June 22, 2012
Partners Nissan and Ashok Leyland Gear up for Growth in India
June 22 – Yokohama – Dr. V. Sumantran, Vice Chairman of Ashok Leyland, joined the Global Media Center’s Dan Sloan to discuss growth in India, collaboration between Nissan and Ashok Leyland on the Dost and LCVs and more to come. Dr. Sumantran is Executive Vice-Chairman of Hinduja Automotive Ltd and Chairman of Nissan Ashok Leyland Powertrain.
Q1) Please put in context the state of Indian auto market today and how the joint venture between Ashok Leyland and Nissan is tapping light vehicle demand.
Dr. V. Sumantran
I think in the very short-term, of course, the whole world is seeing a bit of headwind that has severely affected Europe and much of the other parts of the world. But I would say that overall, the Indian market is relatively robust, by which I mean the overall economy is growing at a rate of about 6%, not fast enough for those of us in India because it’s down from the 8.5% that we have been used to and we really need. So there is a scaling back.
Nevertheless, 6% of growth today is still encouraging, I would say that the economy is anchored by a tremendous amount of activity and consumer demand, because we have a very large and a favorable demographic. Lots of young people getting into the workforce, starting up with their salaries, growing up with their careers, and naturally with aspirations to spend that money.
So, there is an intrinsic economy that is relatively robust, of course were facing the issues of oil prices and were facing the issues of the flight to the dollar and therefore the strengthening of the dollar. So, there are those temporary issues. But overall, I would say that like many of the other BRIC economies, the young population should anchor sustained growth.
Q2) One success story that has been touted by executives of both companies has been the Dost. Can you tell us some of the background to producing this vehicle?
I remember the very first meeting that happened in the backdrop of the Hannover Motor Show and it seemed like Ashok Leyland, on the one hand, was – or is – a 63-year-old commercial vehicle company, well established in India. We’re the largest bus maker in India, and the second largest commercial vehicle manufacturer.
But we had so far – I would say much like Scania, for instance – we had stayed away from the light commercial vehicle business because we had so far found it very profitable to operate out of the heavy commercial vehicle business.
Over the recent years, and over the last decade, we had certainly as a group wanted to look at how we can address the light commercial business, and we felt that any attempt to address that segment must come from the basis of a broad product range and therefore an ability to frequently cycle products. We didn’t want to make a single-shot entry into this.
Fortunately, about the same time when we started our very first discussions with Nissan, it appeared that Nissan also was very focused on its LCV strategy, which I have come to learn is a very strong part of the whole group. And they were certainly looking to grow into new geographies and leverage new partnerships. I must say that there has been a particularly easy journey for this joint-venture, perhaps in part due to the ethos that we have seen at Nissan.
I think they seem to be intrinsically geared towards making alliances work. I think it’s a mindset that recognizes that partnering works, and, as a result, very quickly from the start I remember the handshake between Mr. Ghosn and Mr. Hinduja. It was late in 2007, and literally three years from then we have a JV, a product developed, we have a plant with tools and operations.
So, I think its been a relatively quick start and I must credit, I would say, the compatible cultures between Nissan and Ashok Leyland for allowing it to happen so soon.
Q3) My understanding is that the JV has a three-platform line up of LCVs, but another is coming from Nissan. What can you tell us about respective production plans?
As you mentioned we have made a start with the first product, the Dost, which is a small LCV, positioned in India as 1¼-ton payload vehicle. Fortunately for both of us it’s off to a good start, its rare these days, but we do have a 3-month waiting list for the product, so we have been encouraged by the first start that we made.
At the Delhi Auto Expo this year we already unveiled the second and the third platforms. The second would be the Nissan NV200 platform, which will come out as both the Evalia for Nissan and well as the Stile for Ashok Leyland. And the third will be the bigger LCV, the F24 – called the Cabstar and the Atlas here.
So, I think we have already got the first three products lined up. The first one has been launched and we already have many ideas for very good variants to come off that platform. The Evalia is close to the end of its development cycle so it’s out in production very shortly. And work is very well underway for F24 as well. I think we feel confident so far that whatever the two companies have defined as a business plan looks within reach.
Q4) Chennai is home to factories for both Ashok Leyland and Nissan, as well as Defiance Technologies ‘s site as a global social media listening post. How are operations coordinated and intelligence shared among stakeholders?
Defiance is for us is a combination of a thinktank and an engineering and IT services company. We recognized a few years ago the power of social media, information data and IT. We put together this company not only for our alliance partners but for third parties as well, and we began to see the value of information that is used in the world today. And if you look at the broad spectrum of information in the case of the social media center, we are actually tracking opinions today.
I certainly can’t qualify, but the younger generation today are extremely active in terms of publicly sharing their views, their opinions and their moods. I think there is a wealth of information floating out there, and if we’re able to make sense of this information there is very, very valuable data that a manufacturer like Nissan can take away. This can range from anything from what are people are saying about our products, what are people are saying about our services, what kind of rallies do they like to attend, what are their tastes in terms of television programs, so that media spend can be targeted – any hot-button issue. And you literally get this as real-time data. This is the marvelous element of this technology.
So, rather than what we used to do as market research and commission a field of activity and wait for three months for data to be analyzed, here, literally, real-time data flows in and it’s extremely enlightening and it’s particularly useful to a company that chooses to listen to what’s going on. I think is requires a mindset to say I will train to listen to what’s going on. Once you have made that mindset adjustment, there is a wealth of information out there.
Q5) Finally, you are also executive vice-chairman of Hinduja Automotive, charged with the expansion strategy of the Group. What looks interesting to you and how if at all could this involve Nissan?
As a group we have already invested in our core area which is transportation and mobility. And certainly within this we have included its definition things like powertrain systems, certain systems of electronics. We have recently been investing in what I believe are three strategic areas. First is electronics, so we are gearing up for the kind of content we are beginning to see in vehicles. The second is environmental technologies. We realize that as we go forward, whether it is hybrid and clean vehicles – in fact, I rode in today in a Fuga hybrid, very impressive I must say – used to reduce emissions, we have invested in our own companies in Europe to be in this field. Certainly, what we just spoke about – IT, data analytics and information management – is a very important future.
In India there is a huge amount of infrastructure investment, were building roads and ports, bridges and highways at a pace never seen in India. We’ve gone into investment into construction equipment. We have made investments in shoring up our defense mobility, which is another important area. We have taken a look aerospace – so I think we’ve got a full plate.