Driving into future: Ashok Leyland

To push the envelope in products and technology

T E Narasimhan / Chennai August 30, 2012, 0:55 IST Business standard

From all accounts, Ashok Leyland (AL), one of India’s leading bus makers, is in cruise control. It has an oversized share of the market at 41.78 per cent, and, along with Tata, which has 41.94 per cent, rules the universe of buses in India.
Moreover, Ashok Leyland has a considerable advantage over the smaller players — especially from abroad, like Volvo or Isuzu — with its strong distribution network of 420 nationwide dealers, enviable brand identity, good relations with state transport corporations as well as local sourcing partners.

Yet, AL has decided it needs to push the envelope in products and technology. It has done so by buying a 75 per cent stake in British bus manufacturer Optare, in December 2011, with the intention of bringing its flagship bus, Solo, described as a low-floor midibus, to the Indian market. The bus will hit Indian roads in the next few months.
This could turn out to be a savvy move. Sometimes, proactive policies while in a position of strength can do wonders to check problem spots that often germinate into full-fledged disasters. And, it is not as if Ashok Leyland hasn’t had its share of problems. For instance, amidst the 2008 recession, the company’s bus sales took a dip from FY07 to FY09 in arguably one of the fastest growing markets for buses in the world. Recently, it was unable to win important bids for contracts with two state transport corporations.
The bus market in India — which saw 98,673 units (including big buses and small ones) sold in 2011-12 versus 92,754 in the previous year — is undergoing a significant transformation. Earlier, travellers in India primarily considered cost as the fundamental determining factor in the decision-making process of which bus to board. Now, comfort, along with safety and reliability is a priority, says Abdul Majeed, analyst with PwC India, which explains Volvo’s rise to prominence in the luxury end of the spectrum. The key driver for all of these is technology, something that industry observers say both AL and as its competitor Tata are not up to speed with, at least vis-a-vis their global competitors.
The main advantage Optare will give AL is in the intra-city space, say industry observers. This is an important category to cater to. No longer like the rickety buses of yesteryear, buses today are fancier and are more comfortable, and commuters are increasingly getting used to them. Tata, for instance, has tied up with Brazil’s Marco Polo and South Korea’s Daewoo, and its sleek buses are now ubiquitous on Delhi roads. AL, too, does not want to be left behind. “We recognise the need to maintain cost competitiveness for the end-customer and consequently our focus would be to see how we can hold on to the prices and offer a match in the market for a value proposition. I do believe that we would not be left behind in terms of the product offerings which are more relevant for the domestic market. From all these fronts we should be able to give a fight,” says K Sridharan, CFO of AL.
Optare’s Solo will provide a product that would compete in this area — traditionally categorised as lying between the normal and luxury segments. “If Solo fits in this space, then AL has got big scope, since STUs (state transport undertakings) want to upgrade from the normal to the next level and AL has all the advantages including brand, long-term relationship and cost,” said the analyst.
AL is also planning to introduce the JanBus, a single-step, front-engine, fully-flat floor bus for which the company has 16 patents. The bus has an automated manual transmission and is targeted at STUs. Meanwhile, AL’s foreign subsidiaries are already offering products for the luxury segment, including buses built in Vietnam, Turkey, Egypt and Peru on 8XX Chassis,in Singapore on AVIA chassis and in Ukraine on the Falcon Chassis. AL is also looking at bringing Hybrid versions of Optare’s electric buses. Since the electric buses may be too costly for Indian markets, the company is evaluating hybrid options