Ashok Leyland in talks to raise $200 mn-$300 mn for EV arm Switch Mobility

The company said it is in talks with investors for both Switch and e-mobility as a service. Last July, US-based drivetrain-maker Dana had bought 1% stake in Switch for $18 mn

Commercial vehicle (CV) major Ashok Leyland said on Monday that it is planning to raise around $200-300 million to fund the expansion and technology investments in its electric vehicle arm Switch Mobility.

"Electric Vehicle business is new for everyone. A lot of investment in technology is needed. We are looking to raise initially around $200-300 million and after that, if we need to do a follow-up, we will do that," said Gopal Mahadevan, chief financial officer and whole-time director, Ashok Leyland. The company said it is in active discussions with investors for both Switch and for e-mobility as a service. In July 2021, US-based drivetrain-maker Dana had picked up a 1 per cent stake in Switch for $18 million.

Switch Mobility is also coming up with its new manufacturing and technology centre on a greenfield site at Valladolid in Spain. This unit will house the production of its first electric bus designed specifically for the European market.

It was in November 2021 that the company board cleared the transfer of Ashok Leyland’s EV business to its step-down subsidiary, Switch Mobility Automotive (Switch), for Rs 240 crore on a slump sale basis. Through this, Switch – a combined entity of Ashok Leyland's electric CV operations and the former bus manufacturer Optare of the UK -- will act as a separate OEM (original equipment manufacturer) focusing on buses and commercial vehicles in the EV space.

Mahadevan said driven by pent-up demand, the company's truck sales is likely to pick up in the coming quarters. "There was a de-growth that happened and hence there is a pent up demand for trucks. In addition, the average age of trucks is one of the highest now at 9.5 years and hence there will be a demand due to the replacement cycle too. Hence, we are very optimistic about the demand," he said. In Q3 FY22, Ashok Leyland MHCV domestic truck and bus volumes have grown at almost twice that of the industry at 39 per cent compared to the total industry volume (TIV) growth of 20 per cent. Ashok Leyland’s domestic medium and heavy commercial vehicle (MHCV) volume at 16,667 units grew by 15 per cent over 14,468 units during the same period last year.

The company is also betting big on the export segment with markets opening up globally, with a focus on SAARC countries, the Middle East and Africa. "We are going to see a lot of demand for buses and light commercial vehicles. We are ready to address that," he added.

The company is also looking to mark its presence in the entire alternate fuel segment including hydrogen, compressed natural gas, liquefied natural gas, bio-diesel and methanol in the next five to ten years. He said that the company's long-term goal is to become a net-zero carbon company, with multiple fuels in the alternative segment.