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MOTORINDIA
l
September 2012
ing this through continued thrust on
international markets and on non-
cyclical businesses such as spares,
defence and engines. Further, its
entry into the relatively less volatile
LCV business will further de-risk
the business. The company is also
continually optimising fixed costs as
well as working capital, to stay pro-
tected in case of a downturn. In case
of surge in demand, it has adequate
capacity to manufacture the vehicles
and engines required for the busi-
ness.
Further, Ashok Leyland is review-
ing the production plan at regular
intervals and has the ability to add
modules of capacity at short cycle
times to meet demand increases. To
mitigate any risks due to material
cost increase, the company contin-
ues to work on material cost opti-
misation through deep dives, value
engineering and alternate sourcing
to sustain profitability to the extent
feasible.
Legislation would continue to put
pressure on improving the technol-
ogy resulting in higher investment
and product cost. To address this
issue, its associate company Albo-
nair is working on a competitive
emission treatment system. In ad-
dition, the company has proactively
launched programmes with its stra-
tegic partners to develop power-
trains to meet upcoming emissions
norms such as Euro 5.
To capture, measure and address
strategic as well as operational
risks, the company has created
an Enterprise Risk Management
function. Having completed the
first round of risk assessment,
it has prepared a dashboard to
track movement on these risks.
Measures to be taken have been
identified for risk mitigation and
incorporated into the company’s
operating plans. Going forward,
quantified risk metrics will be
tracked by the risk management
function and the Audit Committee
and action taken based on it.
The tepid economic environ-
ment, as well as the high base, is
bound to have an impact on TIV
in 2012-13. Several industry ana-
lysts have projected growth rates
at 3-8 per cent, while SIAM has pro-
jected an annual growth rate of 5-7
per cent for medium & heavy duty
vehicles and about 14-16 per cent
for light commercial vehicles.
Ashok Leyland seems to have the
right balance to keep up its growth
curve with its presence in various
business areas. However, in the
coming years, all eyes will be on
the M&HCV business which is the
company’s primary focus area. The
domestic market in the segment is
going through a massive global in-
vasion with nearly half-a-dozen new
players coming in.
Ashok Leyland has been a long-
time No.2 in the Indian commercial
vehicle segment, and it will be in-
teresting to watch how the company
adapts its approach to survive the
growing market competition.
w
vehicle zone (cover story)
Ashok Leyland has also en-
sured that all its upcoming
products meet all norms ex-
pected in the near future, such
as the bus body code safety
norms for trucks and upcoming
requirements for on-board di-
agnostics.