An overseas expansion strategy is also starting to take shape with the company looking to diversify into geographies beyond South Asia, to include countries in the Middle East, Africa, South-East Asia, Latin America and the Commonwealth of Independent States (Russia, Ukraine, Belarus and others). Among these, Ashok Leyland already has a presence in Ras al-Khaimah, in the UAE, where it makes buses. It also has a presence in Russia and Ukraine. Besides expanding in these regions, the company plans to set up facilities in Africa and appoint a dealer partner in South- East Asia. As part of the larger de-risking strategy the company is targeting one-third of its sales to come from outside India over the next three to five years, said Dasari. Not everyone is convinced the strategy will work. “It would be tough for the company to break into markets like Russia and Ukraine, where local manufacturers have a strong presence,” said, managing director at Frost and Sullivan, a consultancy. Besides, a number of these markets, such as those in the Middle East and Russia, are facing concerns emerging from a recent steep fall in oil prices. Waiting for economy to turn To be sure, truck sales remain highly correlated with the economy, and a sustained momentum in economic growth will remain crucial to the company’s turnaround plans. “It’s critical that the upcycle in the medium and heavy duty trucks market continues for the company to move ahead on the path to recovery,” said, analyst at. Maintaining the current
cost structure will be yet another important factor, he said. “In the past, too, they have tightened costs during a downturn, but have got back to accumulating flab during the subsequent upcycle.” Even as a broad-based economic recovery is still some distance away, some pick-up in core sector activity, an attempt to kick-start stalled projects and slowing inflation have led to some improvement. Sales of medium and heavy duty trucks have been rising since June, after dropping for more than two years. Sales of such vehicles rose 11% to 138,228 units in the eight months ended November over the same period last year, according to Siam. Analysts believe a low base effect and positive momentum in the economy will provide headroom for commercial vehicle sales to expand. The recovery, among other factors, will be led by an improvement in real gross domestic product (GDP) growth back to over 6% from sub-5% levels in FY14. , an analyst at in an 8 December report. The sales will be catalyzed by factors like softer inflation and lower interest rates, a gradual opening up of mining operations in South India post a prolonged ban, pro-active attitude of the new central government towards road infrastructure development, a cash for clunkers programme to motivate scrappage of old commercial vehicles, and better profitability of fleet owners led by falling fuel costs, wrote Banerjee. Hinduja said Ashok Leyland plans to be one among the top 10 truck makers globally over the next five years, adding the firm is encouraged by the growing acceptance of its new truck models in the overseas markets.
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- Summer '17
- Jane Smith
- the Holding Company, Ashok Leyland