‘Demographic dividend with new generation will drive long-term growth’

Ashok Leyland John Deere Construction Equipment Company Pvt Ltd (Leyland Deere) is a joint venture of John Deere Construction & Forestry Company and Ashok Leyland Ltd.

P. Ravishankar, CEO – Leyland Deere told Sandeep Menezes that India is one market wherein cost is important and customer will always buy a product which gives him cost benefits.

Excerpts from the interview:

What was the main reason for launching Leyland Deere’s second product – the 435E backhoe loader?

We had the 435 backhoe loader earlier also which you saw in the last Excon – it provided us a platform of a performance machine for customers who had time bound projects or heavy duty work. Based on our experience with that machine which witnessed nearly 1200 such machines in the market – the customers in the hiring segment came to us and said that you have a wonderful and durable platform but can you give us something that is cost optimized because we hire by the day, week or month.

Therefore we sat with those customers and asked what would be beneficial for you. Two things came out; the first was fuel average because fuel constitutes nearly 40 per cent of the operating cost of machines. The other was the general cost of service and machine. This is the result of the whole optimization process.

The new machine during trials with customers gives half litre per hour benefit. This translates to 3000 hours per year which is savings of around Rs 90000 to Rs one lakh.

Now with the market down and recessionary conditions existing today this is giving customers a very viable option for reducing costs. Then we went into all the service fills like the transmission oil fill and hydraulic oil fill etc – so now we have got a 15 to 16 per cent saving on fluids and consumables by tweaking the service intervals and service quantities. This saves another Rs 50000 to Rs 60000 per year.

Therefore we provide the customer an option to lower his cost structures by nearly one and half lakh rupees per annum.

Therefore this new machine will lower operating costs. Comment.

Most of these machines are typically financed by a financer who puts in margin money of between Rs 4 lakhs to Rs 4.5 lakhs while the remaining is financed by the financer itself.

If you calculate this Rs 1.5 lakhs a year savings, then within the three year tenure the customer gets his margin money back in addition to the RoI that he is deriving from the loan.

In the long term, this machine is important because India is one market wherein cost is important and customer will always buy a product which gives him cost benefits.

Launching a new machine in the current challenging scenario facing the equipment sector, isn’t this a bold move?

We are not the only ones doing it; many other manufacturers are also doing it. A manufacturer who responds to pressure and gives a solution in terms of viability will help the customer and market.

Interest rates have witnessed hardening in recent months. How has this impacted the equipment sector?

We work together with financers. It’s not only us but all industry participants work with financers to provide various forms of financing. Sometimes we help in bringing down the cost of funding for the end user. Because events like Excon put all three stakeholders – the manufacturer, financer and customer on a platform to access how best to make use of an opportunity or situation collectively. The government policy due to inflation and various other macro economic factors is a given. How do we optimize ourselves is the way we look at it as a manufacturer. Therefore we will continue to work with customers and financers. One way is to reduce operating cost, acquisition cost and funding costs.

What is the quantum of indigenization in your machines?

It’s very high. Around 95 per cent localization has been achieved therefore we can proudly say that our machines are made in India. Ashok Leyland gave us the engine part of the technology while John Deere has worldwide capability in structures, power-trains etc so they allowed us to quickly work with suppliers. In fact our suppliers appreciated the quality of interface of our engineers. We now have the skill to quickly localize any stuff.

Projects are not taking-off and economy has slowed down. As a leading CE manufacturer, tell us about your predictions for the future?

In the long term there is no change to the India growth story. I mean more than 18 to 24 months – it’s a very strong story. There are deficits compared to our neighboring countries like SAARC, there are challenges compared to emerging growth markets like China, South America etc – there is no doubt about that.

The demographic dividend that we have along with young population will drive our long term growth. The challenge for all is to manage this window in between of around 18 to 24 months.

If we as an industry through events such as these and through our products help catalyze the industry towards recovery – it will then be much faster.

Going forward, does Leyland Deere intend to expand its dealer network?

We are continuously expanding and currently have 40 main dealer points. Each main dealer point has around two to three branches in tier two or tier three type of locations. Currently we are operating with around 155 touch points across the country.

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