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Ashok Leyland plans a capex of ₹1,000 crore and expansion of product range this fiscal as the country’s second largest medium and heavy commercial vehicle (M&HCV) company gears up for the upcoming growth curve.
The company ended 2017-18 with its highest-ever medium and heavy duty truck volume of more than a lakh units and maintained its market share at 33 per cent despite intense competition.
The Hinduja flagship expects the growth momentum in the M&HCV (goods) segment to continue till 2020 due to favourable growth drivers.
“I think the market is very bullish and the next couple of years look strong. This year outlook is bright due to infrastructure push and year after that will be BS VI pre-buy period. And year after that, normally you expect the demand to moderate. But that is the year scrappage policy will kick in. So, the overall demand outlook is favourable,” Vinod Dasari, Managing Director, Ashok Leyland, said at the company’s global conference event here.
He said the capex for the current fiscal would be about ₹1,000 crore, which will be invested in expanding capacity and capabilities as also in new product development. The proposed capex is the highest in the recent years.
The company will be debottlenecking all its plants to solve the capacity constraints, which arose due to rise in demand for tippers and other vehicles.
Dasari also said the shift towards the higher tonnage vehicles in the market helped secure better margins and the company’s revenues will be more than ₹25,000 crore for FY18 against ₹20,000 crore in the previous year. “But, we will continue to focus on generating double-digit operating margins,” he added.
Ashok Leyland’s LCV business has turned positive in terms of margins from negative last year.
“We turned this business around completely,” he said.
The company will launch 20-25 new products which will include variants and new models across categories this fiscal. The company is betting on products such as 41 tonne fully-built truck and MiTR left-hand-drive for fuelling growth this year.
Dasari also highlighted the success of the company's own technology and other customer-centric initiatives such as i-Alert, LeyAssist and LeyKart.
“Despite negative campaign against our own innovation, our iEGR technology has proved its mettle across the markets and the sale of more than one lakh trucks in FY18 underlines the faith the customers have on us,” he said.
The company’s focus on helping the dealers increase profitability through its MaxServe model has paid dividends.
Its dealers were selling about ₹530 crore worth of services in FY16 and the value doubled to ₹1,048 crore in FY18. “This also resulted in substantial improvement in the service satisfaction index,” said Dasari.
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