Ashok Leyland mulling sub-2-tonne truck for last-mile delivery

Representational Image (Pixabay)

To expand its presence in the Light Commercial Vehicle (LCV) segment, Ashok Leyland is exploring the feasibility of launching a sub two-tonne truck for last-mile delivery in multiple applications.

Even though the Chennai-based company didn’t share price points, sources revealed that it could be priced in the range of Rs. 7-8 lakh

Shenu Agarwal, the newly appointed Managing Director and Chief Executive Officer of Ashok Leyland, told Moneycontrol: “We have been contemplating about this segment for quite some time. The competitive products (Tata Ace, Mahindra Supro, etc.) in this range were launched several years back and it is a very developed and mature market and to enter there in today's time is not so easy. Therefore, we are thinking --is there any way to really disrupt this market.”

In global markets, the Small Commercial Vehicle (SCV) is essentially a sub-segment of LCV. However, in India, the SCV as a category was created by the launch of Tata Ace in May 2005 and can be characterized as a sub-1000cc engine and less than 3.5 tons of weight. SCVs compete in the prevailing three-wheeler segment on the basis of cost, durability and emission norms.

While the company didn’t share technical specifications and other details of the product, industry consultants revealed that the SCV will be taking on Tata Ace and the first vehicle is likely to be electrically powered.

When asked about the powertrain options, Agarwal said: “We are looking at all the options, whether it is petrol, diesel, CNG (Compressed Natural Gas) or electric. Of course, hydrogen is not very feasible at this point of time in the smaller vehicle.  So, that I think would not be considered, but everything else we would consider. It will cover all the applications in the market right. So basically, this (segment of the) market focuses on last-mile delivery. The final decision will take a few more months.”

India’s second-largest commercial vehicle-maker revealed that while it is present in only 60 percent of the light truck market, it is keen to tap the remaining 40 percent with new products.

LCV market 

As per ICRA, the LCV (trucks) market in India is expected to close FY2023 with volumes in the range of 520,000-540,000 units, a year-on-year growth of 15-17 percent. It is expected to grow by 4-6 percent in FY2024. Of this, ~35 percent is contributed by the SCV or sub-2T segment, and the share is expected to remain in the range of 35-40 percent going forward as well.

“We are very seriously thinking about this (SCV) segment and seeking answers internally and through our partners that what would be a smart way to enter this segment. So, that within the first three or four years of the launch, we can achieve considerable market share in this segment,” added Agarwal, who was helming Escorts’ Agri Machinery arm prior to joining Ashok Leyland in January.

Ashok Leyland ventured into the LCV space in 2011 with the 2.5-tonne Dost (priced at Rs  7.81 lakh, ex-showroom Delhi). It later introduced 'Bada Dost' based on an indigenously-developed new generation LCV platform, Phoenix, in 2020. At present, it offers a variant each in 3- and 2.5-tonne categories and has a 20 percent market share in the LCV space.

The company, which has earmarked a capital expenditure of Rs 750 crore during the current financial year, will be deploying a similar amount for the upcoming financial year.

While the company has already expanded its capacities across its facilities, it may ramp up the output further if it goes ahead with the plan to build an ultra-light truck.

Battery-operated vehicles  

Ashok Leyland reaffirmed its plans to introduce battery-operated Dost and Bada Dost light commercial vehicles under the Switch Mobility brand during this calendar year.

The electric variant of Bada Dost, which was unveiled at the Auto Expo held recently, will be the first model to be introduced followed by the Dost Electric Vehicle.

The flagship company of the Hinduja group has claimed that its upcoming electric LCVs, which are also targeted at the last-mile logistics segment, will be able to shake up the cargo LCV market.

The mini-trucks are targeted at the last-mile logistics segment, where the company sees enormous demand.

“We are going to develop a market for these products as there are no products in this segment between two and three-and-a-half tonnes (electric variants) in the market. And hopefully, we will be the first one to the market in 2-3.5 tonne electric trucks,” said Agarwal.

He clarified: “It is not a volumes game, at least in the immediate term, like in the first year or so, it is more of a bringing the product out, maturing the technology, developing the market and the ecosystem. So, initially we would like to work with only a handful of customers, maybe institutional customers or some fleet owners etc. to bring this product to the market, the volume will start coming after a year or so.”

Over the last few years, the small truck sector has been the fastest-growing vehicle category as it grew by 17 percent to 475,989 units in FY22 compared to 407,871 units in FY 2021, according to the Society of Indian Automobile Manufacturers (SIAM). In terms of volumes, the LCV segment accounted for 66 percent of the total 716,566 units sold during FY 22 and the numbers were led by Tata Motors (36 percent market share) and Mahindra & Mahindra (35 percent market share).

Industry observers reckon that a growing number of small and medium enterprises, increasing per capita income and expanding logistics and e-commerce sectors will fuel the LCV market through 2024.

“The SCV segment is seeing good traction over the past couple of years, largely due to healthy demand from the e-commerce sector and increased last-mile transportation requirements. Accordingly, given the continued ongoing shift towards omnichannel presence across many sectors, these trends are expected to continue, and OEMs (Original Equipment Manufacturers) are continuing to enhance their product offerings in this segment to gain a share of the growing pie,” said Shamsher Dewan, Senior Vice President and Group Head- Corporate Ratings, ICRA.​