Why Ashok Leyland is pinning big hopes on the Bada Dost

Ashok Leyland Chairman Dheeraj Hinduja is a happy man. Two years ago, the board approved a proposal by his LCV (light commercial vehicle) team led by Nitin Seth to expand the business. Today, the team has delivered on its promise with ‘Bada Dost’ in the light commercial vehicle (LCV) space. The company had entered the segment nine years ago with Dost, a pickup, with its erstwhile partner Nissan. Bada Dost is a larger version of the Dost, though on a different platform.

Seth, Chief Operating Officer, Ashok Leyland, spoke to BusinessLine on the journey ahead for the company in the LCV segment. Excerpts:

Was it challenging to develop a new LCV platform after parting ways with Nissan?

All the hard work by the ‘Phoenix (project name of the new LCV) team’ paid dividends. It was an interesting phase. Despite the Nissan JV going away, we never lost market share. Also, as we were seeding everything, we didn’t lose our dealers and suppliers. I think the confidence people had in Ashok Leyland was immense. To develop this new platform, we have spent about ₹350 crore, which includes product development and robotic lines. It took about 24 months to create this genuinely good product, which is made in India both for the domestic market and for the world, as part of our vision.

How has the recovery been in the LCV market? Is the time is right for the launch?

To our surprise, the LCV market as a whole grew 6 per cent (year-on-year) in August 2020, which clearly tell us there is demand. Despite some challenges this month, there is decent demand. This means we are building to a good festival time in October. Sales of our LCVs (Dost, Partner and MiTR) have been growing month on month — 1,100 units in May, 1,500 units in June, 3,000 units in July and 3,700 units in August. September sales will be even better.

There is good LCV demand among specific customers. E-commerce, rural markets and the consumption segment (essentials, and consumer items) have been the drivers of LCV volumes. Also, if the crop season is good in October, LCVs will have a stronger period for the next few months. So, this is the right time to launch as there is genuine demand in the system.

What do you think will make Bada Dost a successful product?

Apart from decent demand, the market shift is also in favour of higher tonnage vehicles from the sub-1 tonne for years. We introduced Dost in the 2-3.5 tonne category in 2011-12, when the market was heavily concentrated in 0-2 tonne (about 70 per cent in FY11). Over the years, Dost has helped the shift to 2-3.5 tonne, which now accounts for about 60 per cent of LCV volumes. It created its own segment due to superior features. Dost helped Ashok Leyland become the leading player in that space after Mahindra. Similarly, with more industry-first features, higher payload and aggressive pricing, Bada Dost will attract a lot of buyers. On the finance side, too, Ashok Leyland is in demand among the lenders. As we have maintained a reputation with a no discounting and 20 per cent margin money formula, financiers will be willing to lend for Bada Dost.

What are the ramp-up plans for LCV manufacturing?

We have created a new fully-automated facility for LCV production in Hosur with a capacity of about 84,000 units a year and this unit will gear up for ramp-up going forward. Since the quality expectations are very high due to our aspirations in this segment, the ramp-up will be gradual. For any such quality product, production will be challenging in the first phase. We don’t intend to create all-India demand, hence, we are launching only in seven States. We plan to go pan-India in about three months — when all our 570 outlets through 113 dealers will be selling the Bada Dost.

What are your medium-term objectives for the LCV business?

Since we are here for the long haul as part of our vision to be among the top 10 CV brands, we will sell our products both in India and overseas. We will come out with new products based on the Bada Dost platform every 3-4 months. The target is to increase four times our existing LCV volumes (all brands put together) over the next four years — from about 50,000 units now to 200,000 units a year.