Ashok Leyland, India’s second-largest manufacturer of medium and heavy commercial vehicles, presents a positive outlook for the commercial vehicle industry in FY25, contrary to industry analysts’ predictions of negative growth.

Most research agencies had predicted a 4-7 per cent decline in the commercial vehicle (CV) industry. However, Q1 performance has defied these expectations, showing a 10 per cent growth despite elections and forecasts of an average monsoon. “We, at Ashok Leyland, were always very positive,” said Shenu Agarwal, Managing Director of Ashok Leyland, while discussing the company’s Q1 performance.

Rating agency ICRA stated, last month, that the domestic CV industry would witness a decline of 4-7 per cent in wholesale volumes in FY25 on a high base. Similarly, CareEdge Ratings forecasted earlier this month that CV sales would decline by 3-6 per cent this fiscal due to a slowdown in demand in both the medium and heavy commercial vehicle and light commercial vehicle segments, as well as high inventory levels with dealers.\

Agarwal expressed optimism not only for Q1 but for the entire year, maintaining that the industry will fare well. “We do not agree with the initial forecast of a decline. We believe the industry will at least remain flat, with a significant chance of showing good growth,” he added.

Capex planned

The Hinduja flagship has planned a capex of ₹750-800 crore for the current fiscal, which will be spent on new product development. “We have sufficient capacity for at least the next two-three years. So, most of this capex would be either on the sustenance of the current facilities and new product development,” he added.

Discussing the plans of Switch Mobility, Ashok Leyland’s electric vehicle arm, Dheeraj Hinduja, Executive Chairman of Ashok Leyland, said future plans for the EV arm were still being worked out. Switch Mobility is not in a hurry to raise funds, as Ashok Leyland has already infused about ₹1,200 crore into the company. Also, Switch’s EV bus order book is strong, with plans to deliver 300 electric buses to Bengaluru and 950 e-buses to Delhi in this financial year, while also having an order from Uttar Pradesh. “We will continue to bid in new tenders as well,” he added.

Q1 results

Meanwhile, the company reported a net profit of ₹526 crore for this June quarter compared with ₹576 crore in the year-ago quarter. “In Q1 FY24, under the new tax structure, the company restated the deferred tax liability from 35 per cent to 25 per cent, resulting in a one-time gain of ₹172 crore. If we exclude this effect, our profits for the current year would be about 30 per cent higher than last year, said K M Balaji, Chief Financial Officer of Ashok Leyland.

In this June quarter, the company’s revenue grew by 5 per cent to ₹8,189 crore, marking the highest-ever quarterly revenue on the back of higher vehicle sales at 43,893 units compared with 41,329 units. The company also reported its highest EBITDA and PBT, at ₹911 crore and ₹701 crore, respectively.