Automobile Companies Plan to Plunge into Defence Sector as Growth Declines

Diverse automobile companies and parts makers in India plan to leverage opportunities in the defence sector to counteract sluggish demand for automobiles in the domestic market amid the coronavirus crisis. They also aspire to exploit a government push for increased local manufacturing of defence equipment and a deeper presence of private firms in this strategic sector.

Ashok Leyland, Force Motors, BEML, Bharat Forge, JCB India and Automotive Axles behold the government’s localization push for the defence sector as a major opportunity. The defence ministry on 9th August issued a list of 101 items on which an imports embargo will be imposed with certain timelines. While 69 items on the list were given the import embargo deadline of December 2020, the timeline for the remaining items stretches until December 2025.

“There will be a number of indigenized developments, which will bolster the defence logistics industry. Now, with clarity on the restricted items, the industry will work on strengthening its product offerings,” says Vipin Sondhi, Managing Director & CEO, Ashok Leyland.

“This will also offer an opportunity to suppliers to participate with the automakers in the development and growth,” asserts Sondhi adding that more than 50 items in the issued list were already part of import restrictions as per the defence production policy 2018.

Auto companies also aspire to exploit a government push for increased local manufacturing of defence equipment and a deeper presence of private firms in this strategic sector

Ashok Leyland is one of the largest suppliers of heavy vehicles to the military. In FY20, the company supplied 359 vehicles including bullet-proof vehicles, as well as kits for 8X8 trucks. It also entered the tracked vehicles (used in all terrains) business for supplying aggregates and components for T-72 and T-90 battle tanks. The company has already assigned its defence vertical as one of the core focus areas for growth in the midterm.

Deepak Shetty, Deputy CEO & MD, JCB India, says the government’s decision has the potential to create more opportunities. “We have been supportive of the make-in-India programmes for a long time. We have been supplying to the defence force based on their tender-specific requirements,” he adds. JCB provides construction and material handling equipment to the Indian Army and the Border Roads Organization.

Amit Kalyani, Deputy MD, Bharat Forge, called the government’s plan to boost localization in defence equipment as a great step that recognizes local manufacturing capabilities. “This is also good for the supply chain. We are working with over 400 companies in the defence supply-chain ecosystem,” he adds. “We have developed four platforms. Once the last phase of trials is over, we will be ready for the sale process to begin,” asserts Kalyani, adding that three of the guns are in the advanced stages of testing. He also adds, “Based on the government announcements, we plan to deepen our capabilities within these product segments”.