The commercial vehicle industry is bound to go through cycles, with the last one being 2013-14 and the current one running the past one year. CV maker Ashok Leyland said it has chalked out plans to help it manage future downturns better. After showcasing the company’s BS-VI trucks and buses, Dheeraj Hinduja Chairman spoke to T E Narasimhan on the company's strategy, going forward. Edited excerpts:
When do you think CV demand will improve and what needs to be done?
Improvement of the finance sector would bring back confidence in this industry. In my talks with the banks, NBFCs, I find that they are definitely showing lot more appetite for financing vehicles, which is good for us. Second, if the Government continues to invest in infrastructure, it will provide a major impetus to the sector. Lastly if the scrappage scheme is announced, it will boost sentiment.
The government has indicated that by July there will be some level of certainty on scrappage scheme.
You have set a vision of becoming a top-10 global CV player. When do you see this happening? Will the current downturn affect your plans?
We achieved our last vision of becoming a top-10 M&HCV player in nine years. I will be disappointed if we don't achieve the new goal of becoming a top-10 CV player in less time.
To achieve the global vision, we will require a volume of about 400,000 units and LCV will be one of the key drivers for this goal.
The company is developing a new platform for LCVs, the products launched from which will help the company address 65 per cent of the market by fiscal 2024 with a volume of around 150,000 units, as compared to 34 per cent now.
Anything that the OEMs can do to revive the demand?
There is very little in terms of how OEMs can incentivise, and giving discounts is not a good idea. For them, they will only purchase the vehicle when they can use it optimally. For example, for tippers they need infrastructure projects, for long-haul vehicles they need the movement of goods. As an industry, I cannot see what is that we can do for encouraging customers.
Definitely if sentiment improves and infrastructure kicks in, and if the scrappage policy does come eventually, it would be a great help. We continue to believe this is not a luxury segment, so GST reduction could do the industry a lot of good.
How do you plan to address future cyclicality?
Light commercial vehicles, international operations, spare-parts business, power solution business, defence, all of these along with customer solutions, can derisk the company from being purely a M&HCV company.
Over the past five or six years, whenever there was a recessionary trend, we were not drastically affected. We have seen the results already. Had it not for the LCV, we would be focused on M&HCV now.
M&HCV was contributing to over 70 per cent of our business, but going forward it should be definitely less than 50 per cent. International business was accounting for 10 per cent, but now we have a product range that specifically addresses the international markets, so the contribution will improve significantly.
Are you cutting down investment and capex?
In core areas like Modular Vehicle, BS-VI and the new LCV platform, we have not slowed down. How we move forward depends upon the need. We will get into more cycles of investments which will be regular ones.
Will you be looking at inorganic growth?
The industry is already consolidated, and there are very few opportunities to consider acquisition. If we look at acquisitions it should add technology or it gives us a new geography. At the moment, we have lot to do in India and lot to do with the products we are bringing out. These products itself will help us to expand in the new countries.
From UK's perspective, Optare will help address developed markets, be it electric or diesel.
Where do you see Ashok Leyland in the next two years?
The worst is behind us -- even if we do not see double-digit growth in the next few months. Once the first quarter of the next fiscal has passed, people would have experienced the BS VI vehicles and we would start getting feedback on fuel efficiency. Post July and August, the market will start making a strong revival.
We have five months to go, so there can be a good pre-buy also. We might see four months of strong sales, though Q1 might be slightly slower. This industry will grow at 1.5 per cent of the GDP, if the GDP is growing at five per cent. So if the Government is saying 7 per cent GDP, there is a lot of opportunity. Therefore, we are bullish.
It is difficult to predict turnover numbers, as many factors can affect us. We have given our longer-term vision, which is very challenging. We are making lot of efforts to achieve the goal. How the next 12-18 months hold is important, but it will not deter us from going towards our longer-term vision.