‘Chip shortage can hit production even as demand for trucks improves’

Leading truck and bus maker Ashok Leyland indicated that production would be impacted if the shortage of semiconductors persisted in the global automotive market even as the company hopes to achieve better volume growth both in domestic and export markets during the current quarter.

“The global auto industry has been affected by the constraints in the supply of electronic control units (ECUs) owing to global shortage of semiconductors. The Indian auto industry is no exception, and we are closely monitoring the situation with our suppliers as this can have impact on production if constraints do not ease,” Vipin Sondhi, Managing Director & CEO of Ashok Leyland, said during Q3 conference all.

With good growth in Q3, Ashok Leyland sees bright prospects to improve its sales in Q4 of this fiscal in view of revival across product categories. “In Q4, we expect volumes to grow further, subject to the ECU challenges that the entire global automotive industry facing,” said Gopal Mahadevan, whole-time director and chief financial officer.

Thrust on infra spends

He explained that multi-axle vehicles and tippers would see further growth due to stronger thrust on infrastructure spends by the government along with pick-up in mining and road building activity, while ICV (intermediate commercial vehicle) and tractor-trailer has been doing well. E-commerce continues to drive LCV category, in particular small commercial vehicles.

With incremental volumes from recent launch of Bada Dost, the company has been doing about 5,500 units a month in the LCV segment. LCV volumes grew 27 per cent at 15,991 units compared to 12,574 units in Q3 of last year. The company has sold close to 3,000 units of Bada Dost. “We are presently satisfied with this number and we may expand the capacity for LCV as the demand picks up further,” said Mahadevan.

He said exports had started picking up and the company was working out distribution strategy to boost international sales. The company aims to raise exports to about 10 per cent of its revenues. Exports at 2,941 units almost doubled in Q3 on a sequential basis and grew 24 per cent compared to a year-ago period.

The company has been effecting price hikes to offset soaring raw material prices. It undertook a price increase in Q3 and will take another price hike in this quarter, too.