude oil prices, the economic slowdown, and political instability in many regions, according to a report by TechSci Research. In 2015, it witnessed year-on-year growth of about 4 per cent and is anticipated to exhibit slight growth over the next five years. 

By 2020, the global commercial vehicle market is expected to reach 29.1 million units, according to a Global Industry Analysts report. It’s only after next year that things are likely to look rosier for the sector, with rising demand from infrastructure and construction projects across the world.

Regional outlook

In the Middle East, the commercial vehicle market is facing a new fuel price paradigm because of accelerated decline in the prices of crude oil. 

“Middle Eastern countries are majorly import-driven and considered oil economies, [so] the decline in crude oil prices has potential implications on all types of investments in these countries — because of which commercial vehicle demand has significantly decreased, especially over the past three years,” says Karan Chechi, Research Director at TechSci.

“Countries in this region witnessed a decline of about 10 per cent over the past three years. Although the Middle East has huge demand for commercial vehicles owing to large-scale construction and the infrastructure sector, as of now a decline in demand for commercial vehicles has been observed due to declining crude oil prices.

“However, it is projected to revive in the Middle East with the restoration of construction projects and recovery of oil prices, which is anticipated to stabilise post 2017.” 

Globally, there are a few spanners in the works though. Commercial vehicles’ major application areas are the freight and transportation sectors. The expanding rail network, which is relatively cheaper than road transportation across the globe, is expected to affect the growth of commercial vehicle sales in the future. 

Plus, growing demand for safe and efficient transportation of goods and passengers is anticipated to enhance rail and air transportation and negatively impact the market for commercial vehicles internationally.

In the smaller passenger buses segment, the big players in the local commercial vehicle sector understand competition will come mainly from the rising Japanese and Korean brands. For trucks, there are also some European competitors to watch for as everyone strives for a larger piece of the pie.

One country that is seeing a commercial vehicle boom is India. Its market is projected to grow at a compound annual rate of over 14 per cent in value terms from 2017-2022.

The largest manufacturer in the Indian automotive industry is Tata Motors, and it has made a bold move into the UAE market. Last year the company began selling its smaller, light commercial passenger vehicles here as part of its global roll-out plan. Tata already sells 24- to 36-seater vehicles, mainly for schools and transporting labourers in the UAE and the wider region.

“We will customise the vehicle for different markets depending on the demand in each market,” R.T. Wasan, Vice-President of Sales and Marketing for Commercial Vehicles at Tata Motors, said in Dubai last year. 

SME picture

Globally, small and medium enterprises are getting serious about the commercial vehicle sector too, and banks are acknowledging this by creating specially designed business loans for the purchase of light, medium and heavy commercial vehicles. It’s the light vehicle segment where the most innovation is taking place. 

A good example is Mobile Aid in the UAE, which started last year — a service where the company will dispatch a repairman via motorbike to fix your mobile phone no matter where you are, like a doctor making a house call.

“We realised that it had reached a point where everyone in the UAE owned just about everything from a consumer electronics point of view,” Khalid Sharaf, Mobile Aid Co-Founder, explained after the launch.

The start-up also qualified for backing from Dubai SME, the Department of Economic Development’s unit that gives support to Emirati-owned start-ups.

Keys to growth

TechSci Research provides market insights and advisory solutions to customers worldwide, spanning a range of industries. Here’s some advice it offers suppliers of commercial vehicles.

With growing demand for commercial vehicles, the demand for fossil fuels has also surged. Suppliers should develop alternative fuel options to combat any insurgencies due to fluctuation in global crude oil prices. 

Suppliers should also focus on developing products that comply with the new emission standards followed across different regions/countries of the world. This will enable them to comply with policy and regulations of any country in a more effective manner.

Global commercial vehicle original equipment manufacturers should innovate new fuel-efficient technologies that would help them to leverage the cost benefits.

The traditional commercial vehicle markets, comprising Europe and North America, have now matured. Suppliers should target laggard economies in Africa and South East Asia to tap into potential demand.