Commercial vehicle (CV) has been one of the worst-hit segments due to the pandemic with companies struggling with customer acquisition. Ashok Leyland, the country’s third largest CV player is hoping for a faster pick up in demand which would then drive down discounts that has remained notoriously high.
“Discounting currently is on the higher side and this is driven by the fact that demand has not been really high. Some part of the industry has used discounting as a way to acquire a customer,” Gopal Mahadevan, director and chief financial officer, Ashok Leyland said responding to a question from Moneycontrol.
A 10 percent discount is a general practice on the price of a truck or bus. This level of discounting has gone up over the last few months due to the second wave of Covid-19 pandemic. Both Ashok Leyland and CV market leader Tata Motors have decided to reduce the level of discounting in the market and pursue profitable growth.
“When one participates in the market, one needs to ensure that there is efficiency cost and pricing. The best way to do that is take out unwanted costs from the operations. Hopefully when the demand picks up the discounts should come off. We also want to pursue growth but we want to do it profitably,” Mahadevan added.
During April and May this year, Ashok Leyland reported wholesale sales of 10,699 units in the domestic market. During the same two months of last year the company saw 1,277 units sales because of the strict nationwide lockdown.
With accelerated vaccination drive, reopening of industries, and gradual pick up of the economy CV making companies are hoping for a faster return of the fleet buyers to the dealerships.
Fleet buyers have been sweating their assets more than the traditional duration which has led to postponement of purchases of new trucks. Buses fleet owners have been the worst hit by the pandemic with a direct clampdown on their operations due to hygiene and sanitation issues.
“The social distancing thing is going to continue even beyond the pandemic. This would lead to limited accommodation in buses which would then hopefully lead to purchase of more buses. We are optimistic as far as demand for bus is concerned,” Mahadevan added.