Commercial vehicles face tough time in 2013: Ashok Leyland

The auto industry has seen some sluggishness of late and R Seshasayee, Executive Vice Chairman of Ashok Leyland believes FY13 is a tough year for the commercial vehicle industry. He said that growth is troughing out and expects improvement going forward. Although, the mood at the moment remains positive, he does not expect dramatic changes to the current scenario.

Also read: Festive season sales disappointing for auto cos: Ventura

Seshasayee further added that infrastructure project execution is likely to pick up once the National Investment Board (NIB) is in place. He further added that interest rate cuts will be a catalyst for improving confidence in future as the finance minister seems to be geared up for reviving the investment cycle.

However, Seshasayee is not very hopeful about significant changes in the market share in the near term.

Here is the edited transcript of the interview on CNBC-TV18.

Q: We were speaking to some of your two wheeler peers who pointed out that post this festive season reality is going to sink back in and it is looking like a tough next year in terms of sales. Would you agree with that opinion, is it going to be even tougher than this year has been?

A: It is going to be a tough year but, there is another way of looking at it. If you say that without any political policy interventions, positive interventions, without any kind of positive sentiment, without any of the external supportive we can have a datum level of growth at this level of 5 percent or so, we should celebrate. It can only get better. That is another way of looking at it.

But, nevertheless having said this, it is going to be a tough year primarily because of the sentiment issue, the political situation and the external situation.

Q: What's the mood like, has sentiment improved in these last few weeks now that we are beginning to see some kind of affirmative action from New Delhi or do you think it is not enough and it is just sentiment on the margin which is not enough to unlock the investment cycle?

A: You have said it; it is still on the periphery. We have to pull that in and that would mean some very decisive action from the political side. It should also be kept in mind that they have had a bad monsoon and the power situation being what it is, you can't expect dramatic changes in the mood also. But, if it is in the upward climb then I think we should celebrate.

Q: You have been part of some of the key industry bodies that have pointed out that infrastructure is the biggest laggard and the biggest problem point. On that specific area, do you sense any movement either in terms of a greater move towards clearing up projects or opening up new projects or even funds?

A: Frankly, no. I don't see any action on the ground which will give us the confidence that the infrastructure investment will be back very soon. That is a matter of concern and hopefully, something should happen after the National Investment Board (NIB) is in place.

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Q: What signals are you getting on the ground for the commercial vehicle sector in specific? From the indications that you get from either freight trades or other indicators, does it look like things might pick up in the near term or are buyers generally apprehensive?

A: The over capacity that was evident in the last eight weeks has not worsened from what I can see. The turnaround time for return loads continue to remain where they were for the last four to eight weeks. So, one could therefore consider this as a bottoming out and if we continue to see some positive signals coming, particularly with interest rate reduction, there is a good chance that the fourth quarter might turn out to be much better than Q3.

Q: Where is the greater pinch being felt though, in terms of protecting your volumes or sales targets or on the margin front where we understand pricing competitiveness is very high, many discounts are being offered as well?

A: In a market like this you would expect to see some discounting, given the capacity which is far in excess of the demand. It is not unusual at all. It has happened in the past but, again as I said, it is very likely that the last quarter might look up if the sentiment improves as a result of interest rates.

Q: Are you seeing significant changes in market share between the established players?

A: I don't think that this is going to be disturbed in the short-term. I think the current equations will remain the same. There are no threats that I see which will change the current equations in terms of incumbent place.

Q: How would you approach the present or the next budget? A lot of auto makers have already begun to ask for some tax cuts. Do you think that it is going to be a very expansive corporate India friendly kind of budget?

A: One thing I certainly expect to see is a lot more support for investments. We have a Finance Minister who is pretty focused on getting the investment cycle back again. I would certainly expect to see something which supports investment.

It may not be anything direct in terms of investment tolerance or accelerated deprecation or anything of that sort because that would put us back on the clock with regards to the fiscal reform. But, I would definitely expect something to support savings and investment.

Q: You sit on the Infosys board as well and there have been conflicting reports on how sluggish the market continues to be out there, is that the feedback that you are getting as a board member that it is still a difficult market in the west?

A: The external environment continues to be pretty tough overall and not merely looking at Infosys in particular, but in general I would say whatever signals I am getting from my engagement with other organizations, external environment continues to be tough. But, there are opportunities.

There are certainly opportunities because there is a clear cost saving thrust that is beginning to be felt and so long as you play the cards correctly, India might continue to gain from this cost saving thrust that is coming out of large companies, large corporations in the west.