Ashok Leyland To Adopt Cost-Cutting Measures; Plans To Save Rs 500 Crores This Year

Aug 02, 2019: The auto sector is impinged by one of the worst ills this year. Plunging sales and closure of dealerships are getting rampant across the country. The Chennai-based truck and bus manufacturer, Ashok Leyland, is also not immune to this. The company is planning to apply severe cost-cutting measures throughout its operational network to save Rs 500 crores this year.

The move to save more and spend less follows the report that reveals a 9% drop in revenues to Rs 5684 crore in Q1 of this financial year for Ashok Leyland. The profits also plunged by 45% to Rs 230 crores in the same quarter. Furthermore, the company has registered a 6% slump against 17% decrement in the total industry sales volume.

“Our EBIDTA at 9.4% is better than the industry. The reason is that we have been more penetrative in our top line. Secondly, even with a 9% decline in our top line, we ensured our costs were intact, which means our operating, plant, manufacturing and other costs were kept down. We have a special programme running for it. We are expecting that, with these initiatives, we will take at least Rs 400-500 crore of operating costs out of the system,” said Gopal Mahadevan, director of Ashok Leyland.

The company will inspect administrative overhead closely, evaluate the expenses in manufacturing and sales and will also check the annual spending on its trucks distribution to save Rs 500 crores this year. It also undertook the shutdown of manufacturing plants to make the production coherent with the demand. However, the shutdowns are meant only for a brief period.

Amidst all these steps, the company has hopes that the sale will start taking a positive pace around December this year as it expects that the demand for the BSIV vehicles will grow rapidly by then.