Ashok Leyland Plans To Shut UK E-Bus Facility To Cut Losses, Bolster Cash Flow

Ashok Leyland Ltd. has initiated a consultation process with employees that could result in a cessation of manufacturing and assembly operation of Switch UK, an EV-focused stepdown subsidiary of the auto major. Analysts see this as a positive strategic move and are also bullish on the company's Indian EV operations.

The UK operations, particularly in the electric vehicle bus market, have not met expectations. While the company posted a loss of around Rs 460 crore in financial year 2024, it is expected to post losses of £22 million in financial year 2025, according to Morgan Stanley.

Taking these points into consideration and given the lack of clear visibility in the EV bus sector in that market both Nomura and Morgan Stanley said that the cessation of operations at the UK factory makes sense.

BofA also said that the company will not see any risk of impairment on account of UK manufacturing shutdown. Positive India accretion will more than offset the write-off needed for the UK business, the brokerage noted.

One of the key benefits of Ashok Leyland’s decision to wind-down operations in UK is the reduction in cash burn. The shift from the UK not only mitigates ongoing losses but also offers the potential for economies of scale as the company consolidates operations in its primary market, India. Morgan Stanley specifically views this transition positively, believing it will help improve cash flow and reduce operational inefficiencies.

Analysts also expect Switch India, Ashok Leyland’s electric vehicle initiative, to be a key growth driver. Nomura and BofA are optimistic about the company’s EV business in India, with both predicting it will reach Ebitda breakeven soon. India’s growing EV demand and the push for electrification in commercial vehicles make it an important market for Ashok Leyland, they added.

Macquarie maintains a Neutral rating with a target price of Rs 234, citing concerns over moderating MHCV volumes and share pledging. However, it sees the restructuring of UK operations as a near-term positive from both sentiment and cash flow standpoints.

Despite this, Morgan Stanley and BofA remain more optimistic, maintaining Buy ratings and target prices of Rs 284 and Rs 260, respectively.

The shares of Ashoka Leyland fell as much as 4.56% to 205.17 apiece, the lowest level since March 19. It pared losses to trade 1.91% lower at Rs 210.87 apiece, as of 9:36 a.m. This compares to a 0.12% advance in the NSE Nifty 50 Index.