With the Ras al-Khaimah Investment Authority, Ashok Leylkand has set up a state-of-the-art facility to manufacture 2,000 vehicles of international quality annually. Strategically located, this plant feeds the growing demands of the GCC and African markets.
Rajive Saharia, President, Global Sales and Distribution, Ashok Leyland, spoke to T Murrali of AutoParts Asia about the export strategy of the company.
Q: What are the latest developments in Ashok Leyland?
A: Let’s take a look at what we have done over the last three to four years and our plans for the future. You from AutoParts Asia have tracked us pretty closely and you know our growth, change in our market share, the way we expanded our product portfolio, our manufacturing capabilities and quality, including what we have done in the network and customer engagement processes. So the changes you see are because of them.
Going forward, there are different growth levers that we are looking at. Right now we depend heavily on domestic trucks, the market for which has been fluctuating wildly. The last 18-24 months have been positive. We are not yet back to the level we were earlier. We are still at 75-80 percent of our peak. The situation is not really rosy. The real growth will be when we cross the peak. So it is important to grow our non-domestic truck business. Some of the growth areas would be exports and aftermarket that is where my concentration is.
Q: Which are the markets you target in the coming years and where you will build on your strengths?
A: We have a strong presence in the SAARC countries, especially in Bangladesh and Sri Lanka. Some work has to be done in Nepal. That is one segment we are actively looking at.
We are fairly strong in the Middle East where we are clocking 3,600-4,000 units a year. That has been stable for the last couple of years. Here there is a lot of scope. We catered mainly to the school bus and staff transportation, inter-and-intra city business. There are other segments waiting to be opened up.
Outside of the Middle East, Africa is interesting. We have taken small steps in East Africa and Kenya where we have distributors. We have a fair amount of activity going on in western Africa. The scope there is far higher. Then there are other emerging markets like Iran with great potential but still an enigma. The other market is Myanmar. Other than these, we want to ramp up operations in Russia but the economy there is in the doldrums. This is the time for us to set up a foundation there. It will be useful in the long-term.
Q: Ashok Leyland, a domestic player is going global. What are the numbers you aim at?
A: Our product portfolio has expanded to give us a comprehensive range except for the multi-axle luxury coach that is still under development. We do not have an inter-city luxury bus. Of course that is a small segment in India, not inviting much attention, but will be very much in our plans as we go global. Our product range has evolved from Boss to Guru, in the Intermediate Commercial Vehicle (ICV) range. Launched at the Auto Expo 2016, the commercial sales of Guru will start soon. You have seen the Captain in two versions – the tipper (in 25 tonne and 31 tonne) and the 40-tonne tractor. We are going to expand this range so that you have an articulated tractor series and a complete range of tippers from 6/4 to 8/4 and possibly even 10/4.
The cabin for the tractors are globally benchmarked with the drivetrain combining with the Neptune engine going up to 400HP complying with Euro-6 regulations. So with these cabins, drivelines, platforms, chassis etc., we have products that support our marketing. These products will take a couple of years to stabilise in the domestic market. For example, Boss is almost two years old and is now stable in terms of quality and production capability. The left-hand drive is ready and will go on sale in Russia, Middle East and West Africa (Ivory Coast to start with) over the next couple of months. With the products coming good it is important to get the rest of our acts together – distributors, dealers, workshops, branding.
Q: Is there a particular strategy for you to take the exports forward? It is okay in India but at the global level it is a big challenge because of local regulations, tax structures etc.
A: There is no single strategy for the global arena as the markets in Kenya, Bangladesh, Ivory Coast, Iran, Russia etc. are diverse. There has to be different strategy for every market. That is the only way to succeed. The same value system that helped us succeed in the Indian market has to be exhibited abroad. We also have to consider the need for localisation whenever we go abroad. We do the entire bodywork in UAE with a 40 percent local content. It will be similar in the other markets we enter. We have the determination to succeed everywhere and we have proven models to replicate production efficiency in different locations.
Q: Is the capacity at Ras al-Khaima sufficient to serve the local markets?
A: The capacity built at the Ras al-Khaima facility is for the local market. The capacity can be ramped up to 3,600 units a year. Last year this facility had to divert orders to India as it could not meet the local demand on its own. For example, in Kenya if we have a production model that gives 150-200 units a month of trucks and buses, it breaks even. We are already at 100 trucks a month in Kenya with full CBU exports from India. If I ramp up my distributors and dealerships, there is a potential to take it to 250.
Q: Is there a plan to replicate Ras al-Khaima in Kenya?
A: The plan is to replicate this model in as many places as possible. We have a proven business model that has grown in Ras-al-Khaima. We have grown 20 times from 10 buses a month. Now we have a specific plan for Kenya.
Q: How many models are assembled in Ras al-Khaima?
A: There is a basic model for staff transportation and a bus for schools. Now we are talking of premium transportation for the office through a new product we are offering. We are able to customise and cater to a larger spread of customers by expanding to global markets with special focus on the markets we are already in, and replicating the business models there.
We have developed a local model for UAE called Oyster and it will be unveiled shortly. It has been completely designed and developed there. This is possible only if you have that level of understanding of the market, the customer needs, the benchmarking of competition and what is going around. It is not possible with just an overseas presence.