Mumbai: Ashok Leyland Ltd, India’s second-largest truck maker, has launched a new venture christened Altrux to sell used trucks through its existing network of dealers in an effort to tap a large and growing market. In 2006-07, truck makers sold 2,46,862 new heavy and medium trucks (Ashok Leyland has a 26% share of this market). In the same period 77,000 used trucks changed hands in a fragmented and unorganized market.
Although this is the first instance of a truck maker selling used trucks, the trend of manufacturers entering the used-vehicles market is an established one in the passenger vehicles segment. Maruti Udyog Ltd and Mahindra & Mahindra Ltd have used vehicles ventures, True Value and Automart India Ltd respectively.
“We have started our Altrux business this week with two dealers—one each in Rajasthan and Kerala. We will expand it gradually. We are aiming to get 10-15% of the used-truck market in next three years,” says V.M. Hombali, special director, customer support group, Ashok Leyland.
Altrux will source five-year-old trucks made by Ashok Leyland through dealers, assess their condition, validate ownership documents, and purchase them. The average life of a truck is between 12 and 15 years. Hombali claims that the used-trucks business is also a “valuable after-market service” that the company was offering its customers. He adds that a completely reconditioned used truck, with original parts, would cost 50-60% of the price of a new truck. For instance, Ashok Leyland’s 2214-1S, a multi-axle truck with cabin and body, costs Rs13 lakh. Altrux will sell a five-year-old model of this at around Rs6.5-6.75 lakh. All reconditioned vehicles will carry a six-month warranty—something that isn’t provided by the unorganized sector.
Ashok Leyland’s entry into the market will likely open up better and cheaper financing options for buyers of used trucks.
“Altrux vehicles will be certified for quality performance and service backup. Besides, the company is working out arrangements with a few banks and non-banking finance companies that will provide funding for Altrux vehicles at competitive terms,” says Hombali.
The company expects the markets for trucks, old and new, to grow at between 10% and 15% a year. By buying trucks from large fleet-owners, Ashok Leyland could make it easier for them to buy new trucks to renew their fleets and, consequently, help its own cause.
“The entry into the used- truck segment will help Ashok Leyland achieve an incremental sale for new trucks as the sellers are usually large transporters who require new ones after selling the used ones,” says an auto analyst. He requested that he not be identified citing his brokerage’s policy.