Demand reviving for commercial vehicles across all segments: Ashok Leyland

Vipin Sondhi, Ashok Leyland MD
Commercial vehicle maker Ashok Leyland Ltd. (ALL) sees demand reviving across segments and it is optimistic about the fourth quarter and the next fiscal, the company said on Friday.

Vipin Sondhi, the company’s managing director, said the company’s medium and heavy commercial vehicle (MHCV) business grew by 16 per cent in the third quarter compared to the same period last year. MHCV (domestic) contributed around 56 per cent of overall revenue during the third quarter as compared to 45 per cent in the second quarter.

ALL’s market share in the truck segment rose to 28.1 per cent during the third quarter of 2020-21 from 24.9 percent, a year ago, he said in an earnings call. “Demand is increasing month on month. With growth in infrastructure, demand is improving for multi-axle vehicles and tippers."

He attributed the demand increase to pick up in economic activities and successful launches of its Modular Platform AVTR and Bada Dost (in LCV segment). "When the economy grows, goods movement will increase and in turn demand for trucks will increase," said Sondhi.

The bus segment continues to be under pressure. “We expect the demand for buses to revive by next year as lockdowns are getting relaxed, people have started moving and schools have also started opening slowly,” said Sondhi.

Gopal Mahadevan, Director & CFO added, the two big challenges faced by the auto industry globally and ALL are raw material price increase, especially steel, and shortage of semiconductors.

To offset raw material price increase, atleast partially, ALL increased the prices by around 1.5 per cent. The company also took various cost saving measures internally. The company has generated cash of Rs 160 crore during the third quarter.

As far as semiconductor is concerned, he said so far there is no big impact but if the situation continues it may disturb the production.

"We are constantly in touch with our suppliers to address the supply constraints," said Mahadevan.

Speaking about Capex, he said, the company has incurred around Rs 450 crore capex and Rs 260 crore investments during the current fiscal.

ALL reported a net loss of Rs 19 crore during the quarter ending December 2020, which includes exceptional item of one- time VRS cost of Rs 85cr. The loss has narrowed against a Net loss of Rs 147 crore in second quarter of 2020-21. However, the company had posted a net profit of Rs28 crore in third quarter of 2019-20.

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