There is no impact of elections on the market: Ashok Leyland MD & CEO

Agarwal talks about the company's capex, funding plans in EV arm Switch and growth in bus sales

At a time when the industry is expecting an election impact on commercial vehicle (CV) sales, Shenu Agarwal, managing director (MD) and chief executive officer (CEO), Ashok Leyland, believes that the segment may do well during the first half of this financial year. In an interview with Shine Jacob, Agarwal also talks about the company's capital expenditure (capex), funding plans in electric vehicle (EV) arm Switch and growth in bus sales. Edited excerpts:

There were expectations that CV sales would be affected because of the ongoing Lok Sabha polls. What is the trend on the ground?

Around December-January, there was this huge sentiment that there would be some high base effect, some tapering down of the industry because of a negative cycle and the impact of elections. The general view in the industry was that in the first half, it may see some degrowth, in the range of 10-15 per cent.

Some reports said that, overall for the year, the industry will be negative in the range of 4-7 per cent.

Ashok Leyland felt that there is no indication of a downfall in the industry. Everything was pointing towards a positive side — freight demand, freight rates, reduction in diesel prices, and sentiment of our fleet owners. In April, we saw a 10 per cent growth in our own volumes. This growth, coupled with what we hear from the market, makes us feel that there is absolutely no impact of elections on the market.

I think the economy has matured quite a lot, and people started understanding that the country is going to move forward. In the coming months, we would also like to maintain an optimistic outlook.

What is your sales outlook for the entire year?

Against the unanimous view of the industry of a 4-7 per cent fall in FY25, we are holding a more positive view.

There is a chance that the industry could end up flat, and maybe if May-June works out well, we may even see a small growth. I am basing it on the pulse on the ground.

Your bus sales were up by 171 per cent in April. What were the reasons for this?

FY23 also saw substantial growth in the bus market. That trend will continue. The pent-up demand after Covid is still there. Demand from state transport undertakings (STUs) is there due to their old fleet, and even private demand is emerging now.

It is favouring us as we are the market leaders in buses. In FY23, we had close to a 30 per cent market share in buses.

In FY24, we have been able to increase it to 38 per cent. Now, we are a significant player.

What are your capex plans for FY25? Are you still looking for funding in your subsidiaries like Switch?

The capex in Ashok Leyland is very stable. Normally, we spend about Rs 500-700 crore every year. We are expecting similar numbers this year. This will be excluding the investments in Switch Mobility or Ohm Global Mobility Private (OHM). Last year, we invested Rs 1,200 crore in Switch and around Rs 300 crore in OHM.

We said that while we are looking for an external fundraise for Switch or OHM or both, we are not in a hurry to do that, unless we find a strategic partner who wants to come in. The balance sheet of Ashok Leyland is very strong now.

Even for FY25, if we don’t find the right partner, we will continue to fund Switch and OHM.

The numbers may be lesser than what we have invested last year.

Requirements will be there, as Switch is working on developing a lot of new products. The idea is to find a partner who can add value.
 

The FAME scheme did not get an extension for your segment. Has it affected the sector?

I don't think there is instability on the policy front. It was unfortunate that the government could not come out with FAME III before the expiry of FAME II. The interim schemes did not cover cars or CVs.

We are very sure that the government is looking at it very seriously and after the new government comes in, FAME III should be out by July-August.

Some original equipment manufacturers (OEMs) are trying to rope in partners for battery manufacturing and assembly. Are you also looking at some similar tie ups?

We are discussing a lot of options now. We are talking to a lot of people, to understand what is happening in the battery space.

We are also looking at FAME requirements where a certain amount of localisation is required.

We haven't taken a final decision on whether we would invest. We already have partners in sourcing, battery cells, packs and modules.

Now, the volume is not large enough to think about a long-term strategy.