With the increase in population and expansion in business and travel frontiers, more and more people are hitting the road. Road transport is indeed big business; no wonder then, that with more money power and affluence among travellers, manufacturing luxury coaches and hi-tech buses makes good business sense. But all is not well with the bus body building industry in the South, especially in Karnataka. The lack of demand for buses due to a recession in the tourism sector and the huge entry tax introduced by the government have forced the industry to tighten its belts.

indiamarkets spoke with longtimers in the bus body building industry to elicit information on the industry scenario. Sharing his views, C S Chadha, Director of Azad Coach Builders Pvt. Ltd, Bangalore, says that caught in the rut of competition, his company is "just surviving". ''The company is going through a rough phase. About five years ago, we did well when we had orders for building bus coaches from the Karnataka State Road Transport Corporation (KSRTC). Now we are just pushing forward with a few private orders,'' Chadha says.

He continues: "The scene is not that favourable for people like us. The entry tax has badly hit the industry. Increase in the cost of raw materials too has contributed greatly for the decline in the business. Earlier, we used to build over 30 buses a month. But now, we are able to make only 15 to 20 buses, with orders from the private operators. However, the group is doing well in the north, with the CNG vehicles.''

However, Bangalore-based S M Kannappa Automobiles (P) Ltd., one of the leading coach builders in Bangalore, says that his company has tried to hold its head above water at a time when the industry in general is going through a rough patch.

Here are excerpts from an interview with K M Loknath, Managing Director, S M Kannappa Automobiles.

indiamarkets: Why has the bus body building industry been hit so badly?
KM Loknath: Yes, the industry has been hit really hard. If industrial recession has been a major cause, the tax system has added more agony. In India, the buses are built on truck chassis. Many are scared of building more number of buses because of the huge entry tax on the completely built buses and multiple taxes for inter-state buses. If the chassis manufacturers themselves had taken over the complete building of coaches, things would have been better. The grim scene on the tourism front has also dipped the demand for luxury coaches.

indiamarkets: But Bangalore has a number of major players in the field...
KM Loknath: There are 16 bus body builders in Bangalore alone, including longtimers like Ashok Leyland, Telco, Azad, Jaico, besides us. But only a few are operational today. Apart from the factors I spoke about, bad management is also another important contributing factor.

indiamarkets: Amidst all these problems, how have you been able to play it safe in the industry?
KM Loknath: As one of the leading bus body builders in the South, I owe the success of our company to our professionals and the strong team spirit among them. When major builders fared badly with considerable reduction in their offtake, we built 350 buses last year. Expert management by professionals who bring out quality work is what keeps us going. In any company, good management is what allows you to be a cut above the rest.

indiamarkets: What is the yardstick your company has adopted to keep the steady pace in the field going?
KM Loknath: First of all, we look at innovative methods every time we get new orders. I personally believe in trial and error than in R&D, where results are difficult to be achieved in a physically controlled unit. This definitely has paid us good dividends.

indiamarkets: Who are your major clients?
KM Loknath: KSRTC has been one of our major clients for luxury coaches. It may be true that others suffered from the cut in government orders, which brought down their business. But we have been lucky in continuing our relationship with KSRTC. There are already 25 luxury buses, the P5000 series built by us which are operating under the State regional transport network. The KSRTC feels that its luxury coach segment has pepped up its revenue in the tourist sector after these buses were introduced.

Other clients include all types of bus operators, educational institutions, hospitals, public/private companies and also chassis manufacturers. We have also been OE (Original Equipment) suppliers for chassis manufacturers / commercial vehicle giants like Ashok Leyland, Telco, Eicher Motors etc.

indiamarkets: How are your company prospects this year?
KM Loknath:  Our business prospects looks good this year too. Owing to the success of the P5000 series, the KSRTC has placed orders with us for 50 more luxury coaches of the same kind this year. This will keep us going when others are on the verge of collapsing. We have orders from other private operators too.

A bus from the P5000 series.

indiamarkets:  Are you planning to introduce a new series this year?
KM Loknath: Yes; we are working on the P6000 series. This will have additional features when compared to P5000, with attractive interiors. We will roll them out in a couple of months.

indiamarkets: How is the scene with the government bus body builders?
KM Loknath:  KSRTC on its own builds 1,500 mofussil (red) buses for its consumption annually. The KSRTC is unable to build luxury coaches on its own. With the introduction of luxury buses from outside, they are doing very well and are giving a real tough time to the private operators. This again has led to lack of demand for more buses by private operators.

indiamarkets: Apart from luxury coaches, what other segments do you focus on?
KM Loknath: We build coaches of different configuration from ordinary to hitech and from simple to special applications. We also build maxi-cabs and Light Motor Vehicles (LMVs).

indiamarkets:  How many buses do you build per month?
KM Loknath: It was in 1968 that we started building cozy luxury bus coaches. Around 1986, with the nationalisation of bus services, we were building five buses a month. Today, the number has risen to 30.

indiamarkets:  Has this year's union budget been of any help to the bus body building industry?
KM Loknath:  Though this year's budget has not focussed much on the industry, it has done no harm either. The industry feared that excise duty would be imposed. Luckily, it was not and that is a great relief for us.

indiamarkets: Does the company have any plans of expansion in the future?
KM Loknath: We have plans to go in for a foreign collaboration in a couple of years.

indiamarkets: How long a time do you think the industry would need to recover?
KM Loknath: The automobile industry is in a very sluggish state. With fluctuation in the prices of aluminium, steel, rubber and gloss, the industry often witnesses a rise and fall in the business. It will take another two years for the industry to come back to normalcy. The only way to beat the recession is: Cut the costs, gear up to international levels, update one's standard and infrastructure. If you don’t foresee the future and equip yourself for the same, you are doomed.