Ashok Leyland is taking big strides in making its business future-proof , both in terms of energy mix and scale. In fact, in its earnings call after declaring Q1 numbers, Dheeraj Hinduja, Executive Chariman, Ashok Leyland said that the company is gearing up for significant launches this year. Around five new EV launches are planned.
This includes the much-awaited first electric LCV offerings under the Dost range “after Diwali”, Switch Mobility’s E1 electric bus for European and the Middle-East markets, and low-floor electric buses for the domestic market.
The electric Dost range will see pilots begin with few customers, large corporates, and fleet owners to understand the market, and mature the technology before going ahead for a full-scale aggressive play. In fact, the company is also seeing progress in the hydrogen truck segment under its pilot with Reliance.
“Based on feedback we are maturing our technology in IC-hydrogen and fuel cell,” shared Shenu Agarwal, MD & CEO, Ashok Leyland.
Responding to a question on investments in Switch Mobility, Hinduja said that the company’s board had earlier given an in-principle nod for an investment of Rs 1,200 crore. “It is core to the future for creating alternate fuels, part of core investment strategy for Ashok Leyland.” He also mentioned that Switch Mobility has already delivered 15 electric double-decker buses to BEST and 35 more will be delivered by September this year.
Room for increasing bus sales
The IC-vehicle commercial vehicle segment is not going away anytime soon and hence continues to be a healthy growth provider for all OEMs. For Ashok Leyland too, there is ample space to increase its sales and in turn market share.
“There is growth happening across the bus segment. Last year the bus segment didn’t grow as much as trucks, so you are seeing growth all around – ICV, STU and private buses. Historically we have been leaders in the bus segment, but in the last few years, we lost our leadership. From last quarter we have started getting it back. In the ICV bus segment we had a low market share of around 15% where we see significant opportunities, as it almost contributes to 2/3rd of the market,” added Agarwal.
Margins and price hike
Just like any other vehicle segment, the increase in raw material costs and new emission norms has increased prices for the CV segment as well. This means that OEMs have taken various percentages of price hikes.
“Sales in Q1 of a financial year is always going to be less than that of Q4 of the previous fiscal. We have not yet been able to recover the delta on the AVTR range, there is also a lot of inflationary pressure in the last couple of years, and hence we will not be able to absorb all that from the market. But our AVTR range in the BS6 era is getting better pricing premium versus competition, even though it is a long way before we start getting margins like in the BS4-era,” explained Agarwal.
He pointed out that the process of hiking prices is complex as one needs to look at the market, operational, production costs and product acceptability. The intention is not to keep increasing prices, but action is taken if it is needed.
Gopal Mahadevan, CFO, of Ashok Leyland highlighted that “CV pricing now has become more rational and which in turn is helping improve margins. The net price realisation on a quarter-on-quarter basis is seeing improved margins for Ashok Leyland which is industry-leading. The customers are now maturing and taking decisions from initial cost of ownership to total cost of ownership (TCO). Going forward industry should move up from pricing rational towards value selling, material costing should also be soft.”
