Commercial vehicles major Ashok Leyland said that with the economy improving and core sector businesses doing well, commercial vehicle sales will improve after witnessing a long period of poor sales. Ashok Leyland is in talks with investors to raise capital for its EV arm Switch Mobility
Commercial vehicles majorAshok LeylandNSE 4.39 % said that with the economy improving and core sector businesses doing well, commercial vehicle sales will improve after witnessing a long period of poor sales.
“All the ingredients are starting to fall into place,” Vipin Sondhi, the managing director of Ashok Leyland said on Monday. The “ingredients” that will aid demand recovery include the improving economic activity in the country, higher fleet utilisation for transporters, better availability of financing and the scrappage policy that disincentivises the use of older vehicles, he said.
The company has sold 41,866 vehicles between April and September this year, almost twice of what it sold in corresponding period last year. However, sales were a third less than what they were pre-Covid. Lower sales meant that the company has reported consolidated losses for the first half of the ongoing financial year.
“The losses are happening because volumes are still not, you know, kind of fully [recovered],” said Gopal Mahadevan, the chief financial officer at Ashok Leyland. “So as things open up and the volume start to grow, you will see that commercial vehicle manufacturers will become more profitable.”
Extremely low bus sales since the onset of Covid-19 has also impacted the business of the Chennai-based company. Experts expect bus sales to improve slowly once offices and education institutions open with higher vaccination.
To be sure, CV makers across the board in the preceding quarter too had called out that signs of demand recovery. However, sales have been slow to take off.
Ashok Leyland was also talking to investors to raise capital for its EV arm Switch, according to Sondhi.
“We will certainly be looking for investors. I think there are discussions going on with investors. What we’re looking for is the right partners, both strategic and financial,” he said.
Recently, Tata Motors raised a billion dollars for its EV passenger vehicles arm. Other Indian automakers too have hived off their EV businesses into a separate subsidiary with the intention of getting investors onboard specifically for the clean vehicles business.
Globally, investors are chasing EV businesses in hopes of finding the next Tesla, the Elon Musk-led company that has given over 1600% returns in the last two years. EV makers in general command a high premium over traditional automakers.