Ashok Leyland - Geared For The Long Road Ahead

Dalal Street Investment Journal|October 23-27, 2019

Ashok Leyland - Geared For The Long Road Ahead
Ashok Leyland is a manufacturer of commercial vehicles such as medium and heavy commercial vehicles M&HCV, light commercial vehicles (LCV), passenger vehicles and automobile components and services related to automotive aggregates, vehicle financing, and engineering design services.

It offers a range of trucks, which include long-haul trucks, mining and construction trucks, and distribution trucks. The company designs develops and manufactures defense vehicles for armed forces as well. Apart from these, the company offers power solutions for electric power generation, earthmoving and construction equipment, agricultural harvester combines, and marine and other non-automotive applications. The automotive giant recently accomplished its mission to be amongst the top 10 M&HCV trucks and top five M&HCV bus manufacturing companies globally in terms of volumes. It has more than 10 successful new product launches in the year.

Industry Overview

Global growth has been on a decline due to factors such as the negative effects of the tariff increases in the US and China, trade tensions which have taken a toll on business confidence, tightening of financial conditions, etc. For the automotive sector the year FY 2018-19 was very tedious. The government’s support for infrastructure development and road construction hoped to boost the demand for automobiles but on the other hand, macroeconomic factors indicated a huge mismatch in production and demand, especially for passenger vehicles. Even as the sector was able to maintain a steady output in the domestic markets, a fall in exports caused higher than usual inventory levels.

The commercial vehicle (CV) market in India registered a growth by 18 percent in total industry volumes (TIV) during FY18-19 with an increase of 19 percent in light commercial vehicles and 15 percent in medium and heavy commercial vehicles. To add to the pressure of increase in oil prices on the industry, the BS-VI regulation will become effective from April 1, 2020, with implementation of other protocols such as the introduction of the anti-locking braking system (ABS) as well as the implementation of the 2nd phase of safety protocols. The Society of Indian Automobile Manufacturers (SIAM) has projected an expected growth of 3-5 percent in FY20E for the automotive sector. The obstacle that the industry faces is accurate volume planning for production in order for supply to meet with the demand.

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October 23-27, 2019