Our aim is market share growth with an eye on margins: Ashok Leyland CEO-MD

In a Q&A, Vipin Sondhi says the firm will launch more LCVs and step up exports to Africa and Middle East as part of its de-risking strategy

Ashok Leyland’s fourth quarter operating performance beat consensus estimates. A good performance of the light commercial vehicles (LCVs) business helped the Hinduja Group flagship tide over the disruption the medium and heavy commercial vehicles (MHCVs) business faced owing to the economic slowdown. Vipin Sondhi, CEO & Managing Director, tells Shally Seth Mohile that the company is looking for a profitable growth and will launch more LCVs and step up exports to Africa and Middle East as part of its de-risking strategy. Sondhi expects the overall market to improve quarter on quarter as the economy bounces back. Edited excerpts:

Q. This quarter has been a washout. How do you see the next quarter, given that normalcy is getting restored gradually with unlocking?

For us, it will always be lives before livelihoods. We have a third wave ahead of us. Though it can be blunted to some extent with the vaccination drive, as citizens we can’t let our guards down. Every quarter is expected to be better than the previous. The GDP forecast is 9.5 per cent for the year with the first quarter washed out. It's not bad at all. The one part which we are concerned about is the buses which went down by 80 per cent last year for obvious reasons. It will take time to come back.

We understand the State Transport Undertakings (STUs) will be encouraged to buy the BSVI buses and that is expected to drive demand to some extent. It’s going to be a quarter-on-quarter play and we are ready for it all. Last year we were launching products and this year some of these newly launched products have already proven themselves.  We just hope every quarter is significantly better than the previous one and we don’t get any setbacks during the third wave.

Q. Over the past 7-8 years, Ashok Leyland has been focused on profitability. It now wants to chase volumes and market share. Is there a shift in the overall approach?

We are aiming for profitable market share growth. We will have to ensure that we keep margins and earn market share because of the value that our products, with the technology we have built into them, provide to our customers. It won’t be at the cost of anything else.  

Q. The commodity inflation has singed margins of most companies including Ashok Leyland, how do you intend to protect the margins. Is there a price hike on the cards?

We took price hikes in the fourth as well as third quarter. It will be a combination of various efforts including price hike, value engineering and driving internal efficiencies. We will have to enhance these further. It will also include convincing the customers for a further price correction as the rate at which commodity prices have gone up has been like never before. We will have to look at all end of the spectrum to protect margins, including price correction if necessary.

Q. The discounts in the truck market remain at an elevated level.  This is in sharp contrast to the expectations that discounts will be behind us as BSVI trucks get launched. What’s going to be Ashok Leyland’s stance?

I agree that discounting has been significant and the reason for that is that the market didn’t get a chance to recover and there is significant overcapacity.  Once the capacity gets utilised, discounts will come down automatically. As for Ashok Leyland, I will say, our trucks with its modular platform offer the best total cost of ownership and the quality and reliability.  We haven’t had a full running of vehicles.   When that happens, we will get value for the technology we have built into our trucks. This in turn would further drive the value and pricing of our products.

Q. How do we see the company driving its de-risking strategy (comprising exports, LCVs and defence)  further?

The Bada Dost has helped us get a lot of traction in the LCV segment.  The segment has been growing at a fast clip on back of demand from the e-commerce companies. The Phoenix platform which underpins the Bada Dost will allow us to come up with more offerings.  We were earlier participating in the 34 per cent of the LCV market and will now participate in 50 per cent of the LCV market.

We play in the mobility segment in defence. We have a strong order book and we are confident of continuing our prominent play.  In exports, the Middle East and Africa will be our priority. In the last 15 months we have appointed distributors. These are homegrown ones who already have experience. They are well connected. With a large portfolio of the models that we now have, we expect once things normalize for us, it would help.