"We are looking at expanding our LCV product portfolio to cover at least 70%-80% of the market share in the next few years. The LCV presents huge potential for us to grow our CV volumes in the future,” said Dheeraj Hinduja, Chairman, Ashok Leyland, during a post-earnings media call on Friday.
Without sharing specific product details, Managing Director and CEO Shenu Agarwal said, “We are going to start launching new products this month itself. And every alternative month of the year, we are going to the market with a new product.”
“Some of these new products are totally addressing whitespaces that we currently have and some of them are actually extensions of the current products, but they are addressing either an emerging application or an emerging emerging trend in the market,” he said.
In the medium and heavy commercial vehicle (M&HCV) segment, Ashok Leyland has a market share of 31%. In the LCV segment where it currently serves the 2-3.5 tonne with its Dost and Bada Dost pickups, it occupies a 20% share in the market. With the new product offensive, the aim is to take this share to 25% in the medium term.
The focus will also stay on growth of the bus segment in the intermediate commercial vehicle (ICV) category. “We have a lot of opportunities to grow here. So the focus for buses would be on ICVs while defending our market share on state transport undertakings (STUs) and other segments.”
Last year, the Chennai-based automaker lined up a capex of about INR 500 crore. For FY25, it plans in the range of INR 500crore - 700 crore.
No discounts for market share
Going forward, the CV maker is confident about its product portfolio and strong future lineup to help improve its market share. The aim is to drive its operating profit margins to the mid-teens in the medium term (over the next two to three years).
“Our focus is on profitability. We are never going to win market share by playing on the discounts,” Hinduja said.
Its average selling price has been improving over the last quarters. Even though the company’s Q4 FY24 revenues were almost flat, its operating profit margins were at 14.1%. In Q3, the margins were at 12%, compared to 11.2% in Q2 and 10% in Q1 of this year.
The CV maker attributes the margin growth to three main factors– better realization and mix of products, all the businesses, including OEM, spares, LCD, defence and exports, doing well. Secondly, steel prices have become lower, and third, value engineering with better quality products.
Hinduja is confident about obtaining strong margins on LCVs and believes “there is no reason that only the M&HCV can give us the type of margins”.
In February, the company laid the foundation for a new plant in Uttar Pradesh (UP). It aims to complete this and start production by July next year. “We are still sticking to that timeline as the progress is good. We are in the final stages of negotiating with the government. The land is now about to be cleared, we will start constructing the boundary wall in the next few weeks.”
FY25 outlook
The company is quite positive about its growth and the CV industry as a whole this year. It has seen no major negative impact of the ongoing general elections.
“At the beginning of the year, there was widespread anxiety that the CV industry in Q1 and Q2 might degrow because of elections and other factors. April numbers have proven this wrong. The pulse on the ground is very positive," Hinduja said, while expecting a good monsoon for this year.
“We are really optimistic not just about the whole year, but H1 as well. If you look at any macroeconomic parameter that affects the CV industry, everything is in green,” he added.
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