1. Despite demonetisation speed-breaker, Ashok Leyland honcho says demand for trucks will rise

Despite demonetisation speed-breaker, Ashok Leyland honcho says demand for trucks will rise

The Chennai-based company has also made major inroads in the northern and eastern states by increasing the overall touch points and dealerships.

By: | Published: December 30, 2016 6:29 AM
demonetisation, Ashok Leyland, M&HCV segment, Anuj Kathuria, Trucks The Chennai-based company has also made major inroads in the northern and eastern states by increasing the overall touch points and dealerships. (Source: Reuters)

Notwithstanding the adverse impact of demonetisation Ashok Leyland has managed keep its tipper sales intact compared to October as result of increase in infrastructure projects across the country. Anuj Kathuria, president, global trucks, Ashok Leyland told FE’s Malyaban Ghosh that the company’s market share in the tipper segment has increased by 5% y-o-y and same in the over all M&HCV segment has increased to 32% y-o-y in the first nine months of the current fiscal year. The Chennai-based company has also made major inroads in the northern and eastern states by increasing the overall touch points and dealerships. Excerpts…

How do you see the performance of Ashok Leyland in the heavy vehicles segment?
If you look at the market now, volumes in November decreased on a year-on-year basis. It started well in the first week and then because of demonetisation the volumes started to fall. But if you break it down into sub segments, the tipper segment continues to do well. Because the demand for these vehicles is coming out of infra projects. These are all long term contracts that are being awarded. So we continue to see good demand for tippers and in November we sold close to 1,500 tippers which was the same in October. In the first nine months of this fiscal the tipper volumes has grown by 45% and Leyland has increased its market share in tipper segment by 5% y-o-y. Overall in the medium and heavy truck segment we have 1.5% y-o-y grwoth during the fiscal to 32%. The drop in volumes was in the multi-axle vehicles where the volumes dropped by 25% and it impacted the overall volumes.

What was the impact of demonetisation on volumes and how are you planning to tackle it?
We are trying to reach out to as many customers as possible and provide better products which are more customised for their application. We are trying to meet the team of financiers and understand what are the steps they are taking to help customers who have failed to pay their monthly installments due to demonetisation. Some restructuring schemes have already been offered. As an adverse impact of demonetisation, the volumes of TIV trucks dropped from 25,000 in October to 15,000 units in November. So the decline was almost 40%. We cannot predict the volumes in December at this moment but it may be worse than November not only because of demonetisation but also it is the year end. Last year though December was good but traditionally the commercial vehicle sales slow down during the month.

How are you planning to expand your market share?
We have a complete product range and we have been increasing market share in north and east besides the traditional stronghold of the southern states. Ashok Leyland have gained market share in north, east and the central zones and going forward most of the gains for us will come from these zones. We are trying to address issues in every region and segment to get a good presence across the country because that is way to ensure financial sustainability. We can’t afford to depend on a particular segment or region. In the eastern zone we have managed to increase market share by three to four percentage points to 25% and are holding on to it in the past few months. Last year in the northern states we had 20% market share which has improved to almost 24% this year.

What are you doing to counter other manufacturers’ expansion drive in the southern states?
At present, we have 1,000 touch points across the countries and in the last two years we have increased the number of touch points in the eastern and northern states. We have also ensured the availability of the spare parts by expanding our network related to selling these parts of our vehicles. We don’t open dealerships or workshops which cannot self sustain. It has to be profitable.

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Has the demand for fully built trucks increased over the last few years?
Most of the fleet owners now don’t want to buy a standalone chassis any more and want a fully built one instead with the load or the tipper body with a complete cabin. This trend has come into being in the last few years and in the years to come it will grow substantially. Five years back we used to sell tipper chassis with the sub frame and tipping gears. Today 95% of the tippers we sell are fully built from the factory and the customers start using the vehicle from the next day.
Cargo from sectors like manufacturing, infrastructure and agriculture has not improved substantially.

How do you see the demand for trucks in the next fiscal year?
Replacement demand will continue and will only increase if the ban on the 10-year-old commercial vehicles gets adopted by other cities. It is already in place in the national capital region (NCR), Mumbai and some other places. Growth will come from infrastructure projects and government spending in the sector will also increase in the coming years. Demand in the real estate segment is expected to go down and that may affect the market a bit. Also we have to look at the implementation of the GST as that will increase the efficiency of the vehicles. Revenue generation from the vehicles will increase as inter state taxes will cease to exist and turn around time of the vehicles will also improve. So the viability of a transport business will improve which will drive the demand for new vehicles.

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