After addressing its supply chain constrains for its Light Commercial Vehicle (LCV
) product, commercial vehicle major Ashok Leyland
is now gearing up to launch
higher tonnage of its LCV product, followed by passenger and Compressed Natural Gas (CNG) versions. The company is also ramping up its LCV production by over 30% and said it will invest around Rs 500 crore in the LCV venture over the next two fiscals.
K Sridharan, chief financial officer, Ashok Leyland Ltd said that the growth in the LCV segment was good and run rate has been around 9,000 vehicles per quarter, which will be increased to 11,000-12,000 units in the fourth quarter, since the supply constrains has been resolved.
“Our inability to ramp up production to cater the demand was due to sourcing of gear boxes, which was done by the JV, which is now been resolved,” said Sridharan, told Analysts.
He added, since the issue is now resolved the company is gearing up launching higher tonnage of Dost which would be in 5 tonne range, then it will be followed by passenger version and CNG Versions of Dost.
These launches will be before the new green field facility at Pillaipakkam gones on stream. The JV partners, Ashok Leyland and Nissan, is setting up the greenfield facility at a cost of around Rs 4,150 crore, near Chennai and it expects to go on stream in the fiscal 2016.
It may be noted, Ashok Leyland entered LCV segment in 2011, by joining hands with the Japanese automajor Nissan. Ashok Leyland holds 51% stake in the JV. The first product was launched by Ashok Leyland in September 2011 and was branded as 'Dost'. The second product from the JV will be from Nissan and the third product will be from Ashok Leyland.
At present Ashok Leyland's Hosur facility can produce 55,000 units of Dost, while its joint venture partner Nissan's facility at Oragadam can produce around 44,000 units.
For the nine months period ended December 2012, Ashok Leyland sold 24,000 units of Dost, of which 17,000 units were sold outside Tamil Nadu, he told Anaylsts. It may be noted, the company sold only 6800 units, outside Tamil Nady during the same period a year ago.
The demand for LCV is driven by the fact that hub and spoke model is growing across the country. The demand will continue to boom for LCV, while downfall will continue in M&HCV. The growth story for 12 tonne would continue for some more years, said Sridharan.
Asked about the break-even of the JV, Sridharan said, once the JV reach 50,000-55,000 level it will happen. “Acceptability of our product has been good, overall demand projection we are talking about next year is over 55,000 units, which we should be able to achieve”.
On investment in the LCV JV, he said, Ashok Leyland has committed an investment of around Rs 500 crore, which will be done in the next two fiscals.