Ashok Leyland, Nissan sign pact to produce LCVs, power trains

Chennai: Ashok Leyland and Nissan on Monday formally signed a master co-operation agreement to set up three joint venture companies in India. The two partners intend to invest $500 million (Rs 2,000 crore) across the three companies.

One joint venture will manufacture light commercial vehicles in the 2.5 tonne to 8 tonne gross vehicle weight under both Ashok Leyland and Nissan brands. Ashok Leyland will own 51 per cent stake in this joint venture. At a press conference here today, Mr Carlos Ghosn, President and CEO of Nissan, said that the joint venture could start producing vehicles by 2010-11, at which stage the facility will have a capacity to produce one lakh vehicles.

2 types of vehicles

The joint venture will produce two kinds of vehicles. The first kind are vehicles that are jointly developed by the two partners specifically for the Indian market. These vehicles will be sold under the Ashok Leyland brand. The other type of vehicles are those that Nissan already produces and markets outside India, such as the Nissan Atlas F 24 LCV.

The Ashok Leyland branded vehicles will address the lower end of the market and the ‘Nissan’ vehicles, the higher end. The responsibility of marketing the vehicles vests with the joint venture. Ashok Leyland and Nissan are further discussing the prospects of using each others’ dealer network to sell these vehicles in India and abroad.

The Ashok Leyland Managing Director, Mr R. Seshasayee, said that the manufacturing facility could be set up either in Uttarakhand, Andhra Pradesh or Tamil Nadu. However, it is learnt that Sriperumbudur near Chennai is being considered first — officials of Ashok Leyland, Nissan and the Hinduja brothers visited Sriperumbudur this afternoon.

The second joint venture will be 51 per cent-owned by Nissan and will produce power train (engine, gearbox and transmission) for both the first joint venture as well as to Nissan worldwide.

The third joint venture is a technology development company responsible for the development of LCV products and related power trains, destined for the Indian and select global markets. The joint venture will be equally owned and will be located at Chennai.




Mr Seshasayee noted that the market for lower tonnage LCVs was veering towards vehicles of 1-1.25 tonne payloads. This is the segment that the range of products of the joint venture starts with.

Last year, the goods-carrying LCV market grew 39 per cent to 1,68,503 vehicles. Of this, the below 3.5-tonne segment grew 63.5 per cent (to 1,32,067 vehicles) and the 3.5-5 tonne segment grew 146 per cent (1,735 vehicles). The third segment — 5-7.5 tonne — declined 12.6 per cent to 34,701 vehicles. This trend was broadly maintained in the first quarter of the current year too, when only the sub-3.5 tonne segment grew 21 per cent (29,985 vehicles), while the other two segment declined.

Clearly, the market is in the lower-tonnage vehicles, and the Ashok Leyland-Nissan JV affirms that it would be present in this segment.