India’s second largest truck maker Ashok Leyland Ltd will make light trucks with Japan’s Nissan Motor Co. in three Indian joint venture (JV) companies that will develop and manufacture light trucks and related components.
Neither company announced the likely investment. Ashok Leyland disclosed the plans in a statement to the Bombay Stock Exchange.
Mint had first reported Ashok Leyland’s plan to enter this segment through a JV or acquisition on 30 May. At that time, the firm had said it was looking to invest Rs1,800 crore.
Light commercial vehicles are the second fastest growing segment in the truck market and Ashok Leyland only has a 1.5% market share. Demand for such vehicles grew 34% to 192,282 in fiscal 2006-07 from a year ago.
Analysts say this market is expected to continue to grow at 15-17% annually for the next three years, as more transporters adopt the so-called hub-and-spoke model. Under this, heavy trucks carry goods on highways and small trucks are then used to carry them inside towns and cities. Nissan makes only light trucks worldwide.
“It’s always better to take a tried and trusted product as long as it meets the cost equation in India,” Dheeraj Hinduja, president of the Hinduja Group that owns Leyland, had previously told Mint.
After Wednesday’s announcement, Hinduja declined to say if the Rs1,800 crore investment plan has since been revised.
Ashok Leyland said it will own the majority stake in the vehicle manufacturing company, which plans to produce at least 100,000 units a year in the medium term. The vehicles will be sold under both the brands.
This compares with a 225,000 unit a year small plant in Uttarakhand, which rival Tata Motors Ltd has just finished building.
The second JV will make engines and other components for light trucks and also for export markets. Nissan will own the majority stake in this firm.
The two companies also said they will equally own a technology development unit that will develop light commercial vehicles and auto parts for such vehicles.
The two companies are also examining the possibility of selling Nissan trucks through Ashok Leyland dealerships in India and allowing the Indian company to use Nissan’s dealers in overseas markets.
“It’a win-win situation for both companies,” said Amit Kasat, analyst with Motilal Oswal Securities Ltd. “Ashok Leyland is predominantly a heavy-tonnage vehicle maker. Now, they also get the technology for the light vehicles,” Kasat added.
Nissan has a separate manufacturing partnership with Mahindra & Mahindra Ltd and Renault SA to make cars and utility vehicles in Chennai.