Ashok Leyland-Nissan JV eyes turnaround in 3 years

The JV company reported loss of Rs 174.51 crore in 2013-14

Ashok Leyland (AL) is expecting its joint venture with Nissan for light commercial vehicle (LCV) to turn profitable in the next three years.  The company said it would introduce more variants and products, which would push the volume, and in turn make the venture profitable.

AL chief financial officer Gopal Mahadevan said, “We expect in two-three years it (the JV) will be profitable.”

According to AL’s 2013-14 annual report, Ashok Leyland Nissan Vehicle Ltd reported a loss of Rs 174.51 crore on a turnover of Rs 1,052.15 crore.

Foraying into the LCV segment was important to the company, said Mahadevan, adding 10-12 years ago the whole trucking industry predominantly was large commercial vehicles, at best 9-12 tonne vehicles. But then the whole country went into a hub-and-spoke arrangement with long-haulage, medium haulage and then local.

“While other players got into LCV, it was important for Ashok Leyland also to get into the segment and so we invested with Nissan,” said Mahadevan.

Most of company’s joint ventures are two-three years old and would require time to start making money for which volumes has to increase, according to him.

“Dost (the first LCV rolled out by Ashok Leyland) has been a good success. After three years of launch, the market share of Dost is around 15 per cent. We want to improve by around 300 basis point, which we hope we can before the end of this year,” he said. A major chunk of the capex was over and now the company should start getting benefits.

Greenfield facility on hold
In September 2008, four months after forming the JV, the partners had signed an MoU with the Tamil Nadu government to set up a greenfield facility at Pillaipakkam, 40 km off Chennai, with an investment of around Rs 4,000 crore.

“We have done a good job of not investing further in Pillaipakkam. When we saw that there was capacity available in Hosur, we decided we will only acquire land and not invest in manufacturing capacity,” said Mahadevan.

The Hosur facility has a capacity to manufacture 55,000-60,000 LCVs in three shifts. This can can go up to 72,000 units.

“We have sufficient capacity to cater to our demand,” he said.