The reason for the surprise announcement of Vinod Dasari in November last on quitting Ashok Leyland (AL) is now clear: Royal Enfield appointing him as CEO and his joining Eicher Motors, the parent body of Enfield, as Executive Director.
Dasari joined AL in 2005 and succeeded R Seshasayee as Managing Director in 2011. Dasari timed the announcement on quitting AL after the company celebrated its 70 years with a performance at its peak: the company produced 174,873 vehicles, 18,751 engines, had gross sales of Rs 26,525 crore and profits of Rs 1563 crore: all records! The company, in line with the industry, was riding on booming market conditions.
Since 2000, under R Seshasayee, AL embarked on multidimensional expansion. The most significant of these was the focus on R&D. From low levels of R&D commitments until the late 1990s, AL massively stepped up R&D expenditure. The company assembled abundant talent of R&D scientists and engineers from across the globe like Dr V Sumantran, Dr. Arvind Bharadwaj and others. From negligible numbers, the R&D strength shot up over 1100 in quick time.
Simultaneously AL also embarked on a spate of collaborations with Renault, Nissan, John Deere and also acquired a company in Europe to access state-of-the-art technology; and AL built a lot of electronics and IT into the vehicles. One noticed dramatic and continuous improvements in the range and quality of new products coming out of AL. The boom in market conditions also helped maximize production at Ennore, Hosur, Alwar, Bhandara and importantly, at Pantnagar.
EMPHASIS ON SHORT TERM GROWTH…
Dasari focused on getting the best out of the production facilities and succeeded in this. AL ended the collaborations with Nissan. The Hindujas closed down the earth moving equipment manufacturer with John Deere. Like our politicians occupied with frequent elections, AL under Dasari also concentrated over the short term. There was a distinct emphasis on quarterly growth and results over the short term. The old strength of AL noticed under Ram Shahaney and Seshasayee on long term vision was put on the backburner. With the aged Ennore facilities set up six decades ago saturated and despite having other land resources in the city, AL did not plan to create new capacity in new locations.
After enjoying the boom for four years, the automobile industry is now on a downturn. It is facing massive challenges in the form of tighter emission norms. With Indian Oil commissioning its terminal for importing natural gas at Ennore Port, there will also be a huge opportunity to switch to CNG vehicles in the southern cities. There is even greater urgency to change to electric vehicles. The going is bound to be tough.
Dasari’s earlier experience at Cummins and AL could be more useful to Eicher Motors than perhaps to Enfield. His stint at AL, which dominated the passenger vehicle segment for decades, should be of particular help. Eicher-Volvo has emerged a strong third force in this segment.
THE STORY OF ROYAL ENFIELD
Royal Enfield, promoted by K R Sundaram Iyer and K Eswaran in the 1950s, pioneered in India the production of 350cc motorcycles. The company flourished for close to two decades in the protected market when the two-wheeler market was divided among Enfield, Ideal Jawa, and Escorts. For over two decades, Enfield India flourished and continued to build its niche in the heavy vehicle segment. When the market was opened to new generation bikes from Japan and Europe in the 1980s, the Sundaram Iyer family, the original ownership group, could not meet the fierce competition from advanced technology mobikes and sold off the business to Eicher Motors led by Vikram Lal.
Today at Enfield India the challenges are different. The company is facing a fall in demand after making significant expansions in India and outside. At the new unit at Oragadam, it has suffered severe industrial relations problems through the past year. Add to these the Trump factor: the US President has been crass with India on the high tariff on high-end Harley Davidson motorcycles produced in the US. If India relents, which appears likely, it can add to the woes of high-end bikes of Enfield India. – SV
