From a domestic commercial vehicle manufacturer, Ashok Leyland has metamorphosed into an automotive powerhouse and going ahead with global goals. From time immemorial, Ashok Leyland is a synonym for commercial vehicles in India. Right from the days of Ashok Motor, traversing through the rough roads of commercial vehicles market in India and the transformation after the Hinduja Group took over the company into a automobile powerhouse is amazing.
What is more, the transformation from a mere truck and bus manufacturer to a full range automobile player is evident from the fact that in the last five years, the flagship company of Hinduja Group has initiated some bold moves including firming up new alliances, both for the vehicle production as well as the manufacture of auto components, overseas acquisitions, establishing green field facilities both in the domestic and overseas markets and ramping up existing facilities. All these endeavors have had a lasting impact on the image of the company.Besides its core business of manufacturing and selling medium and heavy duty trucks and buses, Ashok Leyland has signed a joint venture with John Deere for the manufacture of back-hoe loaders and construction equipment. Furthermore, the company also formed another alliance with Nissan Motor of Japan for making LCVs. Plans are afoot to have another JV with the Japanese giant for the manufacture of a compact car. Ashok Leyland has also set up a bus manufacturing unit in the state of Ras-al-Khaimah in the United Arab Emirates, in order to cater to the requirements of the Middle East and African markets. More recently, the company has acquired 26% stake in UK based bus manufacturer Optare.
Besides these initiatives, the firm has also set up a slew of joint ventures in areas such as design and manufacturing auto components with global giants including Continental, Albonair and Alteams. In a strategic move, Ashok Leyland has also acquired the US-based Defiance, to share the synergies and expertise of the latter, which can provide end to end solutions right from design to the manufacture of components and systems. Overall, the company is planning to invest around Rs 2000 crore in capex during 2010-11, out of which Rs 1200 crore would be funded for various joint venture projects.While tracing the genesis from its core business of making trucks and buses and the journey through various segments of automobile business, let us take a closer look at its transformation.
Existing business
As trucks and buses are its bread winners, the commercial vehicle business will continue to be Ashok Leyland’s mainstay. The company has set a roadmap to increase its market share in the commercial vehicle segment. As part of its endeavour to stay competitive, yet adding value to the customers, Ashok Leyland introduced the U-Truck, its latest range of world class products during the Delhi Auto Expo held early this year.
The U-Truck is designed and developed in line with its strategic objective of becoming a low cost producer of commercial vehicles, at the same time, adding more customer value. What is more, the U-Truck range offers a flexible platform in meeting a gamut of exacting customer requirements, right from the demand of satisfying various applications, following the mandatory and stringent emission norms and varying load requirements, through a large number of variants and combinations between 16 tonne GVW to 49 tonne GCW, that could be derived from a small number of modules in an even shorter time frame.
Following the customer demands will lead to lower cost of production and in turn, the customers will be benefited as the U-Truck will provide world-class features at Indian prices. Another advantage for the customers who have a fleet of U-Trucks is that the inventory cost of parts will reduce to a great measure, thanks to the modularity of parts. The company has scheduled to launch the U-Truck tractor and tipper range in the second quarter of the current financial year.With greater emphasis being given for better road infrastructure, India is also following global trends of increasing power-to-weight ratio. Therefore, to compliment the U-Trucks with higher power, Ashok Leyland has also developed a new genre of engines and badged as ‘Neptune’ series, which will be capable of producing engine power, ranging from 160 hp to 368 hp. The company plans to bring out the Neptune series engines in four and six cylinders configurations that have BS-III and BS-IV compliance of emission norms. Furthermore, the engine is also designed to meet the next level of BS-V and BS-VI emission norms.
Next Generation Cabs
Ashok Leyland felt the need to educate the drivers about the safety aspects and skill set improvement to the drivers. To make commercial vehicle driving an attractive vocation, it is imperative to improve driving skills as well as driving conditions. Therefore, the company, in an endeavour to resolve the challenge has piloted a programme: ‘Next Generation Cab (NGC), which will provide cabs with world-class standards related to noise/heat insulations, ventilation, ergonomics, comfort and driver safety, all at an affordable cost. NGC will be implemented along with the launch of U-Truck range and this unique initiative by the company will redefine the way vehicles are developed in the country.
Besides implementing the NGC programme on the U-Truck range, the firm is also planning to develop on a modular platform where cab variants could be produced from a combination of height, length and width. This initiative is also part of its objective of providing higher value to its customers at lower cost.
Exports
Ashok Leyland has also made significant progress on the exports arena by expanding its footprint into regions such as Latin America, Peru and made further inroads into locations as far as Ukraine to Saudi Arabia and all these markets hold lot of promise for the company in the coming years.
Expansion plans
Ashok Leyland, which was hitherto known in the Indian automotive horizon to be a South-based manufacturer of trucks and buses, had dispelled the cloud of darkness with a pan Indian presence by setting up a manufacturing facility for trucks at Pantnagar in Uttarakand and another unit for buses at Alwar in Rajasthan. The commissioning of Pantnagar plant is a significant step forward for the firm and it has invested Rs 1,100 crore. Notably, the sense of urgency shown by the company is laudable in that it had set up this unit in a record time.
Ashok Leyland plans to manufacture the U-Truck at this state-of-the-art and fully integrated facility that matches international standards. With the commissioning of the Pantnagar unit in March this year, Ashok Leyland has added an annual capacity of 75,000 vehicles. Currently, the company has an overall production capacity of 1,50,500 vehicles a year on a two shift basis.
Initially, the plant at Alwar was meant only for the manufacture of chassis and now it is transformed into a full-fledged bus manufacturing facility. The company’s long term objective is to convert this unit into a contemporary integrated bus manufacturing plant.
With the commissioning of new facilities up north, the firm found lot of spare capacity available at its existing units at Hosur in Tamil Nadu. The company is now planning to utilise a part of the capacity in Hosur for the manufacture of light commercial range, jointly developed with Nissan.
Ashok Leyland has formed a tripartite joint venture with Irizar and TVS for bus body building and had set up a new facility in Viralimalai, Tiruchy in Tamil Nadu with a capacity to make 2000 buses a year. Ashok Leyland’s bus manufacturing unit at Ras-al-khaimah, near Dubai, with a capacity to produce 2000 buses went on stream, catering to the demand for buses in the Middle East and African markets.
Japanese JV
The joint venture Ashok Leyland has with Nissan is to develop light commercial vehicles and this segment has a significant growth potential in the country. During the financial year 2009-10, the contribution of LCVs in India was on the upward tick with a phenomenal 54 percent of the total commercial vehicle volumes.
Due to the global market slowdown and the subsequent market sluggishness in the commercial vehicles segment, the joint venture modified its manufacturing strategy to optimise investments. Clearly, this new strategy helped the JV to leverage the surplus capacities available at the two parent companies, with the ability to increase production capacities at the appropriate time. The joint venture is likely to roll out its first LCV vehicle some time in April next year. As mentioned earlier, part of the production of these LCV would happen in Ashok Leyland’s facility at Hosur, partly at Nissan’s facility at Oragadam, near Chennai. Vehicles produced in these respective facilities would be marketed with both Ashok Leyland and Nissan badges.
As news is making rounds that Ashok Leyland is also working with Nissan on a compact car project, though an official announcement is yet to come from both the sources.
John Deere alliance
Ashok Leyland’s 50:50 partnership with John Deere Construction & Forestry Company has resulted in the formation of a new entity, Ashok Leyland John Deere Construction Equipment Company Private Limited in July last year. John Deere is the US-based firm which is one of the leading construction equipment manufacturers in the world. The joint venture with that firm means, Ashok Leyland would gain access to the full range of construction equipment of John Deere and the synergy can be replicated in its Indian operation.
When the two partners firmed up a joint venture deal, the initial initiative the new entity did was to acquire 48-acres of industrial land at Gummidipoondi, near Chennai. The firm has laid the roadmap and the work is progressing as per schedule. Currently, the company has started the construction of the first shop. The first batch of products is likely to be rolled out by early February next year. According to the company, the project is running on schedule and orders for the manufacturing equipment have been placed. What is more, the firm has already kick-started discussions with the key suppliers, just to make sure the cost and time readiness is there at their disposal. Also, the marketing plan is in place and the product specs appropriate to the Indian markets have also been worked out and the engineering work is going on in full swing to make sure that the commercial production starts without any snags.
All the mandatory approvals from the Government have been obtained and the company has also started the recruitment of key personnel. Gradually, the firm will also start recruiting associates as well. Although the joint venture has concretised on the initial batch of products to be manufactured and launched in the market and once it starts production of these products, introduction of additional product lines would be evaluated periodically.
Continental connection
Ashok Leyland’s joint venture with Continental AG is solely focused on consolidating the execution plan for the existing projects, which were aligned with a roadmap for stabilisation and growth. During the last one year, the key thrust areas included building technical competence, develop innovative low cost products for both Ashok Leyland as well as its partner and further engaged in engineering services to align with Continental’s product development process.
Albonair
Ashok Leyland had set up Albonair GmbH in Germany back in December 2007 primarily to provide cost-effective after treatment systems for commercial vehicles in emerging markets in order to leverage the opportunities created due to the implementation of stringent exhaust regulations similar to Euro-IV regulations and above from this year. The company would offer exhaust after treatment solutions based on selective catalytic reduction technology and other technologies including the diesel particulate filter or oxidation catalysts to the company and to other commercial vehicle manufacturers as well.
During 2009-10, the firm had successfully developed the complete after treatment system based on SCR for emerging markets. The company had even commenced a small scale sales office at Shanghai to be present in the Chinese commercial vehicles space.
Ashley-Alteams alliance
Ashley is Ashok Leyland’s division and it has partnered with Alteams to form a joint venture: Ashley Alteams India Limited. Furthermore, the new entity has set up a sophisticated facility at Cheyyar, Kancheepuram near Chennai. The company has already started supplying products to both the automotive as well as telecommunication sectors.
Defiance Technologies
Ashley Design and Engineering Services is a division of Ashok Leyland and subsequently renamed as Defiance Technologies Division. Defiance is engaged in engineering services and has the requisite expertise and experience to provide manufacturing services to global customers.
Considering the synergy between the activities of Defiance Technologies Division, which is engaged in engineering services, and the activities of Defiance Technologies Limited, the former firm’s fortunes were drying up and eventually integrated with the latter during the year.
Hinduja Leyland Finance
In an apparent move to boost the sales, Ashok Leyland has established a non-banking finance firm, Hinduja Leyland Finance, a captive financing arm with an initial investment of Rs 100 crore. The new endeavour kicked off its operations across 130 centres in 16 cities. What is more, the company also has plans up its sleeves to broaden the network to 300 centres. The main aim of the firm is to fulfill the needs of the commercial vehicle buyers as banks and other financial institutions still show some reluctance in funding commercial vehicle purchases and are very selective in providing financial assistance.
With all these initiatives, it is clear that Ashok Leyland is evolving itself to play in the global turf and the transformation of being a major global automotive major from a mere truck and bus manufacturer is more pronounced now what with all these joint ventures and diversifications happening at regular intervals are anything to go by. The next decade will see Ashok Leyland dominating both the domestic as well as global arenas.
