Revving up! Ashok Leyland - Motilal Oswal

Ashok Leyland
JV with Nissan for LCVs to plug gaps in product portfolio
Dost ramping up; planning two more launches
• Launch of LCV, Dost by the AL-Nissan JV plugs the gap in AL's product portfolio and marks
its entry into the high-growth LCV segment.
• Initially, Dost is being manufactured and marketed by leveraging AL's existing infrastructure,
for which AL gets manufacturing and marketing margins.
• Post Dost, the JV plans to launch two more LCVs, Stile and Partner, with overall intent to
launch one product every six months.
Dost launch plugs gap in product portfolio; enters secular growth LCV
segment
Dost, launched in September 2011, has received encouraging response, gaining ~21%
market share in the 2-3.5 tonne segment. Moreover, it enjoys 31% market share in the
eight markets where it has been launched. The company currently has two months'
order book for the vehicle, with greater demand for the higher-end models. It has
increased production of Dost to 100 per day and expects to sell 36,000 units in FY13
and over 50,000 in FY14. We model Dost volumes to ramp up to 35,000 in FY13 and
45,000 in FY14.
AL's market share in LCV
segment estimated to
improve to ~10% by FY15
based on ramp-up
of just Dost
While AL holds ~25% market share in M&HCVs, it was a small player in the fast growing
LCV segment, with just 1.7% market share in FY12. We believe this JV plugs gaps in
AL's product portfolio, as LCVs are expected to grow at a faster rate due to high
acceptance of the hub-and-spoke model of logistics. We expect AL's LCV market share
to increase to ~8.2% in FY13 and to ~9.1% by FY14, led by ramp-up of Dost. Our estimates
doesn't factor in for any meaningful contribution from other new launches.
DOST to drive AL's market share improvement in LCV segment (%)
Source: Company, MOSL
12 November 2012
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