Besides aggressive cost cutting measures the Chennai-based bus market leader is banking on a complete revamp of its product portfolio
The long-term outlook for the truck and bus sector continues to remain positive and the current phase is only an aberration, Ashok Leyland Chairman Dheeraj Hinduja said in the company’s annual report addressing shareholders.
The 84 percent drop in domestic cumulative sales of Ashok Leyland till July at 7,691 units as against 48,104 units sold in the same four months last year notwithstanding.
“As the governmental measures to reactivate the commercial sector are awaited, the management has taken the opportunity of the last few months to re-examine the business and operating models without any presumptions”, Hinduja said.
Besides aggressive cost cutting measures the Chennai-based bus market leader is banking on a complete revamp of its product portfolio for light and medium and heavy commercial vehicle segments complete with the launch of new brands.
“Upon a clinical assessment of the short term and long-term prospects, a series of initiatives have been set in motion to reconfigure the company aimed at sustainable growth while minimising the adverse impact of economic cycles,” Hinduja added.
Research and ratings provider ICRA has predicted volume shrinkage to 10 year lows in FY21 given the macro-economic headwinds compounded by the pandemic.
“Demand headwinds are expected to continue over the near-term given the macroeconomic challenges in view of the pandemic outbreak, coupled with weakening financial profile of fleet operators and significant price hikes because of transition to BS-VI emission norms," said ICRA in its report on the CV industry.
In June Ashok Leyland launched AVTR claimed to be India’s first modular truck platform which allows up to 6 lakh possible combinations catering to the 18.5-55 tonne segments.
The company is now in the process of launching light commercial vehicle platform Phoenix in the current quarter to address a segment where it was not present. The Phoenix has been in the works for more than a year and will cater to the 5-7 tonne segment.
“We made a courageous decision to introduce a modular truck platform AVTR for the medium and heavy range. We are now ready with an in-house developed new LCV range whose launch had to be deferred due to the COVID-19 crisis. The introduction is expected to be a game changer just as DOST was," Hinduja added.
Last year Ashok Leyland claimed to have saved Rs 500 crore on costs which was in addition to cut-back on capital expenditure (capex). As against spends of more than Rs 2,000 crore lined up for FY20, the company ended up incurring capex of Rs 1,227 crore for the year.For FY21 and FY22 also the company has planned to cut back on capex. Though the exact capex amount was not shared by the executives, Chief Financial Officer Gopal Mahadevan indicated that ‘capex for FY21 will be very tight and much lower than FY20’.