GST positive for CV cycle; ready to invest in any form of new technology: Ashok Leyland

He further said that the government is keen and asking for huge number of buses and the order ranges from 2,000 to 20,000.

He believes that goods and services tax (GST) will be positive for commercial vehicle (CV) cycle.

Below is the verbatim transcript of the interview.

Anuj: Everyone is talking about upping their game in electric vehicle space and you are significantly ramping up production as well. How much are you looking to spend and will your products be similar to what you have been doing or will they be different?

A: We have a three-pronged strategy on electric vehicles. Everybody is interested in electric vehicle because India is generating a lot of power. So, if we have a lot of power available, why don’t we use electric vehicle. So, one of the things the auto industry has been telling the government is that we will follow any emission norm or anything that you set, just give us a roadmap.

So, in fact one of the suggestions we made is that rather than following the European stem of euro-III, euro-IV, euro-V, and so on, why don’t we look at something which is more directly in the national interest like saying 10 years from now we will have zero imported fuel for automobiles and if that means we have CNG, ethanol, electric, whatever, it is all indigenous and if it is electric then it is no emissions also. So, maybe in few years after this target, then we can achieve that.

So, we have a three pronged strategy, one is what we developed with Circuit. As you know we launched India’s first electric bus. We also have European technology, we are one of the largest electric bus manufacturers and hybrid bus manufacturers because we own a company called Optare here in UK. The third is something that we are trying in India with the battery swapping. So, we are trying all three simultaneously whichever one works best we will try it.

The pace at which it is coming has suddenly gone up, so, we will have to invest quite a bit of money in development of their technology. The initial sources say that at least Rs 100 crore will go in. However, the base bus is about the same. What we are getting to is batteries which are bought out or do you want to get into development of batteries. Then you have the motor and do we design our own or do we buy it out. So, it is yet to be seen exactly where we are on battery technology. Most of the batteries are still imported, so, if we start to get into making batteries, that will be a huge investment. We don’t see ourselves doing that right now.

Sonia: The Rs 100 crore that you are looking to invest it will not be for battery swapping only?

A: At this point it is only for development, integrating, electric drivetrain into our bus. Which electric drivetrain will work, whether it is a let us say a 500 kilowatt battery pack which weighs huge amount and then more than a tonne and then it is charged with a fast charge system or is it a pantograph system that could be one. There could be another which is 500 kilowatt with slow charge system or something like that. There could be another with a smaller battery with a swap that you change the battery every so often.

So, which one of these will be most efficient is not known but battery costs are coming down and there will be a tipping point. Few years ago batteries were USD 1,500 per kilowatt. They have come down to about USD 200-250 per kilowatt now. The minute they hit a USD 100 per kilowatt, I think you will have a situation where electric technology will be competing head-to-head almost with diesel. So, per kilometer operating cost of electric becomes as much as diesel. So, at that time, there will be an inflection. I don’t see that to be too far out.

Latha: What is this scope of growth in this electric vehicle business and where do you see Ashok Leyland itself feature in the market share gain?

A: I think everybody is very bullish about electric vehicles but as of now the technology roadmap is not very clear. As they evolve and based on the cost competitiveness and the operating cost competitiveness, we will see.

Sonia: I want to talk a little more about the buses segment because we hear that the government has expressed some interest on how many electric buses they would like to buy over the next one to two years. Have you heard anything from that front and would you get a big chunk of that order?

A: We are the largest bus manufacturer in India. Outside China, we are the world’s largest bus manufacturer. So, obviously, whenever something new is coming to India, we would be working with the government to bring in whatever technology, try new things. We came up with the first CNG bus in India, we came up with the first hybrid then we came up with the first CNG hybrid, last year we launched the first non-plugin hybrid and then we launched the electric. We don’t know which one will sell but we like to be at the forefront of technology which is based on Indian innovation, not just cut and paste from wherever else in the world.

So, the government is quite keen, I think they are asking for a huge number of buses; numbers are all over the place anywhere from 2,000 to 20,000. So, like I was saying, this whole thing is evolving. I think it will take at least a year or two before it starts to unravel and at that point we will know which technology roadmap, how much government incentive is needed, how much is the operating cost vis-à-vis diesel versus electric and once that is clear, I think there will be much more traction to this; still early days.

Latha: What is generally the demand situation especially with GST coming up?

A: I think it will be positive for the commercial vehicle (CV) cycle. The profitability of my customers is likely to improve because they will have lesser down time and they will make more money, so, they will buy more trucks.

Secondly, with GST, the economy itself is likely to improve and once the economy improves, our industry as you know is tied to three things, GDP, the infrastructure as well as mining. The latter two anyway are going up because of the huge infrastructure work that is going on and the associated mining with it. So, as GDP also pushes up, which everybody is hopeful for with this GST, I am sure it will give a nice boost to the commercial vehicle industry also.

Sonia: You had guided for capex of Rs 500 crore in FY18, will you invest only Rs 100 crore in the electric vehicle (EV) business or is there scope for more investments there?

A: Let me put it this way, four years ago, our debt was Rs 7,000 crore. We ended March 2017 with zero net debt. As and when we see an opportunity, we will invest. I don’t think cash is a concern right now. The opportunity has to present itself, we are working on several fronts and if we have to suddenly invest Rs 1,000 crore in electric, we will, no problem.