Anuj Kathuria, Chief Operating Officer, Ashok Leyland Ltd. talks about his performance outlook for 2021, expectations from the government and raw material prices and its impact among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:
Q: What is your outlook for 2021? Do you think that recovery is back and a good bounce-back will be seen?
A: The performance of our M&HCV series segment of the commercial vehicles each month in the industry has been better than the previous month. The same trend was continuing even in December and our total demand in this month was better than November and we expect the same in the coming future. The demand especially for our intermediate commercial vehicle segment, which ranges from 7.5 tonnes to 16 tonnes, has been very good.
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Even e-commerce segment is performing well and there is a good demand for vehicles from there and I expect that it will continue to remain the same. As far as construction and mining segment is concerned, it is doing good and a month-after-month growth is visible there, as well. We have seen growth there in December also. If we will talk about the infra projects then a lot of mobilization is happening there and every day, we get the news that the government is issuing new contracts. In mining activity, we are seeing that it is gaining momentum and iron ore mining is getting better. Work has started in coal blocks and demand is increasing in the Eastern part of the country, like Odisha and Jharkhand. Demand has also improved in the northeast.
So, I expect that in these segments, the demand will continue to be same and sales will remain good even in the fourth quarter. As far as long haul is concerned, then our fleet operator’s utilization was not quite good in the second quarter but in the third quarter, we have seen that the fleet utilization of our operators – when we talk with them then they say – has reached almost 80%. So, in the industry, it is considered that when the fleet utilization reaches up to 80%, then the operators start adding more to the fleet. As we all know that BS-VI was introduced in April 2020, and since then a good number of vehicles have hit the road till date and the modular platform, we launched in June with a name AVTR, is very much liked by the customers. AVTR’s performance in BS-VI is quite better than our BS-IV and the rest of the BS-VI vehicles that are available in the market.
Mileage or fuel efficiency is the most important aspect of the vehicle for the operators. And, our customers are experiencing fuel efficiency in BSVI in our vehicles is giving good results. Therefore, we expect that the customer will pay attention to the total cost of ownership due to which there will be a robust demand for the new vehicles.
Q: What are your expectations from the government in this budget?
A: Our segment is a medium and heavy commercial vehicle (M&HCV), which is linked with the performance of many other sectors, like the demand of steel is up due to which demand for our vehicles that are used in inbound logistic and outbound logistic of steel is going up. Demand for our vehicles is going up because of an increase in container movement on the ports. Finally, when the economic activity increases then the demand for vehicles will go up.
So, if I have to speak specifically about the policies related to the auto sector two things have been happening and they are (i) GST rates should be considered if they can, as it will be good and provide an impetus to the industry and (ii) scrappage policy, which has been talked a lot and will continue to be in process. If a decision is made on scrappage policy than it will be another boost for the industry. But overall, if the economic activities go up, infrastructure projects are mobilized bit more and our national infrastructure pipeline work gains a pace and more work is done then it will increase the demand for the vehicles.
Q: You have spoken about your performance outlook on the segment but what is your view on the export market and do you see any opportunity of good growth in export in 2021? Also, raw material prices have increased, so do you foresee a price hike of your products?
A: As far as input material is concerned, its prices are going up, especially the price of steel and everyone knows about it. so accordingly, it is valid for the entire industry and it is not a pressure on any particular company but the entire industry. So naturally, the industry will have to recognize it and our customers should also recognize it. The price of vehicles is also going up due to this and we have also increased our prices from January 1, 2021, and will take it ahead to the market and in next one-two weeks, we will be able to understand the way the market reacts to it.
But our performance has been so good and if freight movement is in demand and vehicles are in demand then our customers will recognize the benefit that they are getting on operating cost and will include these vehicles in their fleet.