Redefining the roadmap for Ashok Leyland

It was not too long ago when Ashok Leyland seemed well and truly lost. Debts had piled up, the commercial vehicle industry was in disarray and the company was staring at a grim future.

Things have changed dramatically over the last couple of years and it is a more upbeat Vinod Dasari who greets us at the ITC Parel in central Mumbai. Leyland’s Managing Director has been making the news for his company’s comeback story which, in his view, needs to be rewound three decades. It was in 1987 when Iveco and Leyland teamed up and the annual spend then was roughly ₹100 crore annually. In 2007, after Iveco was bought out, investments skyrocketed to ₹1,200 crore annually on capacity and diversification. This continued for the next six years till the company ran out of money.

According to Dasari, this kind of spending jacks up the breakeven point for a manufacturing company as fixed costs increase. All these investments were funded through debt which escalated to ₹6,800 crore at one point in time. As if this was not enough, what used to be a two player industry with Tatas and Leyland increased with more companies entering the arena and collective capacity became five times demand. Everybody was fighting for share till the downturn happened for two successive years by 25 per cent each time.

This was the time Dasari knew enough was enough. “We decided not to just cut costs but restructure Leyland for growth with new strategies to become lean and efficient,” he says. Even while costs were being slashed, the company invested substantially in new products and platforms. The network also spread rapidly, albeit cost-effectively where rather than have one huge 20 bay workshop, four 5-bays were set up within a 50 kilometre radius.

Service stations also helped Leyland reach out to the customer. Once the project was completed, all that had to be done was to pick up the station and bring it back. Nearly put 15 of these have been installed in the northeast, a region where the company’s market share which never crossed five per cent is today at 20 per cent. The next service station is being planned at Tawang in Arunachal Pradesh which could become the highest outlet in the world at 10,000 feet.

Dasari also realised that it was imperative for every outlet to have easy access to spare parts. Where a dealer was not available, the company put up its own. “We created a company called Gulf Ashley with 17 dealer outlets all owned by us. All are profitable and I have given my dealers the option of buying any of them if they so wish,” he says.

By the end of the day, elaborates Dasari, the company is not in the business of dealerships and created these since the individual concerned did not have the money. The message is clear: ‘We are partners and I am not competing with you; I just put in money when you were broke’.

Likewise, Leyland took the initiative in spares through Leyparts, where there are nearly 150 centres today. It was also during this time that it launched TatkaAL where any stranded truck driver would give call for help which would reach him in four hours. “If we cannot get your vehicle up and running within the stipulated time we cough up a penalty of ₹1000 a day. It is a statement of my confidence in my network,” reiterates Dasari. There is a call centre to track this and any information on payment of money comes to the MD. “The idea is not to nail someone or pull him up but to know where we went wrong,” he adds.

Today, Leyland is a lot better off with record levels of market share, stability in terms of market capitalisation and lower debt. Going forward, one-third of sales will have to come from outside India, a huge jump from the present 10 per cent. The workforce will also be a lot younger and it is these NextGen leaders who will drive growth.

“We have to take Leyland to the next level which means ensuring that it is never hit by cyclicality,” says Dasari. While focusing on the core business of commercial vehicles, the key is to ensure that everything is in shape. One of these relates to defects per vehicle where Leyland’s was an embarrassingly high 7.8 at one point in time. This has since dropped to a more consistent 0.2-0.3 defects per vehicle.

Outsourcing will also be stepped up in the new drive for efficiency. “When there are people outside who can do things better than us, why should we then reinvent the wheel?” asks the MD. The mantra is to focus on the core growth areas of trucks, buses, spare parts, power solutions, defence and light commercial vehicles.

Dasari wants the non-truck share to account for over 50 per cent of business in the future. “Buses are not cyclical and neither are parts. It is only heavy trucks which are cyclical. How I make the other businesses larger even while I have massive targets for trucks is the challenge,” he says. The answer lies in growing faster and exploring new geographies.

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