• Lucknow facility: Ashok Leyland’s 70-acre Lucknow plant has developed 10 acres so far. Management describes it as the company’s most modern and one of India’s greenest plants, designed with the latest technology and processes, and positioned to serve a growing Uttar Pradesh market.
• Replacement demand: India has approximately 40 lakh trucks and buses, of which only 12 lakh are BS-VI; the remaining 28 lakh are from the BS-IV, BS-III and BS-II eras. Against an industry size of 4 to 5 lakh vehicles a year, management sees a strong replacement cycle and expects the CV industry to do well over the next 1.5 to 2 years.
• Commodity pressure: Rapid commodity inflation is hurting margins, as cost increases cannot be passed on to customers at the same pace. Ashok Leyland is using price increases, internal cost savings and a richer product mix to manage the pressure.
• Margin outlook: Management said inflation affected margins in Q1 and could have a greater impact in Q2; it now expects heavy inflation may continue into Q3, one more quarter than previously anticipated.