Incentivised Vehicle Scrappage Policy To Trigger New Vehicle Purchase

Incentivised Vehicle Scrappage Policy To Trigger New Vehicle Purchase

Interview June 2020 Ashok Leyland Incentivised Vehicle Scrappage Policy Trigger New Vehicle Purchase

The commercial vehicle (CV) industry has been severely affected by COVID-19 and Ashok Leyland is also bearing the brunt of the pandemic

In an exclusive interview with Auto Tech Review, Vipin Sondhi, CEO & Managing Director, Ashok Leyland, talks about the prevailing market environment and how he foresees the future of the sector.

Vipin Sondhi is currently serving as the CEO and Managing Director at Ashok Leyland, a position he took charge of in December 2019 for a five-year term. Sondhi carries more than three decades of manufacturing and engineering experience. Prior to joining Ashok Leyland, he was CEO and Managing Director at JCB India for over 13 years, where he oversaw operations across its five manufacturing plants in three locations, eight product categories, 60 products, 65 dealers and over 700 retail outlets. He was also a member of JCB’s global executive team. Sondhi also served as the chairperson of board of governors at the state-owned Indian Institute of Science, Education & Research (IISER), Bhopal. He is a member of two boards of trustees and has also been in several Confederation of Indian Industry (CII) national committees. A Mechanical Engineering graduate from IIT Delhi, Sondhi also has an MBA from the Indian Institute of Management (IIM), Ahmedabad.

ATR _ The outbreak of COVID-19 has hit businesses across the globe with the automotive industry being no exception. How does Ashok Leyland see the road ahead for the commercial vehicle (CV) industry?

Vipin Sondhi _ These are unprecedented times and the economy has been severely hit. The automotive industry has been reeling under a prolonged slowdown even before the COVID-19 pandemic had hit the industry. Given the exceedingly challenging market environment there is a strong need for the government as well as the automotive industry to work more closely to help restore the automotive industry back on its feet, as its recovery is vital for the revival of the overall economy. The CV industry is expected to contract 20-30 % in FY21 after having witnessed a de-growth of 30 % in the last fiscal year.

The special economic bailout package announced by the government for highly stressed sector like MSMEs, among others, is a step in the right direction, as they serve as the backbone of the Indian auto industry (they represent a large chunk of the auto component industry). Having said that, this package is a more of a monetary measure, largely driven by liquidity, loans and only some amount of it is direct injection. There are limitations to fiscal spending for a country like India owing to our high fiscal deficit. Given this scenario, such stimulus is more of a support to provide loans on easy terms.

Besides the special economic package, the auto industry is looking forward to long-term reforms and policy interventions by the government to revive demand. The government must focus on accelerating infrastructure spending, as this will help put cash in people’s hands and provide a boost to the industry. High priority must be accorded to road construction projects, wherein there is a need for faster implementation of national and state highway projects.

Another area the government can focus on is in initiating an incentivised vehicle scrappage policy to trigger new vehicle purchases. Besides rolling out the vehicle scrappage policy, there must also be a realignment of GST rates. Further, state transport undertakings (STUs) and private bus operators would need a special package to buy buses. All these measures could act as demand triggers and help reboot the automotive industry.

The auto industry can look at adopting a calibrated and safer approach (giving considerations to the geographical spread of COVID-19 in the country) towards restarting economic activity. Of course, there are challenges related to restarting supply chains as thousands of migrant labourers have returned to their native place of stay and they need to return to work. More importantly, these workers on their return to work have to adhere to social distancing norms and operate at various plants in a systematic and safer manner.

The government’s economic package for the MSME sector is a step in the right direction as it serves as the backbone of the Indian auto component industry

Give us some perspectives on your much-talked-about Mid-NOx technology. How is it different compared to the Intelligent Exhaust Gas Recirculation (iEGR) technology?

Ashok Leyland has been the torch bearer for the auto industry in terms of innovations. In the past, when emission norms were being upgraded, we were the first to come up with indigenous and innovative technologies that catered to customer needs. And in line with our commitment to raise the innovation bar, we came out with our indigenously-developed Mid-NOx technology for our BS 6 vehicles. This Mid-NOx technology was developed by leveraging our competencies in iEGR as well as of Albonair, our sister concern. This technology offers a combination of proven iEGR and best-in-class selective catalytic reduction (SCR) system, while making minimal changes in the engine; thus, enabling our vehicles to comply with BS 6 norms.

Further, the Mid-NOx technology will also enable compact designs for incremental payload, easy maintenance as well as low AdBlue consumption. All these paves the way for building dependable engine platforms and deliver better total cost of ownership (TCO) to our customers. We accord high priority towards providing efficient, cleaner, safer, accessible, and affordable value proposition to our customers. The Mid-NOx technology gives us a competitive edge, especially in Indian market conditions that are unique and different from other countries. This technology has undergone gruelling testing, including over five million kilometres of field running. We believe that this is the right technology that can cater to the diverse needs of different vehicle segments in the country.

We have also introduced the modular vehicle platform that will address our customers’ specific needs. This platform will help meet the increasingly dynamic customer requirements offering multiple options of loading spans, cabins, suspensions, and drivetrains. These combinations would be offered to customers through a custom-built product configurator. Ashok Leyland has already seeded new vehicles based on the modular business programme (MBP) platform with some of our key customers. You will soon see our entire range of vehicles and the MBP platform in the market once the lockdown is lifted.

Ashok Leyland has undertaken a slew of digital initiatives in recent times – can you elaborate?

Ashok Leyland has undertaken digital initiatives under its brand philosophy of ‘Aapki Jeet, Hamari Jeet’ that have huge potential to transform our CV business. These digital solutions are simple to use, are compatible with all smartphones, and work like any other every day app. Our i-Alert is a state-of-the-art telematics solution that enables customers to monitor the status of the vehicle as well as the vehicle health. This in-house developed solution is enabled by a customised on-board unit (OBU) that is mounted on the vehicle, which continuously tracks the vehicle. In cases where their vehicle needs attention, i-Alert sends out alerts directly to the vehicle user’s mobile phone.

Among other digital solutions, we also rolled out ServiceMandi, a mobile app-based platform that connects customers with our trained and qualified mechanics, wherever their vehicle is. Our customers can obtain live status updates of any vehicle repair directly on their mobile phone and once repairs are carried out, they can pay digitally at the pre-agreed rate, all from the comfort of their homes. Then, we also have our E-diagnostics solution – a Bluetooth-enabled diagnostic solution device that can easily pinpoint the error code for customers’ vehicles by connecting the phone with their vehicle via Bluetooth. A handy troubleshooting list pops up to help the mechanic or the driver to resolve the error in a simple step-by-step visual process.

Another digital initiative is Leykart that offers round-the-clock availability of genuine spare parts. Customers can easily search for the specific part by entering their vehicle registration number or selecting the relevant part from the parts list. They can add their choice to the cart and pay digitally. The parts are subsequently dispatched to their address from the nearest warehouse and they can track the shipment on their mobile phone. All these digital solutions empower customers to better manage their business as well as enhance their profitability and provide an opportunity for Ashok Leyland to sell services in the aftermarket.

Ashok Leyland’s digital solutions are aimed at empowering customers to better manage their business as well as enhance their profitability

What approach should be adopted towards rolling out the vehicle scrappage policy?

In the Indian context, the need of the hour is for an incentive-based vehicle scrappage policy that will help the economy and customers. Customers can acquire new trucks at a lower cost, which will have a lower total cost of operation, thereby improving their operational efficiency and in turn, their profitability and cash position. The newer products (all adhering to BS 6 emission norms) will also be less polluting. This policy would trigger an upward spiral of demand towards newer trucks, which are more efficient and less polluting.

Today, there are around 15-20 % of trucks on Indian roads that are older than 15 years. Even if these are replaced with new trucks over the next three to four years, that would generate a healthy demand for new trucks and help the CV industry to partly wriggle out of the current slowdown. The vehicle scrappage policy is likely to significantly benefit the long-haul multi-axle segment, but of course, it will all depend on the exact modalities of the scrappage policy, including incentives.

There is a great deal of push for electric vehicles (EVs) in India. How is Ashok Leyland looking to walk down the electrification road?

Our electric vehicle (EV) strategy will be devised in such a manner that it is prepared for any kind of technology. Ashok Leyland has already deployed its electric buses in Ahmedabad and Chennai. However, we are being selective about where we want to deploy our buses as we are still in the process of learning about EVs in India. Ashok Leyland is working with multiple partners and organisations, fine-tuning its technology and offerings. We are offering battery swapping as well as fast charging solutions and intend to offer flash charging in future. The objective is to ensure that when real demand picks up (which is going to take some time, we are ready to offer what our customers want. Ashok Leyland’s vehicles are known for its reliability as well as robustness and that is exactly what we intend to offer with our electric vehicles as well.

What kind of time frame is Ashok Leyland looking at for the CV industry to get back on its feet?

Well, it is difficult to predict as to when the economy would turn around and in turn, help the CV sector. As mentioned earlier, a comprehesive economic support package for the auto industry would be critical towards kickstarting economic activity after this long phase of lockdown. Triggering consumer demand is the key and unless the ecosystem through the value chain opens up, a vehicle cannot be produced or sold.

TEXT: Suhrid Barua