The Hindu Business Line

With its entry into light commercial and construction equipment vehicles, truck- and bus-maker Ashok Leyland seeks to fill in the “white spaces.” It is also eyeing a major play in Defense, vehicle infotronics and IT services.

But one big white space the company is missing is, of course, cars, admits Dr. V. Sumantran, Non-Executive Vice-Chairman. “Frankly, I don't think it is the right business sector for us. In terms of the global scale and periodicity of refresh, the segment requires something bigger; plus margins are tough.”

More from Dr. Sumantran on the spate of new launches and “the method in the madness”…

Is this a new Ashok Leyland we are seeing with several initiatives beyond trucks and buses?

We have often been accused of being a south Indian company with a calm exterior and that the idea of a revolutionary transformation is alien to us. But when we see change happening every day everywhere, we also have to be involved. It has been a collective thinking in the management for some time now to change.

For 63 years, we have been a profitable truck-and-bus company. We have had continuous growth; we paid dividends to shareholders. Then, we got into vertical integration with our own foundries, engine manufacturing facility and transmission factory.

Over time, we began to see that dependence on a fairly narrow spectrum of commercial vehicles is likely to leave the company vulnerable to the cyclicality of the economy. So, we got into the Defense business – today we are the largest private sector supplier to the armed forces.

We then realized our portfolio was concentrated in India. So, five years ago, we acquired the Czech truck maker Avia; we set up a bus plant in Raz-al-Khaimah. We also made a major stake acquisition in British bus maker Octave. This has given us a more global footprint and familiarity of what the Western markets have, which over time will come to India. We are looking at more acquisition opportunities in China, Russia and South America in mass transit. This will help make us a global company.

Your LCV business with Nissan has also taken off finally…

The seed was sown four years ago. While it has taken some time, we are out with the product. Our biggest problem now is producing enough to cater to the huge demand. The Dost has had encouraging response from customers and dealers.

It has a three-month waiting period. We have sold 3,000 Dost vehicles so far and are ramping up production. While we are also keen on the export markets – West Asia, CIS, Russia and South East Asia, our current priority is to make sure we meet Indian demand.

You are looking at launching one variant every six months under the Nissan joint venture. How are you geared up for this?

It is a torrid pace but we are well-prepared. The last two years were challenging as we had to start with a clean sheet of paper. But we have climbed the original gradient.

We started the JV with 23 people. Today, we have built up a team of 480. The big ramp-up was getting the Dost designed, developed, having the product tested and validated into the market and getting the vendors. The early climb was difficult. Now, it is about churning out variants and products. This will be relatively easier.

Our team is full on board now with Stile, Partner and Evalia, which were showcased at the auto expo. The Evalia will be launched a year from now, followed by the other two. This year, we will launch the CNG Dost.

Coming to your core business, are you keen on the premium bus segment?

The Jan bus, which we showcased at the auto expo, represents the ideal solution for India. For the cost of five buses, if we could eight buses with features like flat floor, automatic transmission, euro 4 engine, contemporary styling and modern specifications, that is practical for India – as there is still an affordability issue in India. But this will change and we are preparing for this with Solo (from the Optare stable) for this.

You have made sporadic investments here and there... Is there a logic behind this?

The method to the madness is: Focus on core, expand overseas, fill in white spaces and look to the future and identify opportunities. This is the new picture of Ashok Leyland – we hope we come across as a progressive company looking into the future and aggressively investing in it.

Apart from LCV, construction equipment was another white space. This has also gone on stream with a joint venture with John Deere. The future is all about electronics. The amount of electronics in the car is staggering with in-car navigation, telematics and in-car entertainment. So, we got into a JV with Continental. And interconnecting everything is knowledge systems and IT for which we have Defiance Technologies.

You could say we are missing a big white space – cars. But frankly, I don't think it is the right business sector for us in terms of the global scale and periodicity of refresh. Plus, margins are tough.

We are in the right space with our new businesses. It has been a quiet strategy with work in progress so far. But some of the elements have come on stream… Going forward, the new initiatives could add 20-30 per cent to Ashok Leyland's core business in 2-3 years.