 "Ashok Leyland set to change track after expansion spree")
The company has now decided to write off nearly Rs 382 crore in the two ventures, and is evaluating whether to continue with the partnerships or not.
The joint ventures were set up between 2007 and 2009 to beat the cyclical nature of the company's main business of trucks and buses, but the plan, after showing initial promise, fizzled out.
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To build on its mainstay of medium- and heavy-commercial vehicles, Ashok Leyland went on an expansion spree in the '70s and '80s, setting up joint ventures in areas that had synergies with its main business. During this time, it set up plants to manufacture generator sets, transmission system for vehicles and other critical components for automobiles. Six years ago, it added a few more streams of business: defence logistics, engineering and information technology.
The company said it was expanding to "avail the advantages of diversification and reap the benefits of entering profitable adjacencies".
However, in many of these segments, Ashok Leyland was a late entrant in the market, making it difficult for the company to make inroads.
"It's like suddenly you wake up from sleep and start running, which should not be the case. You have to wake up from sleep, sit for a bit, stand for a while and then run. Only then you will not bumble," says an analyst who does not want to be named.
The joint venture with Nissan started off well. It made its splash with a pick-up truck called Dost in 2011. It was an instant hit. By the second quarter of 2015-16, it had cornered a market share of 16 per cent and its sales continued to rise even as the overall LCV market went into a decline, according to data from the Society of Indian Automobiles Manufacturer. In 2008, the company announced it was setting up another plant at an investment of Rs 4,150 crore on the outskirts of Chennai to produce LCVs. The plan is now uncertain.
The joint venture's next offering called the Stile, a 7-seater multi-purpose vehicle (MPV), struggled to take off, forcing the company to stop its production in early 2015. Another product from the group, the Evalia, failed to make a mark too. It was designed to take on Toyota's Innova and the Mahindra's Xylo, but could barely rake up sales of 2,700 units since its launch in 2012 until mid 2015, when its production was stopped.
The joint venture, in which Ashok Leyland owns 51 per cent stake, reported a loss of Rs 791 crore in 2014-15.
A question mark hangs over the future of the venture. "There are losses because of the Evalia and Stile and there is no clarity on who should infuse funds into the JV to revive it," says an executive with the joint venture.
The partnership with John Deere is in dire states too. "After launching the backhoe loader and two variants of it, it has not developed anything noteworthy," says Mahadevan.
Analysts say Ashok Leyland did not have a clear strategy for its new business. "Every product should have its own branding and product progression plan. This was lacking in these JVs," says an analyst who tracks the company.
But even as one part of its business is suffering, Ashok Leyland is trying to look ahead with new plans for its other ventures. Among its focus area is the joint venture with Sweden's Saab group, which was set up in 2014 to provide transportation solutions to the army. Mahadevan wants to make India a manufacturing hub for exporting specialised defence vehicles.
"We are very clear about our strategy. We would pursue businesses which we believe would be accretive to Ashok Leyland," says Mahadevan.