'Semiconductor shortage to ease off after 6 months': Dheeraj Hinduja

Executive chairman of Ashok Leyland says commercial vehicles sector will revive and steel prices will soften in some three months.

Ashok Leyland, the commercial vehicle major and the flagship of the Hinduja Group, expects the sector to return to growth. Dheeraj Hinduja, executive chairman of Ashok Leyland, said the semiconductor crisis will ease in six months' time and commodity prices will ease. Hinduja told Shine Jacob electric vehicles are the future of the company.

What follows is edited interview with Hinduja.

Are you seeing demand coming back post pandemic?

I think demand is very much back and it is very strong, ICRA has estimated a growth of 15 per cent in MHCV (medium and heavy commercial vehicles) and 10 per cent in LCV (Light Commercial Vehicle). Others have also indicated similar trends.

The government initiatives on infrastructure and road construction send very strong signals for the sector. Traditionally, MHCV has been very cyclical. Normally, after a downturn of 12-18 months, this time it is 24 months, we see a growth for three to four years. Hopefully we are behind the difficult days. We are looking at close to around Rs 700 crore capex plans for the current financial year.

How did the semiconductor shortage, commodity prices and shipping crisis affect your company?

The semiconductors have definitely impacted everywhere. Specifically for us, we would have done a few thousand more light vehicles during the last financial year, if chips were available. Going forward, from what we understand is that for another three to six months these shortages will continue and thereafter, this should ease off. This is because a lot of chip manufacturers have been investing in increasing their capacities.

As far as commodity prices are concerned, had it not been the Ukraine and Russian war, you would have seen a softening of commodity prices. I think in the next two to three months, we should see softening of the steel prices as well. That is the indication that we are getting. From the global logistics scenario, India is very well placed today.

What is the status of fundraising plans for Switch Mobility?

We have been looking at raising around $200 million, which is the capex required for the next two to three years. We have been engaging with private equity and sovereign wealth funds. We had been in discussion with multiple parties and looking at something in the next few months.

We are not in much of a rush because we want to find someone closely aligned to the long-term vision of Switch. Some private equities may be looking at certain geographies, but our game plan is much wider. Before the end of this year, we should be able to close our financing for this company.  When Dana (US-based drivetrain-maker) got 1 per cent of the company, they valued it at $1.6 billion and that gives us a lot of headroom. We will always hold the majority in Switch.

What are your plans regarding compressed natural gas (CNG), liquefied natural gas (LNG) and Hydrogen fuel cells?

As a manufacturer where we would like to be seen as someone, who can meet any requirement of the customer. That is why we are working so that our full range of products are available in CNG in the next 12 months. We will also have products available on LNG and Hydrogen as well in the next 18 to 24 months as well. In my view electric seems to be moving faster in the bus segment and light vehicle segment.

What is your EV roadmap?

Switch is now over a year old and I believe the advantage that we have over many others is that we are working in multiple geographies and developing products for multiple geographies – the UK, Europe and India. We are looking at a range of buses -- single deck, double deck, low floor and also looking at the introduction of light vehicles which will be servicing the e-commerce companies. Switch in many respects, I classify as a mature start-up company. It has the products running and experience of how it performs in different geographies.

When you compare with a lot of new companies that have come in, we have the experience in the UK for the last six to seven years and India over the last three years. I think the Switch roadmap is looking quite strong and focus is very much on the bus and LCV segment.

The Centre and the state governments have been moving a lot faster than what I see in other parts of the world. When we look at pollution, many of the world’s polluting cities are in India as well. What the government is doing shows our commitment towards carbon neutrality as well. I think the domestic market in India will continue to grow, possibly with dominance in the bus segment and in the next few quarters will move towards LCV segments as well. In other parts, we see a lot of demand coming from many European countries. We are showcasing our first European bus on June 7 in Paris. We are quite excited about its prospects.