Ashok Leyland sees short-term blips in CV sales due to GST transition

Rajalakshmi S | | Updated on: Jun 28, 2017
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Ashok Leyland expects short-term moderation in medium and heavy commercial vehicle (M&HCV) sales due to the effects of GST transition.

However, the commercial vehicle major has indicated that M&HCV industry is projected to record a growth of 10 per cent during 2017-18 when compared with the flat volume year in 2016-17.

With the possible implementation of GST, fleet operators are likely to hold their decision to purchase, while the manufacturers will align their production and inventory to the GST requirement. Consequently, the near term outlook is moderated, according to the company’s latest annual report.

However, the industry will find its momentum back aided by increased thrust on infrastructure and rural sector, resumption of mining activities in select states (this would continue to support tipper demand which has outperformed the industry in FY 2017) and consumption-driven sectors and e-commerce logistic service providers, among others.

The LCV segment would grow by 7-8 per cent in FY 2018 driven by replacement demand and stronger demand from consumption-driven sectors and e-commerce companies.

Despite intense competition, Ashok Leyland’s pick-up truck Dost has maintained its market share of 15 per cent in 2-3.5 tonne GVW (gross vehicle weight) segment.

“LCV strategy will get further sharpened and a slew of products is already in the pipeline,” Dheeraj Hinduja, Chairman, Ashok Leyland, said.

Over the medium term, the segment would also benefit from the rollout of GST and its impact on logistics sector and preference for hub-n-spoke model. LCV truck segment is likely to register a growth of 11-13 per cent over the medium term, the report said.

Impairment provisions

The company has made an impairment provision of ₹ 121 crore towards Albonair GmbH and Albonair India. Also, ₹ 526 crore has been provided towards Optare Plc. for the loans and obligation.

BS III to BS IV impact

Due to the Supreme Court ban on BS III vehicles from April 1, the company had an inventory of 9,572 BS III vehicles (excluding defence and other specific vehicles) as on March 31, 2017. Of the total inventory, 2,449 vehicles were earmarked for export markets and the balance 7,123 vehicles are being converted to BS IV (the impact for this is about ₹ 815 crore).

Published on January 12, 2018

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