Informist, Friday, Dec 29, 2023
–Ashok Leyland's Kumar: See co's medium, heavy CV sales up 10% FY24
–Ashok Leyland: See medium, heavy CV industry sales up 7-8% in FY24
–Ashok Leyland: Medium, heavy CV sales FY24 to touch pre-COVID peak
–CONTEXT: Ashok Leyland CV head Sanjeev Kumar's comments in interview
–Ashok Leyland's Kumar: Govt may include trucks in FAME-III scheme
–Ashok Leyland: Scrappage policy, road development to boost CV sales
–Ashok Leyland: See medium, heavy CV industry sales up 9-10% in FY25
–Ashok Leyland: Expect medium, heavy CV industry volumes to dip FY26
–Ashok Leyland: Aim to grow share of bus market by 100 bps in FY24
–Ashok Leyland's Kumar: To launch large electric truck soon
–Ashok Leyland's Kumar: To make announcement on large e-truck Jan-Mar
–Ashok Leyland: After buses, expect faster electric adoption in trucks
–Ashok Leyland: CNG CV sales hit by small gap in diesel, CNG prices
–Ashok Leyland: Vehicle, fuel costs biggest hurdles for hydrogen CVs
By Darshan Nakhwa
MUMBAI – Ashok Leyland Ltd is expected to surpass the industry's volume growth in the medium and heavy commercial vehicles segment for the second year in a row in 2023-24 (Apr-Mar), according to Sanjeev Kumar, president of medium and heavy vehicle division of the company. While the industry's sales are expected to grow 7-8% in the current financial year, Ashok Leyland's sales are expected to grow 10%, Kumar said.
In the ongoing financial year, the industry's volumes in this segment, which includes trucks and buses, are expected to achieve the pre-COVID peak of 414,000 units reported in 2018-19. This milestone will be achieved due to continued government spending on infrastructure, replacement demand, and favourable government policies, Kumar told Informist in an interview.
Ashok Leyland, which is the second-largest manufacturer in the medium and heavy product category, reported strong growth in sales in 2022-23. While the industry's domestic volumes grew 49%, Ashok Leyland's sales surged by 76% helping it achieve a market share of 31.8%, up from 30.4% in the previous year. This year, in the Jul-Sep quarter, the company's market share increased to 31.9%. The largest player, Tata Motors Ltd, had a 46% market share at September-end.
This year, the Chennai-based company has reported a growth of 10% in medium and heavy vehicle sales till November. The major growth has come from bus sales, which have grown 72%. In comparison, truck sales have grown only 4%. However, in absolute terms, buses accounted for only 13% of domestic segment sales of 71,381 units the company clocked till November.
In comparison, Tata Motors reported 17% growth in heavy truck sales till November. The third-largest player, Eicher Motors Ltd, posted 23% growth in heavy truck sales till November. These two truck-makers disclose light and medium truck sales under one category, unlike Ashok Leyland, which details medium and heavy sales as one category and light commercial vehicles as a separate category. In the case of buses, Tata Motors reports all bus sales under an omnibus passenger carriers category, while Eicher Motors details heavy bus sales as one segment, and light and medium bus volumes separately.
Currently, Ashok Leyland is the largest bus manufacturer in India. At the end of the September quarter, it held a 37.8% share of the market for buses as compared to 28.3% a year ago. The company aims to grow its bus market share by at least 100 basis points by the end of the current financial year.
"We have become market leader (in the bus segment) once again, and we've grown market share by almost 10% (in 2023-24). But bus contribution in overall TIV (total industry volume) is not so great," Kumar said.
On the expansion of sales and service network, Kumar said the commercial vehicle maker has been progressing well and it expects an extensive network to be the biggest differentiator between companies in future. "We have added big numbers last year, and we are going to double our effort this year also," Kumar said. "About 40% of our network (expansion) is going to come in north and east in the ongoing financial year."
In 2021-22, the company had 729 sales and service outlets for medium and heavy commercial vehicles, which increased to 810 last year. Till November this year, it has further increased the count to 878 outlets and has set a goal to take this number to 1,000 soon.
ALTERNATIVE TECH
Currently, Ashok Leyland offers trucks powered by diesel, liquefied natural gas, and compressed natural gas. It plans to make an announcement on the launch of a large electric truck in the Jan-Mar quarter, Kumar said.
Customers have shown a lot of interest in the electric truck and the company has made a few prototypes, Kumar said. "In the last one year, definitely there has been more focus on electric, and we have already homologated our smaller electric truck, and we are in the process of homologating the larger truck also."
In September, the company launched its first electric light commercial vehicle, the IeV series from Switch Automotive Mobility Ltd. Before Ashok Leyland's entry, Tata Motors was the only player offering a product in this segment in India.
Switch Automotive is a step-down subsidiary of Ashok Leyland, which manufactures and deals in electric vehicles. Ashok Leyland holds 91.6% stake in Optare Plc, which has around 98.9% stake in Switch Mobility UK, which in turn, owns Switch Automotive. In November, the auto-maker approved an investment of 12 bln rupees in Switch Mobility for capital expenditure, research and development, and meeting operational requirements both in the UK and India. OHM Global Mobility is a subsidiary of Switch Mobility which offers services such as vehicle subscriptions, battery as a service and mobility as a service options.
"As of now, the government is in the process of creating phase three of Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles in India policy, and I have heard that they'll probably include trucks also this time," Kumar said. "We have seen electric adoption in buses to a great extent. So, you can safely assume that you'll probably see a faster adoption in the case of electric trucks."
Ashok Leyland has also been working on other next-generation products such as hydrogen fuel cell and internal combustion engine variants in buses and trucks.
In September, the automaker showcased a hydrogen fuel-cell bus developed for National Thermal Power Corp Ltd, which is also the country's first commercially operational fuel-cell bus. In February, it displayed India's first hydrogen internal combustion engine truck, a product it developed in tie-up with Reliance Industries Ltd.
The company's primary goal is to be ready with all next-generation products with alternative fuels and propulsion systems in 24 months and this will be supported by private equity funding to Switch Mobility and OHM Global Mobility, according to Ashok Leyland's 2022-23 annual report. "Ultimately, it will be dependent on the government policy. If they take any call in terms of particular technology, customers will move in that direction," Kumar said.
When asked about the launch of the hydrogen truck, Kumar said, the company hasn't taken a decision on this yet and that this will depend on the creation of the ecosystem. "On the electric vehicle front, a lot of work is happening on creation of charging infrastructure. People are going for electric vehicles because of the availability of the charging infrastructure. But in the case of hydrogen, I think the biggest stumbling block would be the cost of the vehicle and the cost of hydrogen."
Currently, 23 heavy-duty hydrogen internal combustion engine trucks manufactured by Ashok Leyland are in operation at Reliance Industries' Jamnagar facility.
On the lower share of CNG-powered trucks in the overall intermediate commercial vehicle industry volume, Kumar said, the small gap between diesel and CNG prices in many states has affected sales.
In 2022-23, the share of CNG-powered intermediate commercial trucks in total industry volumes had fallen considerably, but now it has stabilised at 9% in the ongoing year, Kumar said. "At some point of time, CNG used to be somewhere between 44 to 50 rupees per kilogram and diesel was somewhere around 90 rupees per litre. Now, in many states CNG prices are higher than diesel."
"The government did take some steps six months back and managed to create some gap. But the incentive which (fleet) operators had in terms of big cost reduction is no more there," Kumar said. So far in 2023-24, Ashok Leyland has sold 1,057 CNG-powered trucks and buses. In 2022-23, the company had sold 1,325 units and in the year before it had sold 1,149 units.
DIP IN FY26?
Compared to 2023-24, the industry's medium and heavy vehicles sales are likely to grow by 9-10% in 2024-25 but may see a dip in the subsequent year, Kumar said.
The commercial vehicle industry is cyclical in nature, where "it (sales growth) goes (on) for three to four years maximum, and then you'll see a dip," said Kumar. "The dip may come, but how significant it will be we need to see that…it will depend on how things pan out in terms of political stability" and momentum in the economy.
At this juncture, there are many things which are working in the commercial vehicle industry's favour. From road infrastructure creation which reduces logistics costs, to implementation of the scrappage policy, several government initiatives are expected to drive demand, Kumar said. Further, continuing growth in end-user industries such as cement, steel, and container movements, as well as improvements in general manufacturing activity, and consumption trends continue to be favourable for demand, Kumar said.
At 0922 IST, shares of Ashok Leyland traded 0.6% higher at 176.30 rupees on the National Stock Exchange and those of Tata Motors traded 1.2% higher at 763 rupees. Ashok Leyland's stock hit a 52-week high of 191.5 rupees in August and a low of 133.1 rupees in March. In the current year, the automaker's stock has rallied 22%. In comparison, Tata Motors has rallied 94%. End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Ashish Shirke
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