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An Interview with Vipin Sondhi: On Ashok Leyland, Commercial Vehicles, and the Indian Economy in a Post Covid World

Founder and CEO, Transfin.
Jun 17, 2020 10:25 AM 6 min read
Editorial

We speak with Vipin Sondhi, MD and CEO of Ashok Leyland, who took helm at India’s iconic truck maker just before COVID-19 brought an unprecedented turn for the Commercial Vehicle (CV) industry and the economy at-large.

 

Navigating through this “very unique situation”, Mr. Sondhi emphasises the importance of lower GST an incentive-based vehicle scrappage policy, and accelerated rural infrastructure investment as key policy drivers behind a potential recovery for the CV industry.

 

He is confident and optimistic of the space at-large, elaborating on how Ashok Leyland is well positioned to benefit from the non-stop technology and policy transformation at play here, such as transition to BS-VI and tailwinds in favour of Electric Vehicles (EV).

 

Wherever there is consumption, there is demand for a truck.

 

Q. We must start with the most obvious question. Considering COVID-19, what are your views on the recovery for the CV industry? Do you expect a disconnect between CVs and the broader auto sector in terms of how they may bounce back from the pandemic?

Mr. Sondhi: 

The CV industry is directly correlated with the economy. It will pick up once the economy starts picking up. The situation would depend on various factors such as the impact of reforms initiated by the Government and availability of liquidity at the right time. Once the wheels of the economy start moving again, that itself would act as the biggest stimulus. 

The important thing is how fast the economy starts moving forward and that can only happen once all of us start going back to work. Wherever there is consumption, there is demand for a truck. 

Within the CV industry, every sub-segment such as light commercial vehicles (LCVs) and intermediate commercial vehicles (ICVs) and even the medium and heavy commercial vehicles (MHCVs) will follow their own trajectory of demand. We are expecting every quarter to be better than the one prior. As an industry and as a leading OEM, we will have to be ready.

 

Q. Are there any near-term catalysts in the sector that can drive accelerated growth? Are there any other policy catalysts that you think may benefit the industry? 

Mr. Sondhi:

Auto industry body SIAM has been urging the Government to reduce the GST rate on vehicles from 28% to 18%. We concur with this view.

The CV industry is at the core of the economy. For a core industry like ours, it will help if the GST rates are not the highest in the slab. Lower GST rate can certainly be one of the possible demand triggers.

The other trigger points could be introduction of a scrappage policy and more investment in rural India. In the Indian context, the need of the hour is for an incentive-based vehicle scrappage policy that will help the economy and customers.

Customers can acquire new trucks at a lower cost, which will have a lower total cost of operation, thereby improving their operational efficiency and in turn, their profitability and cash position.

The newer products (all adhering to BS-VI emission norms) will also be less polluting. This policy would trigger an upward spiral of demand towards newer trucks, which are more efficient and less polluting. 

 

Today, 15-20 % of trucks on Indian roads are older than 15 years. Even if these are replaced with new trucks over the next three to four years, that would generate a healthy demand for new trucks, helping the CV industry to partly come out of the current slowdown.

 

The Government must also focus on accelerating infrastructure spending, as that will help put cash in people’s hands and provide a boost to the industry.

Infrastructure spends should be targeted towards each of the 700 plus districts across the country, which would essentially mean investments in rural India. That will yield faster results than the long-gestation projects.

Additionally, a special package will be needed for state transport undertakings (STUs) and private bus operators to buy buses.

In the current situation, the need of the hour is for the Government as well as the automotive industry to work even more closely than probably ever before to help restore the automotive industry back on its feet since the recovery of the industry is so vital for the revival of the overall economy.

 

Mr. Vipin Sondhi (MD and CEO of Ashok Leyland)
Mr. Sondhi took the helm of Ashok Leyland in December 2019, just before COVID-19 struck

 

Q. Strictly from a technology perspective, what do you think are the biggest growth areas in the CV industry? What are the biggest challenges you view for the development of Electric Vehicles (EVs)?   

Mr. Sondhi:

Any industry will be willing to adapt to newer technology and innovation if it makes sense cost-wise. In the CV industry, customers buy CVs as an investment, to make profits from operations.

So, if any technology or innovation which helps our customers achieve a better Total Cost of Ownership (TCO), customers will be open for it. This is precisely what our new range of BS-VI vehicles, AVTR, based on modular platform, will help our customers achieve. Our vehicles can be customised for precise usage. This modular platform coupled with our latest BS-VI engines will translate to better TCO and hence, better profitability for our customers.

Since we are talking about TCO, we also have a plethora of customer centric solutions, based on digital platforms, which are already helping our customers better manage their business and run it more efficiently.

On the EV technology front, our EV strategy is devised in such a manner that it is prepared for any kind of technology. We have already deployed our electric buses in Ahmedabad and Chennai.

However, we are being selective about where we want to deploy our buses as we are still in the process of learning about EVs in India. We are working with multiple partners and organisations, fine-tuning our technology and offerings. We are offering battery swapping as well as fast charging solutions and intend to offer flash charging in the future.

The objective is to ensure that when real demand picks up, we are ready to offer what our customers want. Ashok Leyland’s vehicles are known for its reliability as well as robustness and that is exactly what we intend to offer with our electric vehicles as well.

 

Q. Any other long-term CV trends you think might be interesting to track and look forward to?

Mr. Sondhi:

What we will witness increasingly is tighter cost management at the customers end. Vehicles would need to perform reliably and with reduced downtime. With our suite of customer solutions along with the modular platform and latest emission technology, we will help customers realise this.

Also, the vehicle scrappage policy can have an impact in the short term as well as the long term for the industry, the refresh of the truck fleet will improve the overall efficiency of the trucks, reduce fuel consumption, and improve the profitability of the customers.

It will create an upward spiral of growth for the freight industry and the overall economy as commercial vehicles are core to nation building.

 

Q. Finally, a word for the investor community? Auto sector at-large offers good read throughs into the overall economy. With the country opening amidst an environment of uncertainty – is “cautious optimism” the way forward?  

Mr. Sondhi: 

As I said earlier, we are expecting that every quarter will be better than the one before. As and when the markets start opening, followed by people movement and increased consumption, our industry will also start picking up momentum.

This is a very unique situation for all of us and no one has witnessed such a pandemic in recent history. There are a lot of things that we will have to experiment with and we will learn as we go forward.

While the immediate future remains uncertain, I’m confident and optimistic about the medium-term future. Within India, there is a lot of underlying demand and enough headroom to grow for all sectors. That itself can fuel our economy’s growth.

 

FIN.

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