See slow growth in CV sector for 3-6 months: Ashok Leyland

Moneycontrol Bureau

Sales across the commercial vehicle sector are likely to remain sluggish for the next 3-6 months, Vinod Dasari, the MD of country's second largest truck and bus maker Ashok Leyland , said on Thursday.

CV sales, especially medium and heavy trucks, have hit speed bumps over last several quarters as operators and logistics companies put-off fleet expansions amid overall slowdown in the economy. Small compact trucks, which include products like the Tata Motors Ace and Ashok Leyland Dost, is the only segment that is seeing continued growth momentum.

Ashok Leyland's Dost sales surged 90 percent year-on-year to 3,001 units in Feb, but sales excluding Dost plunged 26 percent to 7,045 units. So far this year (Apr-Feb), the company's sales excluding the Dost are down 15 percent.

"From what we read in the market, it will be slow growth for at least the next three-six months. But towards the second half of this coming fiscal from October onwards, it should pick up. Overall for the next fiscal I think we are predicting growth in the market," Dasari told CNBC-TV18.

Starting of infrastructure projects and mining activity would give a boost to the sector, he said.

Most CV makers have had to resort to heavy discounting in the MHCV segment to push sales, which hurt margins in the third quarter. Ashok Leyland's margins slumped to 4.3 percent in Oct-Dec.

Dasari said that discounts were out to a large extent now. Also, the company had taken price hikes in February and both the factors should help margins improve in the fourth quarter.

Ashok Leyland had cut down its working days to five from six per week to cut manpower costs in the last few months. This month, the company is running at full schedule, Dasari added.

It has also reduced inventory levels to 3-4 weeks from 6-7 weeks to keep working capital requirements under check.

Ashok Leyland had already announced plans last month to sell stake in some of its non-core assets like Albonair GmbH, a solutions provider for reducing automotive emissions and Defiance Technologies and Defiance Testing, which provide services in design engineering, testing and validation, to reduce debt.

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