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 festive sales of consumption goods. Then post November, a sudden crack-up happened as industry demand rose and workers started to return to 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 are easily 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 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 as well.
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: I think 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 could 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 the 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 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 a major role.
Similarly, on the bus platform which is called MiTR, you are likely to see multiple range of buses 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 truckers 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 as such speed. First, bigger trucks are not allowed in cities, so they drop the goods in 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 track FMCG companies and ecommerce players to see why 75% of the global vehicle sales is that of light commercial vehicles. In India it is currently 70%, and I expect this number to settle down between 75% to 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 for 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, the only thing I can say is that margins will be under pressure for all auto players under the current scenario.