Nitin Seth, COO,
, shares his company’s business outlook and predicts the road ahead for India’s small truck industry in an economy changed by the pandemic. Edited excerpts:
ET Now: The pick-up in LCVs has driven volume recovery for Ashok Leyland as well as the overall industry. What is fuelling this demand? Also, do you think this run rate can sustain?
Nitin Seth: It started on the back of ecommerce during the lockdown period. The recovery began with rising ecomm deliveries. Also, as people started consuming more during the lockdown, FMCG stores needed to remain well-stocked.
The September-November period was high on ecomm, with high festive sale of consumption goods. Then post November, a sudden crank-up happened as industry demand rose and workers started to return to the factories. So the SME/MSME goods movement shot up. All this meant very heavy use of LCVs.
Most importantly, with interest rates ruling low, cheap loans have become easily and widely available — a big factor driving the LCV market.
ET Now: Talking of your new platform Phoenix and the model Bada Dost launched in September, how has been the response so far?
Nitin Seth: The response is likely to remain good for at least the next one year. Changing consumer habits mean ecommerce and consumption are likely to keep driving growth next year.
The only possible negative could be interest rates going up, which might be a dampener. If they don’t, I think LCVs should do quite well next year too.
ET Now: Any market share & volume gains on the back of your renewed focus on the LCV segment? Also, are you looking to further strengthen this part of the portfolio?
Nitin Seth: Ashok Leyland has been quite a late entrant into the LCV segment. Also, we play with limited products. Just to give you a perspective, the LCV business last year was close to 4,50,000 vehicles, but we played only in 34% of the market.
Bada Dost and Phoenix will hopefully take our participation to 50% of the market over the next one-and-a-half to two years. LCVs account for 70% of the commercial vehicle market in India. We want to attack most of this market as we go forward over the next four to five years.
The plan is to go from 34% play last year to 65-70% play in the next four to five years. You will see a lot of LCV launches from Ashok Leyland in the next five years.
The market in India is huge; we have been missing out on this play for multiple reasons. Hopefully, over the next five years, Ashok Leyland would aggressively make up for this miss.
ET Now: Is there any scope for further expansion of your market share in the addressable segment?
Nitin Seth: The Phoenix platform should be doing very well going forward. A lot of product launches are in the pipeline. As we expand further, a) Bada Dost, the first Phoenix product, and b) Partner, the medium heavy commercial vehicles range, should play major roles.
Similarly, on the bus platform which is called MiTR, you are likely to see multiple new product ranges coming from Ashok Leyland — from school buses to staff buses.
So, between Partner, MiTR, Dost and Bada Dost, we are targeting around 60% of the market. You will also see another platform coming up in the next 2-3 years.
Three enablers of our coming aggressive drive will be: i) our vehicles range, ii) network expansion to whole of India, and iii) global expansion in left-hand drive vehicles.
ET Now: Where do you see the demand for smaller trucks in the next two to three years?
Nitin Seth: Till four years ago, LCVs as a share of the commercial vehicle industry was just 45%. By the end of last year, it went up to 69%.
There are two reasons why LCVs are marching forward at such speed. First, bigger trucks are not allowed in cities, so they drop the goods on the outskirts, which means LCVs are the go-to mode for the last mile.
Second, India is becoming more and more of a consumption economy. Light commercial vehicles are the best ride to cater to this growing consumption story.
You just have to look at FMCG companies and ecommerce players to see why light commercial vehicles account for 75% of all global vehicle sales. In India it is currently at 70%, and I expect this number to settle down between 75% and 80% in the next 4-5 years.
ET Now: Any strategies to shore up the margins, any numbers that you could share with us?
Nitin Seth: Margin is one subject we do not give a guidance on. However, I can say one thing — rising commodity prices will put margins of all auto companies under pressure. You cannot just keep passing on these commodity price hikes to customers.
So, while we don’t give out any guidance, what I can say is that margins will come under pressure for all auto players under the current scenario.