Ashok Leyland bets big on diversification

The diversification includes company's entry into the LCV business along with Japanese auto major Nissan, in which around Rs 2,500 crore has been committed

Commercial vehicle manufacturer, Ashok Leyland, has said its diversification into adjacent businesses would help the company in the long-run.

The company has invested heavily in these businesses and expects a leadership position in both domestic and overseas markets.

"If you see our diversification, there will be a pattern and they are not only related to our core business and strength, but also high margin businesses. For instance, construction equipment got better margins compared to two-wheelers or passenger cars," V Sumantran, vice chairman, Ashok Leyland, said.

The diversification includes company's foray into the light commercial vehicle (LCV) business along with Japanese auto major Nissan, in which around Rs 2,500-crore has been committed.

"It has been a good start. In the first year we sold 35,000 units of Dost, and now 50,000 units of Dost are on the roads. Recently, we launched a new MPV Stile, and four more products are in the pipeline, which will also be exported," he said.

The company claims to have captured a 19 per cent market share in the LCV segment through Dost across the country and has a 28 per cent share in the states where it operates. "We could not go pan-India due to our capacity constraints," he added.

Similarly, in the backhoe loader segment, which came from its construction equipment JV with John Deere, it claims to be No. 2 in some of the important markets. The JV has attracted investment of Rs 250 crore.

On technology and engineering, the footprint was through Albonair, a German subsidiary that works on reducing vehicle emissions, and Defiance Technologies, which provides engineering, manufacturing and enterprise services and solutions for automotive clients.

Defiance Technologies has been working with Nissan on developing the small car. "Defiance is opening our eyes and that was evident from the recognition we got from Nissan," said Sumantran, who set a mandate to the company that only 15 per cent of the business should come from the group companies.

As far as Albonair goes, in which the company had invested euro 40 million, he said the German subsidiary got around 160 people and had been working on affordable technologies to reduce emissions for both Indian and global markets.

The German arm claims it has become the single source supplier to a large European truck market, and Sumantran expects the company to capture 24 per cent share in Europe, predominantly in the emission control systems, by 2017.