Leyland shifts focus to buses, medium trucks

As commercial vehicles lose traction, Ashok Leyland, the Hinduja Group flagship automaker, has shifted focus to the buses and medium trucks segments. The company net profit fell 59.51% to Rs 190 crore in FY09 from Rs 469.31 crore in the same period of FY08.

For full fiscal 2008-09, sales volume were 54,431 units (83,307 units) and sales turnover was at Rs 5,981.07 crore (Rs 7,742.58 crore). Sales of tractor, tipper and multi axle vehicles, which are high growth sectors, shrunk 41.2% for the company.

R Seshasayee, managing director, said, “One disturbing trend in the segmental shift is the steeper fall in demand for higher capacity vehicles such as tractor trailers and multi axle vehicles, at least temporarily, retarding the modernisation of India’s vehicle composition.” These are the segments where Ashok Leyland has a stronger presence.

Earlier, R Sridharan, chief financial officer, had said the bus segment, which is making up for the fall in the trucks business, is seen growing by 3-5%. Currently, Leyland is a market leader in the bus segment with a 46% share.

Vinod Dasari, chief operating officer, said, “Buses account for just 15-20% of our total sales. But sales in this category are looking good as truck sales have fallen drastically. Due to Jawaharlal Nehru National Urban Renewal Mission (JNNURM) funding, bus sales have gone up. The total JNNURM order is for 14,000 buses, of which Ashok Leyland’s share is 2,800 buses. Besides, we have received an order for 875 units from Delhi Transport Corp and orders for 120 from other state transport undertakings.”

Ashok Leyland improved its market share in buses by 0.5% and retained the number one position. Demand for buses is down just 9.7%. While HCVs were hit badly, light commercial vehicles (LCVs) and medium commercial vehicles (MCVs) have been doing well. A company official said that Ashok Leyland will maintain its focus on MCVs till recovery begins and liquidity improves.

“Those buying new trucks go in for MCVs as they cost less than heavier ones. Demand is increasing for semi forward cabs, which are older vehicles but are cheaper,” he said.
Overall, Ashok Leyland lost 1.8% market share last fiscal, which it attributes to steep drop in its stronghold South India. Besides, its presence in the eastern market, which proved resilient, is low. The company is trying to strengthen its presence in the LCV market, which has grown 28% last fiscal. Towards this, it has floated a joint venture with Nissan to roll out an LCV by 2011.

Meanwhile, Ashok Leyland has lowered its capex from Rs 3,000 crore to Rs 2,000 crore over the next three years.