Company will contain investments within Rs 500 crore this year
With auto makers staring at a severe slowdown, Ashok Leyland will defer all investments and capital expenditure that is not critical, said Dheeraj Hinduja, the company’s Chairman, addressing the media.
Hinduja said that the group had hiked capacity substantially but then the market fell by as much as 25 per cent last year, and in the first quarter of this financial year as well. “We have to optimise what we have. We are delaying any capex and investments for the next few quarters. Till the market revives we have to be as lean as possible.”
The group will contain its investments to under Rs 500 crore this year. Last year, its capital spend was around Rs 1,600 crore.
However, Hinduja gave an upside to the slowdown. “Fortunately for us, most of the critical investments have been done, whether in the Nissan joint venture, Albonair (its Germany-based company that works on reducing vehicle emissions), John Deere…Anything critical will not be stopped but those that can be deferred or delayed will be,” he emphasised. Answering a question on the closure of the company’s facility in Prague, Czech Republic, Hinduja said the European market is also depressed. And with the plant’s total output of around 1,000 vehicles in the last year it didn’t make sense to continue production for now. “But it is in a European market, and has access to East European countries,” said Hinduja.
He added that the factory, which makes the Avia range of 6.5- to 12-tonne trucks, won’t be wound up now. The Boss, the new avatar of Avia, is going to be produced in India “as it makes more economic sense. At the moment we are trying to see what course is available for the company. What we’ve done is to make the Avia with a better cost structure,” said Hinduja. A lot of car makers are using India as an export base and that’s what Ashok Leyland is attempting to do, he added.
Elaborating on what various Leyland group companies are doing, V. Sumantran, Vice- Chairman, Hinduja Automotive, said Albonair is working on affordable technology for the Indian market to reduce emissions. “The company has become a single-source supplier to a large European truck maker. We’ve beaten big names in this business,” he said, adding that the company expects to eventually have a 24 per cent share in Europe in emission-control systems.