Auto companies aim for projects in defence sector as growth slows3 min read . Updated: 25 Aug 2020, 07:30 AM IST
- Ashok Leyland is one of the largest suppliers of heavy vehicles to the military
- The companies also want to exploit a government push for increased local manufacturing of defence equipment
India’s automobile companies and parts makers plan to tap opportunities in the defence sector to offset sluggish demand for automobiles in the domestic market amid the coronavirus crisis.
The companies also want to exploit a government push for increased local manufacturing of defence equipment and a deeper presence of private firms in this strategic sector.
Companies such as Ashok Leyland Ltd, Force Motors Ltd, BEML Ltd, Bharat Forge Ltd, JCB India Ltd and Automotive Axles Ltd see the government’s localization push for the defence sector as a major opportunity.
The defence ministry on 9 August issued a list of 101 items on which an imports embargo will be imposed with certain timelines. While 69 items on the list were given the import embargo deadline of December 2020, the timeline for the remaining items stretches until December 2025.
“There will be a number of indigenized developments, which will bolster the defence logistics industry. Now, with clarity on the restricted items, the industry will work on strengthening its product offerings," said Vipin Sondhi, managing director and chief executive officer, Ashok Leyland Ltd.
“This will also offer an opportunity to suppliers to participate with the automakers in the development and growth," Sondhi said, adding that more than 50 items in the issued list were already part of import restrictions as per the defence production policy 2018.
Ashok Leyland is one of the largest suppliers of heavy vehicles to the military. In FY20, the company supplied 359 vehicles including bullet-proof vehicles, as well as kits for 8X8 trucks. It also entered the tracked vehicles—can be used in all terrains—business for supplying aggregates and components for T-72 and T-90 battle tanks, it said in its annual report. The company has already assigned its defence vertical as one of the core focus areas for growth in the midterm.
Deepak Shetty, deputy chief executive officer and managing director at JCB India Ltd, the country’s largest construction equipment manufacturer, said the government decision has the potential to create more opportunities. “We have been supportive of the make-in-India programmes for a long time. We have been supplying to the defence force based on their tender-specific requirements," he said. JCB provides construction and material handling equipment to the Indian Army and the Border Roads Organisation.
Amit Kalyani, deputy managing director, Bharat Forge Ltd, called the government’s plan to boost localization in defence equipment as a great step that recognizes local manufacturing capabilities.
“This is also good for the supply chain. We are working with over 400 companies in the defence supply-chain ecosystem," he said in a recent analyst call to discuss the June quarter earnings.
The company, which is looking to more than double its defence revenue of ₹500 crore in four years, is looking forward to the completion of final trials of its locally developed artillery guns.
“We have developed four platforms. Once the last phase of trials is over, we will be ready for the sale process to begin," Kalyani said, adding that three of the guns are in the advanced stages of testing.
Bharat Forge is looking to set up a capacity to make up to 150 artillery guns per year, starting from 50 units a year once the orders are finalized. The cost of each artillery gun is pegged at ₹12-15 crore.
The company has created a “three-horizon strategy" to grow its defence business. While products like artillery guns come under horizon 1, armoured and specialty vehicles come under horizon 2, and horizon 3 includes electronic and high-tech products.
“Based on the government announcements, we plan to deepen our capabilities within these product segments," Kalyani had said.