Ashok Leyland to set up LCV unit in Andhra

HYDERABAD / NEW DELHI: Auto major Ashok Leyland has decided to set up an auto plant in Andhra Pradesh with an initial capacity for manufacturing 1 lakh light commercial vehicles (LCV) per annum.

“The company has in principle decided to locate the plant in the state but has yet to finalise one of the two locations it has been shown,” B Sam Bob, principal secretary, department of industries and commerce, Andhra Pradesh, told DNA Money.

Keen to get the unit, the sate government has shown two locations to Ashok Leyland in Visakhapatanam and Nayudupeta, near Nellore. An Ashok Leyland spokesperson declined to comment.

LCVs weigh less than 7 tonnes, and are used both for cargo and passenger traffic in India.

While Vizag will give the company easy access to a port, Nellore has the advantage of being close to Chennai where Leyland is headquartered.

The project will cost anything between Rs 1,200 crore to Rs 1,500 crore, with a first phase capacity of 1 lakh LCVs. In the second phase, the company will add double the capacity to take the total to 3 lakh LCVs, Sam Bob added.

The development comes close on the heels of the decision by MLR Motors to set up a car project in the state.

MLR motors is a joint venture by former Hyundai president B V R Subbu and M Lokeshwara Rao of Lokesh Machines, which will set up a Rs 1,250 crore greenfield project with an initial capacity of 60,000 vehicles per annum. It will be ramped up to 1 lakh cars later.

The car unit, which is coming up at Medchel near Hydearbad, will kick off with two offerings - a hatchback and a 3-box sedan based on a souped-up Fiat Uno platform.
The company is entering the LCV segment in partnership with Japanese major Nissan Motor Company. In August, the two had announced plans for three joint ventures for LCVs.

The first is a vehicle manufacturing company, which would have exclusive rights to manufacture LCV products in India for both the partners. Ashok Leyland would hold a majority stake in this venture, which is expected to produce 1,00,000 units to begin with.

The other two JVs would pertain to powertrain manufacturing (majority equity to be held by Nissan) and a technology development company (50:50 JV). The two partners are also studying cooperation in the area of LCV sales and distribution.

A detailed announcement about the location of these plants is expected by the end of the month.

The joint announcement would be made from Chennai, and it is likely that along with the Ashok Leyland management, Nissan chief Carlos Ghosn may also be present on the occasion.

Ashok Leyland managing director R Seshasayee had said after announcing the tie-ups with Nissan that “Ashok Leyland has been consolidating its growth in the medium and heavy commercial vehicles even while exploring suitable opportunities to expand the total product portfolio.

This partnership with Nissan, renowned for their product engineering and a wide range of LCV products, will allow Ashok Leyland to expand into the fast growing LCV segments in India.”

LCVs account for about 40% f the commercial vehicle market but have grown at a much faster clip than the medium and heavy CV sub-segment over the last six months.

According to data by the Society of Indian Automobile Manufacturers, 1,92,282 LCVs were sold in the domestic market last fiscal, registering an almost 34% growth over 2005-06. In the current fiscal, LCVs logged 15% growth between April and September against an overall CV segment growth of just about 3%.

The Leyland-Nissan combine would face competition from established CV players such as Tata Motors, besides Eicher Motor, Piaggio and Bajaj Auto (which is also mulling an entry into the LCV space).

Tata Motors has already tasted success with its cargo vehicle ‘Ace’ and is developing many more variants on the same platform. Piaggio is also eyeing the small four-wheeler cargo vehicle niche and other players look poised to follow suit.