Ashok Leyland aims to corner 35 percent market share in the intermediate, medium and heavy truck segments

Ashok Leyland, the country's second-largest medium and heavy vehicle maker is targeting a market share of 35 percent in the intermediate commercial vehicle segment in the coming year. This decision is led by its strong market outperformance, claimed the company management to investors on Thursday. 

In the intermediate commercial vehicle segment, it plans to grow its truck share from 25 percent to 35 percent. Whereas for the intermediate bus segment, it wants to double the share from 15 percent to 30 percent. In the medium-duty commercial vehicle space, the company is looking to improve truck share to 40 percent from 35 percent and also defend its 50 percent share in the medium-duty bus segment. This is as per the presentation shared by Shenu Agarwal, MD and CEO. 

Over the last six quarters, the company has seen a steep growth in its market share, which has shot up from 22.5 to 32 percent. The company expects this growth in market share to sustain and reach 35 percent in the coming year. This rise will be a result of the expansion of its network and product portfolio, company officials said. Going ahead, it plans to penetrate deeper into the markets of North India, grow its share in the central and western parts of India and defend its turf in South India, wherein the company enjoys a 43 percent share.

Agarwal defined six key goals for the future. The first is to be ready with next gen products in the next 24 months, with all alternate fuels and get investment for Switch and Ohm. Second, increase the medium and heavy commercial vehicle market share from 30 percent to 35 percent. Third, grow LCV and international operations. Fourth, drive growth in the non-commercial vehicle business i.e., aftermarket, defence, power solution. Fifth, pursue superior returns, i.e., double digit EBIDTA in the near term and move to mid-teens by the medium term with cost leadership. Finally, formulate a net zero target and keep governance at a high level. 

The company has already defined its long-term vision of breaking into the top 10 global commercial vehicle makers. Ashok Leyland is looking at opportunities to enhance its allied businesses of Gro, Switch, Ohm, Hinduja Finance, Hinduja Tech. As part of its environmental, social and corporate governance (ESG) initiative, the company is looking at making its operations carbon-neutral by 2030.

Reviewing the year FY23, Shenu Agarwal, MD and CEO of Ashok Leyland told investors that it had been a remarkable year for the company. Over the last six quarters, Ashok Leyland's market share in the medium and heavy commercial vehicle segment has increased by 1,000 basis points or 10 percentage points to 32 percent. The EBIDTA (earnings before interest, depreciation, taxes and amortisation) margin has crossed a double-digit number by closing at 11 percent at the end of the last financial year. The quarterly EBIDTA hit a peak of Rs 1,276 crore in Q4FY23. The part sales revenue has also increased by 31 percent.

Ashok Leyland posted its highest-ever annual volumes at 67,000 units with a higher margin despite strong competition in the light commercial vehicle space as well. While the overall commercial vehicle exports for the industry dropped by over 30 percent due to the global recessionary trend, Ashok Leyland was able to grow its overseas volumes by two percent. The power solution business, which is another pillar of its operation, posted a nine percent growth in volume with revenues rising by 26 percent.

During the year, the company posted its highest-ever revenue at Rs 36,144 crore, posting a 67 percent growth year on year. The EBIDTA grew three times to Rs 2,931 crore and the operating profit shot up 119 times to Rs 2,026 crore.
The strong margin was backed by the highest-ever material cost savings at the company. At the end of the year, the company had zero debt on its books and is sitting on a 273 crore of cash surplus.

Agarwal said the growing GDP, increasing capital expenditure by the government on infrastructure and steady increase in budgetary outlay by the Ministry of Road Transport and Highways offers a strong tailwind to the commercial vehicle market. The plan to reduce logistic costs from 14 percent to 10 percent of GDP will also help the industry, he believes.

Agarwal said the average age of medium and heavy trucks has increased to 10 years which is the highest ever seen in the last decade. There is likely to be a strong replacement demand in the future, he said.

Ashok Leyland is of the opinion that the truck market will grow four times in India by 2050. The LCV market too is expected to grow three and half times to 1.35 million by 2042, with the 2-3.5 tonne segment expanding its dominance.