Diesel Engine Manufacturing Company

C: I believe that the three wheelers are primarily used for passenger transportation and goods transportation. Does the client cater to both the segments?

I: Yes. It caters to both the segments and the commercial segment is a larger chunk of the two.

C: Have both the segments seen a softening in the topline growth or is it concentrated to one segment?

I: It is concentrated to commercial segment. It was a high growth segment in the past years, but the growth is now seeing a decline.

C: To understand the situation better, within the commercial segment, is there a specific region/industry the three wheelers cater to?

I: You can assume the vehicles are used primarily to transport FMCG consumer goods from Distributor to Retailers.

C: Great. I believe there could be two reasons of the decline in growth. One is that the overall consumer goods segment is seeing a decline, which seems slightly hard to believe given the Indian landscape. The second reason could be that there are some better alternatives introduced in the market to transport those goods?

I: Great. You’ve hit the right spot. Mini Trucks like Tata Ace are replacing the three wheelers which is translating to softening of topline growth. Can you think of the factors through which you’ll evaluate the two alternatives?

C: Sure. I believe there could four factors based on which I would evaluate the options. First is the cost of delivering the goods. Second is safety of the goods while transportation. Third is the time taken per trip. And the fourth is the better technology including refrigeration that might be available in mini trucks.

I: Okay. This primarily covers the factors, but can you also think of a reason which is broader and macro in nature.

C: Could it be due to imposition of the government regulations?

I: Yes, perfect. Okay, so let’s explore one of the options you mentioned earlier about the cost of delivering goods. How would you compare the cost between the two alternatives?

C: Sure. We can do a split between no. of trips and cost per trip?

I: What factors would you consider under cost per trip?

C: We can further split it into Variable Costs and fixed costs. Under variable costs we would consider fuel costs and driver salaries. Under the fixed cost, we would consider price of the vehicle and maintenance charges.

I: Great. We can close the case now.