Ashok Leyland – Nissan joint venture faces widening losses
Published On Jun 26, 2015
Commercial vehicles giant Ashok Leyland has been impacted by the slow LCV market. Just recently, the company had recovered from the rough phase for the medium and commercial vehicles segment. However, just as the brand attempted to regain its business value, the slow performance for the light truck segment took an added toll on it. The company had advanced into the light commercial vehicles market through a joint venture with Nissan Motors in 2007 to 2008. The joint entity, Ashok Leyland Nissan Vehicles Limited was formed, meant as primary developer of light duty trucks in which, the former owns a 51% stake. However, reports have surfaced that the relationship between the two brands in this tie up is deteriorating amidst stagnant sales.
The joint venture has run into losses for the year 2014/2015. Its loss after taxation stood at Rs. 791 crores, compared with just Rs.175 crore for the previous year. Furthermore, the complete turnover that the brand saw was Rs.1,030 crores, against Rs.1,052 crores for the last year. The manufacturer in its latest annual report has stated that “The company, after studying its intrinsic value of investments in Nissan JV using independent valuer, has made an impairment provision of Rs.214 crore out of total investment of Rs.509 crore in the three Nissan JV entities,”.
Ashok Leyland had made indications recently that its joint venture with Nissan was now proceeding to move out of the LCV field, and keep its focus to the manufacture and selling of goods vehicles. One of the brand's models, Stile, had stopped production amidst a poor response. However, amidst the sluggish market field, the company's first pick up model, the Dost, had been going strong in performance. At the fourth quarter of the previous year, Dost had seen an 11% hike in its volumes, at a time when the entire LCV industry was facing negative sales. Ashok Leyland had entered the LCV market with the launch of this model, which is sold over 1 lakh units in Indian markets until now.