Informist, Friday, May 10, 2024
--Ashok Leyland: Light CV sales seen rising in high single digit FY25
--CONTEXT: Ashok Leyland light CV head Singh's comments in interview
--Ashok Leyland: See small commercial vehicle sales rising 5% in FY25
--Ashok Leyland: Light passenger carrier sales to grow 10-15% in FY25
--Ashok Leyland: See headroom for further growth in light CV sales
--Ashok Leyland: Above normal rains, new pdts to help light CV sales
--Ashok Leyland:Thriving e-commerce key to sales of light CVs in FY25
--Ashok Leyland: No hit to light CV sales due to ongoing elections
--Ashok Leyland: High base, rural stress impacted FY24 sales growth
--Ashok Leyland: Plan to launch six light commercial vehicles in FY25
--Ashok Leyland: To launch new light commercial vehicle by May end
--Ashok Leyland: Plan to enter new international markets in FY25
--Ashok Leyland:To enter ASEAN with launches in Malaysia, Phillipines
--Ashok Leyland: To foray into more countries in ASEAN in FY26
--Ashok Leyland: Gulf Cooperation Council added most to exports FY24
--Ashok Leyland:Around 40% of co's FY24 exports were to Gulf nations
--Ashok Leyland: Expect defence business to grow 20-30% in FY25
By Darshan Nakhwa and Sunil Raghu
MUMBAI/AHMEDABAD - Ashok Leyland Ltd expects sales of its light commercial vehicles to grow in high single digit in
2024-25 (Apr-Mar), with headroom for a further growth, according to Amandeep Singh, president of light commercial vehicles, defence, power solutions and international operations, at the company.
The possibility of above normal monsoon and an interest rate cut, if any, along with development of highways, thriving
e-commerce business and introduction of new light commercial vehicles are likely to boost segment sales in India in the current year, Singh told Informist in an interview.
In the light vehicles category, he expects sales of passenger carriers to grow 10-15% in the ongoing year, and that of the sub-segment--small commercial vehicles--to grow 5%. Sales of passenger carriers have grown over the last two years. After the COVID-19 pandemic, there was a lot of pent-up demand, and even last year there was a strong growth in this segment, he said, adding the momentum is expected to continue.
In the year ended March, Ashok Leyland sold a total of 1,680 passenger carriers in the light vehicle category, against 1,313 units it had despatched in the previous year and 246 units in 2021-22. In comparison, the overall industry sales were 55,381 units in 2023-24 compared to 46,114 units in the previous year. The Chennai-headquartered company currently offers MiTR school bus, staff bus and ambulance in this segment. These diesel-powered products have a gross vehicle weight of 7 tn.
Singh's optimism about the volume growth in the light vehicle category stems from the demand trend seen in the ongoing
General Election, which started last month. "We had thought that the first quarter would be slower (in terms of sales) because of the elections, but we have not yet felt that on the ground. Looking at the current market trend, we may be surprised on the upside. As of now, we are pencilling in high single-digit growth over last year," Singh said.
In April, Ashok Leyland's light commercial vehicle sales, including domestic sales and exports, rose 2% on year to 5,148 units. In 2023-24, the company's sales rose 3% on year to 69,800 units. In comparison, the industry's volumes fell by 2.7% to 642,275 units.
Singh attributed the moderation in the company's sales volume growth in the year ended March to a high base effect, and stress in rural consumption. Its light vehicle despatches had grown 25% in 2022-23, 11% in 2021-22, and 5% in 2020-21.
"We may have a year or two of slow growth depending upon the local and other conditions, but if you see the way expressways are getting created, the way e-commerce is growing, and dedicated rail corridors are coming up, these are all going to give a big fillip to the last mile delivery, which is catered by light commercial vehicles," Singh said.
The commercial vehicle segment is also expected to get a respite from higher rate of interest in the ongoing financial year, according to Singh. "If the interest rate cycle turns, as expected from the second or third quarter, then we expect this headwind to turn into a tailwind," he said.
The higher rate of interest has been one of the headwinds that hampered the segment's volume growth last year. Light commercial vehicle buyers are sensitive to interest rates and the equated monthly instalments influences their buying decision, he said.
In April, the Reserve Bank of India's Monetary Policy Committee had left the repo rate unchanged for the seventh consecutive time since the rate-tightening cycle began in May 2022. The RBI has raised the benchmark rate by 250 basis points since then.
Further, if the monsoon is above normal as forecast by the India Meteorological Department, then that will power rural consumption. Sales of light vehicles depend a lot on rural consumption, Singh said.
In 2024-25, Ashok Leyland also plans to launch one light or small commercial vehicle every alternate month. The company will launch its first new model by the end of May, Singh said. "FY25 will be a year of launches, and we've already informed our dealers to be prepared for one launch every alternate month...We'll launch a SCV (small commercial vehicle) or LCV (light commercial vehicle) model every other month. In total, we will launch six models which will be powered by compressed natural gas or diesel," Singh said.
Currently, Ashok Leyland offers two goods carriers and three passenger carriers in the light vehicle category, as per information on its website. In small commercial vehicles, it sells nine goods carriers. All these vehicles are powered by diesel and compressed natural gas. On the electric vehicle front, the company's arm Switch Mobility Ltd sells an electric version of its 3.5 tn model 'Bada Dost', and is now preparing to launch another model with lower gross vehicle weight.
In 2023-24, the Hinduja Group company had the third-largest market share in the light vehicle space in India after Mahindra & Mahindra Ltd and Tata Motors Ltd. Ashok Leyland had a market share of nearly 12% in 2023-24, up from slightly over 11% in 2022-23, according to data from Society of Indian Automobile Manufacturers. In comparison, market leader M&M controlled nearly 43% market share in light vehicles, and Tata Motors' share was slightly over 32%.
Today, shares of the company ended nearly 2% higher at 198.30 rupees on the National Stock Exchange. The stock hit a 52-week high of 205.1 rupees on May 3 and a low of 144.1 rupees in June.
EXPORTS BOOST
In 2023-24, the company's exports of light vehicles more than doubled on year to 3,167 units after a decline of 33% and 1% in the previous two financial years. This massive year-on-year growth was delivered on the back of introduction of new models and resolution of issues in key international markets, Singh said.
"After tough two years in the international markets such as Sri Lanka, Bangladesh, Nepal and some African countries, where sales were impacted due to unavailability of dollars and currency devaluation, geopolitical issues are now resolving," Singh said.
The introduction of the light commercial vehicle 'Bada Dost', known as 'Phoenix' in international markets, also boosted the company’s exports, Singh said. The model has done well in African markets and the company intends to maintain this growth momentum.
In 2024-25, Ashok Leyland also plans to venture into new international markets to grow its exports further, Singh said. "We are looking to enter in ASEAN (Association of Southeast Asian Nations) region in FY25. This is part of our expansion plan. We will first enter Malaysia and the Philippines in this region in FY25 and the other countries in FY26."
Currently, Ashok Leyland exports light commercial vehicles to five regions – SAARC (South Asian Association for Regional Cooperation), Middle East and North Africa, West Africa, East and Southern Africa and CIS (Commonwealth of Independent States).
The company's exports to the Gulf Cooperation Council grew the most in the previous year, as the region was unaffected by the higher crude oil prices and did not face foreign exchange problems encountered by other countries, Singh said. "Our sales have grown most in GCC (Gulf Cooperation Council) region and going forward, we expect countries like Saudi Arabia, United Arab Emirates to continue on the higher growth trajectory," Singh said.
Nearly 40% of Ashok Leyland's exports landed in the Gulf Cooperation Council region in 2023-24. Earlier, 50% of the company's international sales used to come from the SAARC region, but they have declined in the last two years. Its presence in the Gulf Cooperation Council region has helped the company improve its volumes, Singh said.
In 2024-25 too, the company expects exports to grow in the Gulf Cooperation Council region. However, the region's overall contribution to exports of the company in percentage terms may be lower as SAARC markets are expected to make a comeback. "Volume-wise, GCC will still grow but percentage-wise our sales may moderate a bit. Once Bangladesh and Sri Lanka come back, then our volumes will start coming from there too," Singh said.
In the defence business, Singh expects Ashok Leyland to report a 20-30% growth in 2024-25. In the year ended March, the company secured orders worth around 8 bln rupees, below its target of generating 10 bln rupees of revenue from the business.
"Our defence business has grown significantly in FY24. Most of the orders came from the domestic market. We participated in most of the government tenders and our win rate has been around 70%," Singh said. "We also have export orders from some African countries, Bangladesh and Sri Lanka."
Over the last five years, Ashok Leyland has won defence orders worth 20 bln rupees. The company expects to generate an additional 35 bln rupees in the next three years from the defence business, the company said in an investor presentation in 2023. Currently, it has 26 defence vehicles in its portfolio catering to the diverse needs of personnel and logistics across the armed forces. It has developed a range of mobility platforms, including 4x4, 6x6, 8x8, 10x10 & 12x12, for various applications and operational requirements of the Indian armed forces. End
Edited by Vandana Hingorani
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