Is the CV industry in an over-capacity situation?

Shenu Agarwal: Right now, we don’t have capacity constraints. For the next three or four years, we don’t have capacity constraints. Our industry is very sensitive to the overall economy.  Capacity planning is a long-term decision and you don’t build capacity in a year. You have to buy land and expensive machines. So, don’t relate capacity decisions to the judgement of short-term markets. The commercial vehicle industry may have built capacity for 10 years. But ask if the industry would go to that level in 10 years ... then we can have a different discussion.

Given what is happening, it is time to build capacity. The only problem is that the change is happening at a fast pace.  And, the capacity that we have built so far may have to be built in a different way henceforth. In Ashok Leyland, we aren’t building any more capacity. We have enough for the next 3-4 years. Whatever capacity we build for the future will be for the new technology.

With the kind of thrust on electric vehicles, will everything go EV sooner?

Shenu Agarwal: It is going to take some time, though. How much time it takes is, however, not important. What is important is: are you ready? Is the ecosystem enough? Have you invested enough to bring about the change? Whether you want to lead the change or follow it. These are the issues.

In Ashok Leyland, we are very focused on right investment in this space.  We want to lead the change not just in terms of technology. We are also looking at a lot of other areas where we can partner or at least participate.  If EVs come, a huge set-up has to be created for fast-charging. Fast-charging for a CV is not the same as charging a bike. These are very different chargers. So, it is not just building a great electric truck but also participating in the ecosystem ... see how the battery cost can be brought down and see what we can do in terms of charging and participate in whatever the government is doing.  All these things are important.

I think that the EV transition will take a few years, and start from the bottom. Starting in two-wheelers, the EV transition is happening fast in three-wheelers and in entry-level cars also it is happening. But we want to be ready for that. If the ecosystem is ready, the change will happen fast.

What is your EV arm Switch Mobility doing?

Shenu Agarwal: Switch Mobility is focused on buses and some LCVs. We have another company called OHM. We knew that the CV change would happen in buses first ... Not just in the technology but in the way the buses are used. Switch will invest in technology and manufacture of EV buses. OHM will run these buses for the government.

You have just entered the pre-owned vehicle space. What is the rationale behind the move?

Shenu Agarwal: We see huge opportunities in used vehicles. The company—if it were to be successful in the future—has to look at the entire value chain. It is the only way you are going to be successful and make money. Especially with the change happening—moving into hydrogen and electric vehicles, there is no way you can just be an OEM (original equipment manufacturer).

The Switch buses we are making, we are not selling them.  They are still on our balance sheet. We are actually operating them.  We have our own fleet of drivers. We give them on lease to state governments and we get paid per km. You see the whole value chain and how it is getting disrupted with new technology. It is not just about technology. But technology will have a huge impact on the way we do business.

In used vehicles, what is really important?  The normal thing is you want to have a better price for your vehicle. If the whole thing turns into EV, what will happen to those who have the traditional vehicles? It is not just getting into used vehicle space for the sake of it.

The idea is to help hold the value for millions of vehicles that are plying now at a reasonable level ... when you have raised the retail value of your vehicles, you have the advantage on the selling prices. We just started. We are not participating in the used vehicle sale. We are just creating a digital marketplace where people buy and sell used trucks. We facilitate the whole thing ... We provide the systems for billing, maintenance and knowledge about the vehicle. We try to build a lot of intelligence around the pricing so that the buyer can get maximum value. Any brand can be sold on the platform. The idea is to raise the value of it. Right now, we don’t want to monetise it but we may look at that option later on.

What is your take on the scrapping policy?

Shenu Agarwal: Scrapping policy is welcome for us. Will we participate? What would be the business model?  It is still in a nascent stage. And, we are not in a hurry. There is still time to ponder.

Given that the GDP projections vary at around 6%, what do they portend for the CV industry?

Shenu Agarwal: The CV industry is now on a very positive momentum. This may be partially due to base effect. But the general momentum is very positive. This positive cycle will be longest this time around. That is my feeling.

Courtesy: BQ Prime