Ashok Leyland managing director Vinod Dasari reveals how the company has gone about expanding its network, improving both the sales and aftersales experience, and also beefing up exports.
Ashok Leyland has been riding the growth wave in the M&HCV industry. Managing director Vinod Dasari reveals how the company has gone about expanding its network, improving both the sales and aftersales experience, and also beefing up exports. An interview by Kiran Bajad.
How you see the current recovery in the M&HCV sector? Ashok Leyland has outperformed the market. What factors you attribute this growth to?
I think the industry is performing well due to the base effect. The industry fell from 350,000 units to 200,000 units two years in a row by nearly 25 percent each year. This has never happened before and therefore we are at a very low base; last year the industry grew by 15 percent and this year it could be 20 percent or higher in some months. So even if the growth is 15 percent per year, it will take us three years before we reach the previous peak. In the longer run, there is a good upside potential for the industry.
At Ashok Leyland, we have done several things over the last few years which are enhancing our network and making sure it is robust, and also by bringing in brand new products. This has helped the customer become more profitable. Further, bringing in contemporary sales process has helped us perform better than the industry.
Though the LCV segment has been de-growing over last couple of years, the Dost has notched growth. To what do you attribute this growth to?
You are right that the Dost’s sales are growing but that segment is yet to see the growth that the M&HCV segment has seen. It has been lagging for some time but will come back. The Dost is growing because it is a product that performs well, with good load-carrying capability, speed and yet provides better driver comfort with higher mileage. On top of this, we have set up an LCV-specific network across the country. LCV is an important segment for Ashok Leyland and you will see more products in the segment, but I can’t talk about them specifically right now.
Ashok Leyland has bigger plans for export. Can you elaborate on the near-term plans for export?
Export cannot be something that suddenly goes up. We export to several markets — this is fraught with political risk. While some markets do exceptionally well, some are down. For example, last year Saudi Arabia was good but this year it’s down. But some other markets are doing well like Africa, which is our fastest growing market. So we are doing a lot of projects and business in several countries. We are also investing in some of those countries. Our focus has been growing beyond SAARC to Middle East, North, East and West Africa. We were doing well in the CIS countries before their economy collapsed. But whatever investment we have made, we will see the light at the end of the day, sooner or later.
What is the current level of Ashok Leyland's export business and what is the growth roadmap?
Currently our exports are about 10-12 percent but in the long run I would like to see it as one-third of total sales coming from outside India. We are still away from it but that is our target. At present, we have one assembly facility in Dubai at Ras Al Khaimah and we are looking at several locations for such facilities. We want to put up small assembly facilities in key countries across the regions where we want to focus on in the next three to five years.
Over the past decade in India, the commercial vehicle segment has seen several new players entering, especially in the M&HCV segment. What impact do you see of this changing scenario?
I will say two things: the world over, the incumbent players of any country have had a majority share of about 80-90 percent and the same is true in India. In our industry, people don’t buy a product just the way it looks. They buy it because it has to perform better than others. Indian customers are so value driven that they consider several parameters before arriving at a decision of buying a truck. For example, how much it costs, how much mileage it gives, maintenance costs and aftersales service have been incredibly important. All this has made us very sharp over the years.
It is not that we are scared of any competition; in fact, more competition is going to come if there is a large growing market like India. But it was not that they showed up overnight, we knew that they will come and we have been preparing for that and improving and gaining market share and currently have got the highest market share ever despite all these new players.
Also, it is not just about market share but we have to maintain profitability. Secondly, it’s not about getting the vehicle to perform but making it sure that it continues to perform. So expanding our network and ensuring aftermarket services are available everywhere is part of the overall plan.
How do you see technological changes in the CV industry over the years? Do you think high power engines are now gaining acceptance.
No, I don’t think anybody goes for technology in our industry for technology's sake. Nobody will consider a powerful engine just because it is available. Ashok Leyland makes engines up to 450hp today. I have an engine which can meet Euro 6 norms today. I will offer my customers what is best suited to them, not the highest or biggest that we have and it has to be as per customer requirements. The customer asks for a 180hp engine as it is easy to maintain and meets Euro III norms. We are the only ones in the world who can make the world’s best in-line pump diesel engine. That is an Indian innovation for Indian customers. If the same customer asks for 400hp, then we have a solution for him. But not many customers will ask for that much power because what will he do with such high power? Where are the roads for that speed?
I am not in a business of selling Ferrari or Lamborghini, I am in a business of selling a commercial vehicle. My customer is buying capital equipment on which he is making money and I have to make sure he makes more money buying more products, not by confounding him with technology.
I must meet all technology norms all the time that is the regulation but anything above that I will only do if the customer asks. If a customer asks for radial tyres, even though they are not mandatory, but since he gets better fuel economy we will provide him the same. Similarly, we can’t force him to take a cabin although I have two world-class cabs which meet European standards.
Do you see some changing trends in the commercial vehicle industry, the way fleet operators are running their business? One example is your 37-tonne multi-axle truck which is doing extremely well and you have an over 70 percent share in the category?
We have been pioneers in the commercial vehicle segment in India. What people forget is that we were the first to bring out multi-axle vehicles to India and the first to bring air brakes to India. We launched the first 8x2 and then the 10x2. We will continue to innovate based on what the customer wants. The customer says I don’t have a driver and want to carry rated load point to point and I must able to carry as much as legally allowed. Secondly, whenever I get a driver today, it’s very difficult to get a tractor-trailer driver as drivers for rigid vehicles are available. Can you increase the payload on a rigid vehicle? So we added one more axle to it from 4x2 to 6x2 to 8x2 to 10x2. People historically measure numbers of truck sold but they forget what used to be sold as 4x2 before, in two 4x2 capacity, is less than one 37-tonner. If there is a large quantity of goods to be carried and it is defined that I have to carry this every day, then the highest gross carrying vehicle is the best but if you have undetermined load, then people generally tend to buy smaller trucks.
Like the 37-tonne multi-axle rigid vehicle, are you looking at a similar innovation in any of the category where you see traction?
There are several categories like that of 37 tonnes and it is our continuous innovation we will have to do. When we say ‘App Ki Jeet Hamari Jeet’, we mean it. We will continue to innovate for the customer. We are also trying to find ways so that our dealers are profitable and they should not be carrying too much of stock. We ensure not a single dealer is carrying more than two weeks’ stock. We live in an eco-system where everyone — whether our suppliers, dealers and customers — must be profitable and we have to continue to innovate for that.
As regards the regulatory aspects in force since October this year, ABS become mandatory for CVs. What impact you see of this on safety and what are the other technologies you foresee coming to Indian CVs?
I think whatever the regulatory norm, whether its safety related or emission related, the auto industry in India will meet. What is not known is that the pace at which these regulations are coming into India and being adopted by the auto industry is much faster in any country in the world. ABS, for example, is not new in India; it has been there since 2007 for all hazardous goods carriers, which is how it is mandated worldwide.
My problem is not regulation. I have two problems, firstly there are way too many bodies regulating the industry. For example, the Ministry of Environment, Ministry of Heavy Industry, Ministry of Surface Transport, Petroleum Conservation, now legal agencies like the National Green Tribunal and even the Ministry of Urban Development.
I think there is a definite need for one national body like every other country has. As president of SIAM, I have been telling the government that I don’t mind new regulations but please don’t put them like everybody and keep adding one. It confuses the auto industry which one comes when.
Secondly, set out a proper road map for this; don’t say it will be starting from this date because the industry also needs to prepare. Ashok Leyland is the only company which meets BS III norms using an inline pump, nobody in the world does. Why, because we have developed it for India and it is the right thing for India as you have fuel contamination. Another example is the JanBus that we developed. The world over everybody wants a one-step entry and the engine has to be at the rear but in India we have designed the JanBus keeping in mind that you must have the engine in the front so that winds cools it and that reduces fuel consumption. If the engine is at the rear, then you need a bigger fan to cool it; the engine at the front means it gets cool on its way.
Secondly, if I have the engine at the front, I can give a full flat floor; in India there are more people standing than seated and the bus conductor has to go up and down. In comparison, European countries don’t have such bus conductors. We have applied for 18 patented features on the Janbus. This is an Indian innovation — it is not Jugaad, as people who are scared of Indian innovation will say. This is truly innovation with the entire requirement met.
Coming to the bus business, Ashok Leyland aims to be a leading bus maker globally. How are you going about this ambition?
Our vision says we have to be among the top five bus makers globally and we are already there, excluding the Chinese because we don’t have access to the number properly. People don’t realise this but more people travel in our buses than in the Indian railways every single day. We are world leaders in buses and continue to innovate to make sure that we remain that way. The majority of our exports comprises buses and all of the countries that we are exporting to are India-like — they also have heavy load and bad roads.
You have showcased the electric Dost and Boss. What is Ashok Leyland's roadmap for electric commercial vehicles?
Everybody loves to talk about EVs but they are not commercially viable unless there is state funding, whether it local or centre government. The cost of EVs is much higher than it can be affordable, so unless it is funded by higher belief that we need such kind of vehicles to protect the environment, it is not going to work. It is available but for very small applications like e-rickshaws. We are the world’s largest bus manufacturer of electric and hybrid buses because we sell them in the UK but these vehicles are also funded by the government heavily. In India, the government has plans under the FAME scheme but the traction has yet to be seen.
We don’t sell electric trucks in India but the Boss platform was exported to a company which was making an electric vehicle. We know how to integrate such vehicles and have done so in our tech centre but there are no customers. We have everything in our electric portfolio — the Dost, Boss, small bus and large bus.
What is your near-term forecast for the CV industry?
The industry’s growth is very difficult to forecast as it is very volatile — it will grow, may be 15-20 percent higher or lower. But given that it is on a lower base, hopefully it will continue to grow. As far as capex is concerned, we will have normal capex. Whatever plants we will build will be outside the country, not in India. We will continue to bring in very good products and you will see them at Auto Expo 2106.
This interview was published in Autocar Professional’s 11th Anniversary Issue (December 15-2015)
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