Hinduja flagship firm Ashok Leyland will invest Rs 400 crore to develop new light commercial vehicles (LCVs) within the next two years and plans to triple its sales in the segment by 2019-20. The company, which had last year parted ways with Nissan after a tumultuous relationship, is now looking to make up for the lost time, eyeing export markets with new models to be developed on two new platforms. In order to accelerate product development, the company is also re-hiring a number of employees who had left the erstwhile joint ventures with Nissan.
"For the medium term between 12 months to two years, we have allocated fresh fund of Rs 400 crore on product development for LCVs," Ashok Leyland President (LCV & Defence) Nitin Seth told PTI. "We will have two new platforms on which we can develop several models -- from right hand drive to the left hand drives with different powertrains, as we will be targeting not only the domestic market but overseas as well," he said.
When Ashok Leyland was in partnership with Nissan, their joint venture agreement prevented it from developing its own LCV nor was it allowed to export. Last September, ending their 8-year-old partnership, Ashok Leyland and Nissan Motor Co agreed to part ways with the Japanese partner agreeing to sell its stake in three joint ventures to the Indian partner.
In May 2008, the two partners had formed three JVs – Ashok Leyland Nissan Vehicles Ltd (ALNVL); Nissan Ashok Leyland Power Train Ltd (NALPT); and Nissan Ashok Leyland Technologies Ltd (NALT). The partners had invested about Rs 1,000 crore as equity between them.
With the three JVs becoming history and having bought out the Japanese partner's stake while getting licence to its technology, the Chennai-based firm is now looking ahead to becoming a significant player in the LCV segment behind Mahindra & Mahindra and Tata Motors.
"We believe we can be a significant player in the LCV segment. Our target is to achieve annual sales of one lakh units by 2019-20," Seth said. Exuding confidence of "tripling sales" from the current 35,000-36,000 units a year, he said: "It is possible for us, we have the infrastructure ready all we need is new products to push volumes."
With faster product development becoming crucial to its plans, the company is re-hiring some of the ex-employees of the erstwhile JVs with Nissan, who had left during the uncertain times.
"They were a part of the system and they know our requirements," Seth said without sharing the number of people who are joining back. When asked about exports, he said: "We have divided the
target markets into four clusters -- SAARC, GCC (Gulf Cooperation Council), Africa and the Asean."
With many of the international markets being left hand drive markets, he said LCVs on the two new platforms will be developed with a consideration to address those markets, he said. "Our new products will be able to address markets like Indonesia, Malaysia and Africa, SAARC region which are very similar to India. Even for GCC, we will be able to meet the standards there with our new products," Seth said.
Ashok Leyland's focus on exports is keeping with the top management thinking that to overcome risk of the cyclical nature of commercial vehicles market, overseas markets contribute around 33 per cent of its total sales.
Currently, around 10-12 per cent of its total sales come from exports. For the domestic market, Seth said the company's current LCVs -- Dost, Partner and Mitr are doing well.
"Our dealers have been longing for new products, which we will deliver. There will be variants of existing models in short term while the roll out of brand new products will happen in the medium term," Seth said.
Along with the new models, he said the plan is to expand sales network to 450 outlets with 150 dealers across India within the next two years from the current 370 outlets and 113 dealers.