Ashok Leyland

Rivalry among completion

1) Number of competitors (4)
- Competitors Tata Motors, MTBL, AL, VECV, Force
- Source (Society of automobile manufacturer, Crisil research)
- Source (ICRA Market share for CV get it from college)
-Number of competitors is small. Tata motor is the biggest
-(India auto report link in Google group)
-Player (60% 2011), M&M (15.62%) , AL(9.69&) revised
values as from CRISIL research dated 27 May 2013 titled Global
Players gauge local challenges Commercial Vehicle analysis by
CRISIL
2) Industry growth (slow 2)

-CV industry cyclical and progressively downwards (2005

-2014) the future looks slightly bright.

Highway to Hell Commercial Vehicles Have Crashed

BY IAR TEAM DECEMBER 18, 2013
-Growth percentage for industry fall at a rate greater then
GDP percentage fall.
-Although the GDP growth has improved in 2013 -14 however
the downword trend in the sales for CV has continued to go
down.
-IIP follows the same trend as CV sales. slow at the moment
-(source Crisil, SIAM) Highway to Hell Commercial
Vehicles Have Crashed
BY IAR TEAM DECEMBER 18, 2013 (medium and heavy
trucks and buses)

3)Fixed Cost (high 2)

-industry is slow so the overall pie is not growing and since
the fixed costs are high companies compete aggressively for
bigger piece of the pie.
-This increases the rivalry.
-The fixed cost in the CV industry is too high (source annual
report)
4)Differentiation (3 medium )
-product diff. ( low2)
-There are some differentiation in product specification
where customer preference depends on specific need of
the user.
-On broader level we dont think there is any major
product differentiation.

-Need consult industry specialist.

Source( http://www.team-bhp.com/forum/commercialvehicles-india/81943-tata-vs-ashok-leyland-cv-hcv-only.html)
-Brand identity (4 high)
-The market share mix suggest that tata motor has
greater brand identity then other companies in this
sector.
-Need to consult industry specialist on this too.
5)Switching Cost (2 low) need to research MORE
-Need to look at below points to decide
-Spare parts -Technician -Number of service centers
-Annual maintence contract
-Type of customer operations
6)Strategic Stake (low 4)
Excess capacity research
-Interpretation 2 : Excess Capacity is the unused or unutilized capacity of a company which gives it an
advantage in terms of the fact that it can simply raise its
production levels to drive out the competition.
Tata Motors installed capacity below

Barrier to Entry
1) Economies of Scale (large 4)
- it should be high as the fixed cost is high
- Normal order size is high as the buyers (transport
operators, defense, freight operators) place bulk
orders.
- The new entrant will have to start off with producing
on large scale to compete.
- Source: table 2 ICRA india report
- Need to find more source
2) Product Differentiation (low 2)
- Same as RBC
3) Brand Identity (high 4)
-Same as RBC
4) Switching Cost (low) need to research more
- talk to Regie
5) Access to channel of distribution (limited 4)

Tata Motor and AL have their own using distribution

channel mostly. New entrant finds it hard to push his
product
- Whether the DC are company owned or there are
independent distributors
- How spread out the end customer are.
6) Capital requirement (large)
7) Access to technology (restricted 4)
- The technical expertise required to operate in this industry is
high and t
he required excessive investment.
- All the new entrants were already had the required know
how.
8) Access to raw material
9) Govt. Protection (none 2)

Bargaining Power Of Buyers

1) Number of Buyers (4 Large)
- The buyers can be divided into below categories
o Industrial user (transporters, logistics providers,
Coal and Mining industry)
o Public User (individual and passenger
transport)
o Govt. (State and central transport such as DTC,
UPSRTC, BEST)
o 22 STU across the country are large scale
buyers (Kolkata City, Bangalore city, AP, Jaipur,
TN, PUNE Mahanager Parivahan Mahamandal)
o Defense User (Army trucks, tank, transport
buses)
- Most customer are all bulk buyers but there is no
concentration of buyers.
2) Availability of substitute (Few 4)
- Train, Air and Ship are possible substitute but not all
mode of transport are available or feasible in all
situations. This makes the switching cost high.
3) Switching Cost (high 4)
- Need clarification on whether its b/w different
competitors or b/w substitute.
4) Buyers threat of backward integration (low 4)
- Due to high economies of scale buyers threat of
backward integration is low.
- only possible threat is Defense sector
5) Industry Threat of forward integration (low 2)
- The buyers are a diverse lot (mining, defense, public
transport)
6) Contribution to quality

- Buyer are mostly consumer so dont add any value to

the product.
- Need clarification on what it means.
7) Contribution to Cost
- Need clarification on what it means.
8)Buyers Profitability
- in most cases Industry players bid for business from
buyers so not sure how big a factor Buyers profitability
is.

Bargaining Power of suppliers

1) Number of suppliers (large 4)
- There are large number of suppliers for each most of
the production input.
- Tata Motors have 1200-1400 vendors, sometime upto 8
vendors for single item (source economic times)
2) Availability of substitute (many 4)
3) Switching Cost ( Low 4)
4) Suppliers threat of forward integration (low 4)
- The suppliers are generally dont have the expertise to
do forward integration
5) Industry Threat of backward integration (high 4)
- Tata motor has subsidiary Tata Autcom, which
manufactures auto parts.
6) Contribution to quality
7) Contribution to Cost
8) Industry importance to suppliers (high 4)
-

Government Action
1) Industry protection (low 2)
- No special protection is provided by govt. to CV
industry. The industry is deregulated.
2) Industry regulation (medium 4)
- Need to discuss whether it is advantages to
disadvantages.
3) Customs and tariff restriction (high 2)
- There are several state and govt level taxes imposed
on CV industry
- e.g. Motor Vehicle tax, Passenger Good Tax, State
entry tax

Barrier to exit
1) Asset specialization (high 2)
2) Cost of exit (high 2)
3) Govt. Restrictions (low 4)

Ashok Leyland took its market share to 27.1 per cent in the first half of 201415 from 25.5 per cent a year-ago on the back of a 5 per cent rise in sales of
medium and heavy commercial vehicles to 28,290 units in the six-month
period. Its market share rose despite industry volume dropping 1.5 per cent
during this period.

Business standard December15 2014

This excerpt taken from the TTM 20-F filed Oct 7, 2009.

Installed Capacity:
As of March 31, 2009, our total vehicle production capacity
in India determined on the basis of two production shifts per
day and including capacity for the manufacture of
replacement parts, was 870,156 units annually. In addition,
we also have vehicle production capacity of 20,000 units
annually in South Korea through the manufacturing facilities
of TDCV. Our Marcopolo plant has capacity of 6,600 units; we
have bus body building capacity of 330 units in Spain and
240 units in Morocco, and our joint venture in Thailand has
capacity of 25,000 units.

The following table shows our installed capacity as of

March 31, 2009, and production levels by plant and product
type in fiscal 2009 and 2008:
31
Table of Contents
Fiscal Year ended
March 31,
Production
Installe
(Units)
d
Capacity
(1)
2009
2008
Jamshedpur
Medium and Heavy Commercial
Vehicles

108,000

64,39
6

95,14
5

513,125

307,2
79

436,1
77

30,000

21,29
5

26,90
0

210,000

95,54
6

23,13
6

9,776

4,948

7,364

6,600

873

Pune
Medium and Heavy Commercial
Vehicles, Light Commercial
Vehicles, Utility Vehicles,
Passenger Cars
Lucknow
Medium and Heavy Commercial
Vehicles, Light Commercial
Vehicles, Utility Vehicles
Pantnagar
Medium and Heavy Commercial
Vehicles, Light Commercial
Vehicles, Utility Vehicles
Jamshedpur & Dharwad
Construction Equipment
Lucknow & Dharwad
Bus bodies
Republic of Korea

Gunsan
Medium & Heavy Commercial
Vehicles

20,000

9,341

11,82
1

330

151

222

240

37

61

25,000

870

27

Spain*
Buses and bus body
Morocco*
Buses and bus body
Thailand
Pick-up trucks
(1 On double shift basis including capacity for manufacture
) of replacement parts as of March 31, 2009.
* On single shift basis.
At Jaguar Land Rover, manned capacity has been reduced in
response to falling demand to 170,000 units, and we are
currently operating at 97% of that capacity.