The Hindu Business Line : ALL new foray may help beat slowdown

Ashok Leyland’s diversification moves — first into the light commercial vehicle segment (LCV) in a joint venture with Nissan and now into the manufacture of construction equipments jointly with John Deere — have been triggered by the slowdown in its bread and butter medium and heavy commercial segment (MHCVs).

Well thought out

The foray into making of LCVs brought two advantages — one, LCVs have not been as vulnerable to cyclical downturns as MHCVs, and two, with the hub and spoke model gaining ground, the company could now cater to the growing demand (especially for the sub one-tonne trucks) in this segment.

Through the JV with John Deere, the company is now looking to cater to another segment showing promising growth – infrastructure.

Good Nework

Given the burgeoning opportunities in the space and several domestic players vying for market share, factors such as distribution network, technology tie-ups, pricing strategies and after-sales service emerge as key differentiators.

John Deere, known for its modern technology and worldwide presence, is a good fit for the company in this business.

Also, a readily available and well-established domestic distribution network will stand Leyland in good stead.

Besides, it could also find new markets for its products through Deere’s international network.

Product Mix

The JV will initially manufacture backhoe and four-wheel drive loaders.

The product mix appears carefully chosen – the former an equipment used in all facets of construction and for which India is one of the largest markets in the world, and the latter used in big infrastructure projects for which demand is expected to grow in the next few years.

Competition

But the venture could face stiff competition from JCB, which caters to about 70 per cent of the demand for backhoe loaders in India and other established, pure-play construction equipment makers.

Caterpillar too has announced plans to add to its existing capacities for backhoe loaders.

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