Production hit but demand intact at Ashok Leyland’s RAK plant amid Iran war

Ashok Leyland ULE Bus

• Ashok Leyland has a bus making plant in Ras Al-Khaimah
• The plant has been operating at over 100% capacity
• Production at the plant is down by 15-20%

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The ongoing conflict in Iran has begun to disrupt supply chains for Ashok Leyland, forcing the company to scale down production at its Ras Al-Khaimah (RAK) manufacturing facility even as demand across the Middle East remains resilient.

The war, now in its fourth week, has led to the shutdown of the critical Strait of Hormuz, severely impacting the movement of goods into the United Arab Emirates. As a result, key vehicle components shipped from India to feed the RAK plant have been delayed, leading to a 15–20 percent drop in production for the month.

“The parts which are imported have been affected by the closure of the waterway,” Amandeep Singh, President – LCV, International Operations, Defense and Power Solutions at Ashok Leyland, told Moneycontrol.

Despite the disruption, the company has managed to cushion the immediate impact using existing inventory. “We are trying to find alternate sources and logistics routes. For now, the impact is limited because we had pipeline stocks,” Singh added.

High utilisation meets supply shock

The RAK facility, which caters to the broader Middle East market, had been operating at peak levels prior to the conflict. With an installed capacity of 6,000 units annually, the plant produced 6,089 units in FY25 — marking a 44 percent year-on-year growth and operating above 100 percent capacity.

Traditionally focused on bus manufacturing — which accounts for nearly 90 percent of output — the plant has recently expanded into truck production. The diversification has further strengthened its role as a key export hub for the Chennai-based automaker.

Financially, the unit has been a strong performer. In FY25, profits surged 327 percent to AED 36.48 million on revenues exceeding AED 1 billion, underscoring the strategic importance of the Middle East for Ashok Leyland.

Demand remains strong despite disruptions

While supply-side challenges have intensified — with higher insurance premiums and shipping costs — demand has remained unaffected, the company said.

“There has been no postponement of any orders. This is a temporary blip. Production will normalise once the situation improves,” Singh said, expressing confidence in the region’s long-term growth prospects.

The company also highlighted a structural shift in its export strategy. “Earlier, our dependence was on SAARC countries. Now, the Middle East has emerged as a key growth driver,” Singh noted.

With underlying demand intact and mitigation efforts underway, Ashok Leyland expects the disruption to remain short-lived, even as geopolitical tensions continue to test global supply chains.