The SCV segment is a truly Indian invention. Brought to life by the path-breaking Tata Ace in 2005, SCVs saw blistering growth until FY2012. With roughly 446k units that year, SCVs cornered an impressive 50 percent of the overall CV market.

While the last two years have been difficult for the overall CV industry, SCVs managed to escape the economic downturn largely unscathed. Compared to a negative CAGR of 11 percent from FY12 to FY14 overall, SCVs declined only by a CAGR of 1.4 percent driving the SCV market share up to 61 percent.

Drivers for the success of SCVs are many. Increasing rural consumption drives growth in the light CV segment. SCVs are an integral part of the hub and spoke model and necessary for last mile distribution. Opportunities also arise from increasing urbanisation, stringent traffic regulations and an expanding metro rail network.

Interest rates and relatively easy availability of loans have supported the segment as well. However, some banks have taken a more cautious approach of late due to rising delinquencies in the sector. Improved product quality and perceived increased safety of SCVs vs 3 Wheelers, some of the key initial selling arguments in favour of the Tata ACE, go a long way in increasing pride of ownership.

The socio-economic impact of SCVs cannot be underestimated. SCVs are mostly driven by owner-operators who get into the transport business often due to lack of a viable employment alternative. For many applications, these owner-operators achieve higher profitability with SCVs rather than 3-Wheelers.

The author is Managing Partner at Roland Berger Strategy Consultants, India.

(Continued on the next page)