With the Modi 3.0 government getting into action, commercial vehicle makers are anticipating a renewed push towards infrastructure projects in the medium to long term. Leveraging the continued thrust on roads, highways, bridges and other infrastructure projects, commercial vehicle maker Ashok Leyland is anticipating a massive upsurge in medium and heavy-duty trucks and buses.
“There were a lot of apprehensions before the start of the year that elections might drag the (CV) industry growth. They (industry analysts) claimed that the first and second quarters of the current fiscal may even go down by 15 percent. But the sales in May have proven them wrong (as) we had a fantastic month for both M&HCV and our addressable LCV market,” said Shenu Agarwal, Managing Director, Ashok Leyland
Agarwal added that over the past three to four election cycles, the CV industry has witnessed a pickup in M&HCV demand in the year following elections. The CV maker foresees a similar trend this year as the pulse on the ground is strong and all macroeconomic factors are in favour of the industry.
Within the M&HCV growth momentum, Ashok Leyland is seeing strong demand growth from higher tonnage vehicles driven by better unit economics of these vehicles.
Agarwal revealed that the 40-tonne+ vehicles accounted for sub 5 percent of their M&HCV volumes during pre-COVID times and now the share of these vehicles has gone up to 30 percent. Going forward, the company expects a higher migration of CV buyers to the 40-tonne and above trucks.
“The biggest reason is better road infrastructure has resulted in vast improvement in the turnaround time of the vehicle. Hence the profitability improves in those vehicles, which can move faster and take higher loads. The buyers are increasingly moving to higher tonnage trucks. I think this phenomenon is going to continue for several years in the country,” added Agarwal.
Private Capex
The commercial vehicle maker is also betting on a sharp recovery in private capex to drive M&HCV sales. Agarwal believes that there are early signs of pick-up in private investment in some of the sectors, which are largely linked to infrastructure.
“There has been some amount of holdback on the private capex front. But I think there will be a huge revival (in private capex). It will not be small by any means. Assuming that we get a stable government for another five years, you would see a lot of positive sentiments,” said Agarwal.
He stated that banks are also flush with funds right now and are in very good shape financially. “So I think it's not that the money is not available. Banks are willing to lend, and the entrepreneurs are willing to invest,” affirmed Agarwal.
He went on to add, “If the fiscal deficit stays in order (and) if the inflation stays in control, and there is some reduction on the interest rates, it will be far better and much more motivating for the entrepreneurs to further invest.”
Capex and product rollout
Meanwhile, the flagship company of the Hinduja Group has earmarked Rs 500 crore-750 crore for product development, technological advancements, etc. While the automaker is working on multiple products across segments and powertrains (including e-LCV), it has categorically stated that it will not be offering discounts to “buy market shares”.
“We are very clear that we are not going to buy that market share. It will come on the back of our strengths, which is mainly in terms of better product and service offerings to the customers,” maintained Agarwal.
In its bid to cover 70-80 percent of the LCV market share in the next few years, the company will come up with six offerings.
“Looking at the numbers in terms of market leadership, we are trying to be better than our peers in the industry in almost everything. That is our mantra and the numbers will come definitely if we do everything better,” added Agarwal.
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