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Rift with Nissan Pulls Ashok Leyland's Shares Down by 3%

Published On Feb 24, 2016By Prashant Talreja

It appears like Ashok Leyland is paying price for its recent scuffle with JV partner Nissan. The company's shares witnessed a downside of three percent on the back of media reports about Nissan's notice to the Indian firm pertaining to the termination of joint venture.

A report released on the subject states: “Beleaguered joint venture for small trucks between Japanese auto major Nissan and Hinduja group flagship Ashok Leyland hit a nadir with Nissan issuing a termination of license notice to one of their three JV companies, effectively sounding a death knell to the idea of growing of business together.”

The Japanese firm claims that Ashok Leyland owes it a partly sum of Rs. 2.34 Crore in royalty, which the Indian firm denied. Ashok Leyland has alleged that Nissan has illegally diverted the assembly plant machinery defying the government's rules and regulations.

As part of the EPCG (Export Promotion Capital Goods) scheme, both the firms have availed incentives from the government. This scheme is intended to promote exports and facilitates importing of machinery for production of vehicles. The JV companies have imported these production tools for the assembly of Stile/Evalia utility vehicles. An accord had been signed by the two firms that clearly states the exact location for the import.

In the year 2008, both Nissan and Ashok Leyland joined forces for the development of LCVs in 2.5 to 7.5 segment. Both the firms had signed three different accords for establishing three separate joint ventures. They included vehicle manufacturing, technology development and engine manufacturing. Ashok Leyland Dost was the first LCV to see the daylight under partnership between these two companies. It was launched in the 2.5 ton segment and went on to become a success.

See Also:

Ashok Leyland Hopes for Roll-out of GST Bill in 2016 Budget Session

As Stand-off Builds, Ashok Leyland Denies Owing Royalty to JV Partner Nissan

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