Hinduja Group flagship firm Ashok Leyland on Friday said it currently doesn't foresee the coronavirus outbreak affecting its plans for migration to BS-VI emission norms, although some of its component suppliers source parts from China.
The commercial vehicle manufacturer, which on Friday delivered its BS-VI compliant modular platform vehicles to select customers, also said it doesn't see demand bouncing back in the first two quarters of next fiscal.
"While we do not have any direct suppliers, some of our tier-1 suppliers will be kind of impacted...As of now whatever we have understood, if everything happens as per that plan and materials start moving out from China, it should not have a major impact," Ashok Leyland Chief Operating Officer Anuj Kathuria told reporters here.
He was responding to a query on whether the coronavirus outbreak in China would affect its supply chain, thereby impacting its plans for transition to BS-VI emission norms from April 1.
Stating that more companies have started to operate in China in the last few days, Kathuria said, "As of now we do not see a major challenge but...we have to wait and watch. There would be some impact but that could be manageable."
Stressing on the global automotive industry's dependence on China, he said, "Today the entire auto industry throughout the world has something or the other coming form China. There is a dependence on China."
Commenting on market outlook, he said, "At least the first two quarters of the new fiscal, we don't see demand coming back...We are not expecting the market to revive immediately."
He said it will take some time for demand to revive and after that it should remain reasonably strong. However, it would be very difficult to predict a number currently.
In the last few quarters, the GDP growth rate has also been impacted, but that is cyclical part of demand which would come back, he noted.
"But the structural changes that have happened has established a new normal. So this new normal will remain and we have to recognise that," Kathuria said.
When asked about the company's expectations in terms of revenue growth, he said, "Revenue or topline is heavily dependent on market conditions."
Sharing the company's BS-VI transition plans, Kathuria said the company would be ready to roll out upgraded products from April 1.
The company, which is one of the leading players in the commercial vehicle segment, said its BS-IV inventory would be exhausted by the end of this month.
The company would now manufacture BS-IV products on order only, Kathuria added.
He said the company has invested around Rs 500 crore on development of modular platform and upgrading its models to conform to BS-VI emission norms.
When asked if the technology upgrade would lead to increase in product prices, he added, "It is difficult to state as it will depend from model to model, but one thing is sure that the price increase would be substantial. It would be more than what we saw during transition of products from BS-III to BS-IV norm."
Commenting on the benefits of the modular platform for the M&HCV range, Kathuria said the new chassis would help customisation of the product, which in turn will deliver better operational economies to the customers.
"It will improve total cost of ownership for our customers. The modular range can be customised to individual customer's needs -- load, terrain, application and operational requirements," he added.
On being asked about the company's plans to use alternate fuels in its products, Kathuria said the company plans to have BS-VI compliant CNG, LNG based products in its portfolio.
"Government is pushing for alternate fuels like CNG and LNG. It will all depend on the distribution of such fuels. We will be ready as and when distribution of such fuels commences," he added.
On electric buses, Kathuria said the company has technology, but it is not entering the mass market segment due to high costs involved.
Ashok Leyland is already running electric buses in Ahmedabad, and would also try to bid for orders from other state transport units (STUs), he said, adding that the government's local manufacturing norms under FAME 2 scheme will help domestic players compete with Chinese manufacturers.