Truck and bus manufacturer Ashok Leyland is preparing to build multiple satellite plants in Africa, Asean and Latin American markets as the Chennai-based company aims to reduce dependence on the fiercely competitive Indian market.
Demand from such emerging markets, much like India, is skewed towards economical trucks and buses such as those from Ashok Leyland and Tata Motors, which are 15-25 per cent cheaper than their western counterparts.
Anuj Kathuria, president (Global Trucks), Ashok Leyland said, "For now we have plants coming up in Kenya and Bangladesh. In future there will be several of these assembly plants. We could look at Asean and Latin American markets later."
These assembly plants, which could be completely or semi knocked down (C/SKD) plants, will put together vehicle parts shipped from Ashok Leyland's India-based plant before retailing them in local markets.
Through this international expansion the company is targeting a minimum of one-third of the revenues to come from outside India in the near future from the current 10 per cent. Since they will be CKD/SKD plants investment for setting them up will not be huge.
For instance initial investment for setting up the plant in Kenya is between $5-6 million which can go upto about $10 million. This 3,000 units per annum plant is expected to come up in the next one year. The company is simultaneously setting up a similar plant in Bangladesh with the help of a strategic partner.
Ashok Leyland, which exports to 30 countries presently, is the market leader in Sri Lanka, Bangladesh and Mauritius and has a significant presence in Middle East and Africa. It already has a plant in UAE whose capacity is being raised by 50 per cent to 6,000 units a year.
"One of the most important things is that you are actually very close to the end customer community because the government, the people, you provide local employment, the visibility gets better and that is why we said that we will set up the assembly facility there", said Gopal Mahadevan, chief financial officer, Ashok Leyland to analysts recently.
In comparison commercial vehicle market leader Tata Motors has plants in South Africa, Thailand, South Korea, Morocco and Ukraine. The Mumbai-based company is exploring possibilities of opening assembly plants in Africa and Asia.
Ashok Leyland's overseas expansion comes at a time when competition back home has increased multi-fold. Not just with the entry of strong multinational players such as Volvo, Daimler, MAN, Scania the domestic commercial vehicle industry has seen continued rise of Tata Motors, Eicher and Mahindra & Mahindra.
Market share of Ashok Leyland in the medium and heavy commercial vehicle segment has fallen to 32 per cent in the April-August period this year as against 39 per cent recorded in the same period last year, according to data supplied by the Society of Indian Automobile Manufacturers (SIAM).
International premier CV making companies like Daimler, Kamaz, MAN and Scania do not share sales figures pertaining to India. However, these companies are aggressively expanding operations and entering new product segments.