Ashok Leyland, the Indian flagship of the Hinduja Group which showcased a slew of commercial vehicles (CV) at the Auto expo 2023, is taking the approach of being technology and product-ready to meet growing consumer demand. The company also has a bullish outlook on the sector, CEO Shenu Agarwal and CTO N. Saravanan told Moneycontrol in an interview.
Here is an edited excerpt:
Talk to us about the industry scenario, which you may have mapped by now, how's the demand looking for CVs overall?
Shenu Agarwal: See, I think the CV industry has done really, really well, especially in the last few quarters. I am quite hopeful that the CV industry will reach its peak either this year or sometime soon next year. And I also think that the tailwinds are very, very strong. One is, of course, CV industry has seen some downtrends in the last few years. So we have a lot of pent up demand.
Also, we are seeing a lot of focus from the government, at least leading up to the next elections and beyond, I think that will continue. And that is all actually good for CV industry. So I think the next two to three years would be really good for the CV industry. Internally at Ashok Leyland also, I think we have been able to recoup our market share, especially in the last two to three quarters.
Among the host of products unveiled at the Auto Expo, tell us about what the big launches have been?
N. Saravanan: If you look at the portfolio we launched, it starts with CNG at the low end and then we have a heavy truck in LNG. We're trying to showcase the entire gamut of possibilities. Looking at combination of CNG, LNG, battery electric vehicles, hydrogen fuel cell, hydrogen ICE.
Is there enough demand when it comes to commercial vehicles within the CNG space or within any of the alternative fuels that you guys might be developing? How is the demand right now?
N. Saravanan: There are two ways to look at it. One is to say – demand will happen, then I will develop products, then you will lose the market. The idea is…, the approach we're taking is let's be ready with the technology, with the product to some level. When we start seeing the demand coming in, because of infrastructure being available, we can make sure the product is ramped up. So the approach we are taking is technology readiness, product readiness.
If we look at the recovery, some people are a bit concerned that the recovery in volumes at Ashok Leyland has not been as strong. The profitability is yet to be visible in the numbers. So what is your one next milestone that you guys are eyeing in terms of turning more profitable and rewarding your investors?
Shenu Agarwal: Yeah. See, firstly, let me correct that perception that we have been not that successful in turning around on the market share front. I think the recovery has been humongous. And as I said, I mean I have been not in the CV industry per se, but in a broader automotive industry for many, many years and I have not seen such kind of a turnaround.
However, you know, things are changing very, very fast in our industry. I think more than one can imagine, right? I don't know when the tipping point will come.
How do you see things shaping up at Ashok Leyland? Have you set any targets, any vision for the company?
Shenu Agarwal: Yeah. See, our goal has been very, very clear. Although I'm very new to Ashok Leyland, but I can see the missions and the vision is very clear in this company. When you talk about the product segments, I think some product segments we have market share beyond 40 percent-45 percent also. But in some other product segments, we are as low as 10 percent-15percent or 20 percent, right? So there is again a huge opportunity to be able to gain in those segments, where we are relatively weaker.
What are the big challenges that you foresee right now and the opportunities, of course, in the road ahead in terms of adoption of new technology, whether it's EVs, hydropower or CNG.
N. Saravanan: So, for us, we believe in the industry we have a significant advantage because we have flexibility on the platform. We can easily convert a diesel platform into a CNG, LNG and so on. So that gives us the flexibility and speed and so on so forth, that is opportunity. The challenges, of course, will remain. What we are seeing is more and more as the products become much more differentiated or diversified like hydrogen fuel cell, hydrogen IC engine, battery/electric, the supply chain because more and more challenging. It is now no more a contained supply chain like IC engine is primarily localized in India, so we can contain it to a large extent.
So the challenge is going to be more on managing supply chain, which is going to be global at some point, until it becomes high volume, becomes local. But the mid to short term would be supply chain management.
While demand has been very strong, how is the supply situation, what are the capacity utilization levels like right now? And are you investing more in capex right now? Or do you see that happening in the foreseeable future?
Shenu Agarwal: See, most of our capex and future has to be product led and not capacity led. And the reason is, I think we have enough capacity to increase our volumes, both from the industry point of view and also from our own market share point of view. Now, some investments may go into capacity, but largely the Capex would be focused more on the new technologies.
To what extent has a company like yourself benefited from the PLI schemes doled out yet? Has there been any synergies or any benefits seen? Direct or indirect?
Shenu Agarwal: Yeah, directly and indirectly, both, I mean in terms of PLI, definitely, we really welcome this huge move from the government. And we have I think applied for certain benefits under PLI and qualified. So those investments and those efforts would continue to shape. But overall, yeah, very good scheme and very helpful for the industry.
Anything else that you guys have, both of you, as far as your budget wishlist is concerned?
Shenu Agarwal: I think the overall ecosystem is very favorable right now. As I said, for at least next two to three years, we see that there is going to be a good growth in our industry. I think what we would expect is just from the government not to be very specific, but being general, the government to really support efforts of companies like us who are moving, trying to move towards the future, because that will just not be us, but it will also be driven, this adoption will be driven by the ecosystem changes that are not fully in our control.
Anything from the tech, purely tech standpoint?
N. Saravanan: I think government is doing a good job in terms of PLI scheme as example. But I think there's also probably opportunity to probably encourage more R&D in terms of whether it's a tax policy or whatever. So anything on the R&D front I think would be fantastic.
On PLI – is it perhaps helping you also to ramp up your defense play perhaps or any other peripheral businesses given the host of initiatives that have been doled out?
N. Saravanan: I think primarily we are focusing on the electric vehicles and hydrogen vehicles. So our focus has been on the hydrogen fuel cell, the clean mobility portion of the PLI.
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