Ashok Leyland (AL) is gearing up for a significant investment in the battery ecosystem, with plans to allocate approximately Rs 300-600 crore over the next two to three years.
This investment is a segment of a more extensive Rs 5,000 crore capex roadmap, outlined to enhance the company’s electric vehicle (EV) capabilities and position it ahead in the e-mobility transition. AL aims to achieve a net-zero target by 2048, focusing on in-house battery pack production.
The company’s strategy involves localising battery pack manufacturing in India by the first half of 2027. Initially, the production will cater to AL’s captive demand. However, plans to expand into passenger vehicles (PVs), two- and three-wheelers (2Ws/3Ws), and non-automotive applications are in place. This gradual expansion could eventually lead AL to consider cell manufacturing, depending on the adoption of EV and Battery Energy Storage Systems (BESS).
A partnership with CALB, a prominent Chinese player in new energy solutions, is pivotal to AL’s battery localisation strategy. This collaboration is primarily technical, with no immediate financial investments involved. It forms a step-by-step approach to building battery technology expertise, benefiting both automotive and non-automotive applications.
Emkay Global cites the localisation of battery packs as crucial since batteries account for 30-40% of an EV’s cost. AL’s strategy to reduce reliance on imports and external suppliers is aimed at achieving stronger cost control. While the investment is ambitious, Emkay Global notes the divergence from AL’s core CV business focus, calling for more clarity on the intent.
The strategic partnership with CALB will enable AL to start with cell imports and local pack assembly. The collaboration grants access to advanced battery technology, localisation expertise, and exclusive manufacturing rights for select products in India. The final structure of this tie-up is yet to be announced, but it is crucial for AL’s estimated 4-6 GWh of captive battery demand over the next 4-5 years.
This move aligns with AL’s long-term vision centred on developing in-house expertise and cost control, thus gaining an edge over peers. The investment plan includes phased spending of Rs 50 billion over the next decade, with Rs 3-6 billion earmarked for localised pack production in the short term.
Emkay Global has raised its target price for Ashok Leyland by 7% to Rs 150, up from Rs 140. The firm maintains its earnings estimates and reiterates a ‘BUY’ rating, indicating confidence in AL’s strategic direction and the potential for growth in the battery market.
By focusing on technology and manufacturing capabilities, Ashok Leyland aims to lead in the fast-evolving battery market. The upcoming milestones and partnerships are set to position the company favourably as it navigates the complexities of the e-mobility landscape.