Ashok Leyland Ltd. said India's commercial vehicle fleet is at its oldest level on record, helping sustain replacement demand even as higher diesel prices weigh on sentiment.
The truck and bus maker said demand remained resilient through April and May despite concerns over fuel costs, with replacement purchases continuing to support sales across medium and heavy commercial vehicles and light commercial vehicles.
The remarks come as investors assess the impact of the US-Iran conflict on manufacturers' costs. Concerns over disruptions in the Strait of Hormuz have fuelled increases in oil prices, shipping costs and commodity prices, raising the prospect of margin pressure across the auto sector. Ashok Leyland said demand remains supported by fleet replacement requirements as vehicle ageing reaches record levels.
Speaking after the company's fourth-quarter results, Managing Director and Chief Executive Officer Shenu Agarwal said the industry had also benefited from GST rate rationalisation and a growing need to replace ageing vehicles. "GST rationalization acted as a trigger for replacement of the aged fleets, and we know that the aging of the fleet is at its all-time high," Agarwal said.
Demand Remains Steady
Agarwal said domestic commercial vehicle demand had strengthened since October, supported by lower vehicle acquisition costs following GST changes and replacement demand from fleet operators.
While diesel prices have become a concern for transporters, he said the underlying demand environment remained stable.
"In May, we are not seeing any significant slowdown, both on the MHCV and LCV side," Agarwal said.
"There is a kind of sentiment attached to the diesel oil prices that is there in the market, which is affecting the current logistics operations also in many routes and in many areas."
He said replacement demand was helping offset those concerns.
"The resilience of the demand based on GST and on the replacement factor is acting very, very strongly, and it is protecting the minimum baseline on the CV demand right now," Agarwal said.
Exports Face Logistics Hurdles
Ashok Leyland said export demand in its key markets, including the Gulf Cooperation Council region, Africa and South Asian markets, remained stable despite higher oil prices.
However, export volumes could remain under pressure in the near term because of logistics disruptions and production challenges at its facility in Ras Al Khaimah.
Agarwal said the company could not fully meet demand in March and April because of shipping constraints.
"Exports might drop, I would say in Q1, although things are now coming back to normalcy as we speak," he said.
The company is working to restore operations at the facility to full capacity and expects the process to take a few more weeks.
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Commodity Costs Rise
Ashok Leyland also warned of pressure from higher raw material costs, particularly steel, in the current quarter.
President Finance and Chief Financial Officer KM Balaji said the company implemented a price increase of about 1% in January and another increase of 1% to 1.5% in the current quarter.
He said cost-saving measures, including value engineering, sourcing initiatives and supplier negotiations, helped offset higher commodity costs in the March quarter.
For the June quarter, however, Balaji said commodity inflation had intensified.
"There has been a significant increase, which has happened on the commodity cost side, predominantly steel. So, there it is going to be a challenge, which we'll be facing as far as Q1 is concerned," he said.
Ashok Leyland reported record commercial vehicle volumes, revenue and profit for FY26, while ending the year with net cash of Rs 5,899 crore.
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