Ashok Leyland's LCV gamble pays off with a little help from the pandemic

Its offering Bada Dost has helped in huge market share and volume gains

A decade back when Ashok Leyland partnered with Nissan Motor to enter the light commercial vehicle market as part of a strategy to de-risk itself from cyclical swings of the medium and heavy commercial segments, it was viewed with skepticism. The Hinduja Group flagship was a challenger in a segment that was the stronghold of Tata Motors and Mahindra & Mahindra.

But the company took the challenge head on and entered the market with the Dost, a sub 3.5 tonne small commercial vehicle in 2011. A decade later, encouraged by the brand taking great strides in the last mile connectivity segment, the company took another bet—it launched another model on the newly developed Phoenix called the Bada Dost to consolidate its position in the LCVs. And it was second time lucky.

Riding on the new offering, the company's market share in the LCV segment rose to 18.1 per cent in FY20 to 20.2 per cent in FY21. This was in a year, when total industry volumes for the LCV sales declined 17.1 per cent to 408,000 units in FY21 from 493,000 units in FY20 amid the Covid-19.

“We grew with e-commerce and increased consumption of fast moving consumer goods,” said Nitin Seth, chief operating officer, Ashok Leyland. As people stayed indoors locked up in their houses amid the raging pandemic, dependence on e-commerce companies to deliver everything ranging from daily consumables and groceries to home appliances increased. The trend fuelled demand for LCVs that can plug the last miles for the e-commerce companies and the Bada Dost was a clear beneficiary of the trend.

The share of LCVs in the overall market mix in commercial vehicles in India that has been climbing up steadily is an indicator of the growing demand. It moved up to 72 per cent in FY21 from 69 per cent in FY20 and 61 per cent in FY19, according to Society of Indian Automobile Manufacturers (Siam)      

Favourable interest rates – the lowest in 10 years coupled with government’s agri-push and a bumper harvest drove sales of the LCVs, said Seth.   He expects the segment to grow 30 per cent year-on-year on a low base of last year and a strong demand. We will be outsmarting the industry,” he said.

Company’s plant that produces the LCVs is running at peak capacity. “In line with our aspiration, we have improved our capacity to meet market demand and on an average have been clocking 6000 plus units per month, he said. The company also plans to commence export of the Bada Dost from August this year to the Africa region. Seth however, cautioned stoppage of the production lines and harsh lockdowns due to the rising number of Covid-19 cases can disrupt the plans.

The success of its LCV brands including Dost, Partner (LVC truck), MiTR (LCV bus) and the Bada Dost has helped the Chennai-based company to grow its LCV business and hedge cyclicality of the MHCV business from  zero per cent in FY11 to 51 per cent in FY21, said  Seth.