Why Ashok Leyland Share Price is Falling

Share price charts would very look different if businesses operated in isolation.

If businesses operated in isolation, then they would not be impacted by any change in the external environment. In that case, only the company's own performance would impact the share price.

But it is not possible.

Businesses operate in a complex web of connections and networks. Interaction with the external environment is required to grow.

However, this also means that any negative change in the external environment could be bad news for investors.

Ashok Leyland investors are going through the same right now.

With the auto sector reeling under pressure, the company's shares have fallen by 5% in the last month.

Let us find out what is driving the stock down.

#1 Dull economic scenario for auto companies

Economies around the world suffered because of the pandemic. Then came the Russia - Ukraine War which worsened the impact of Covid-19. Issues such as supply chain disruption, demand-supply imbalance, and rising interest rates, etc. were born because of the crisis.

This led to an increase in the price of many input materials for auto companies. Low demand too impacted profitability.

This put shares of auto companies under pressure and Ashok Leyland was no exception.

#2 Semiconductor shortage

Any electrical component in a car, ranging from a battery to small parts like seat belt tensioners, all need a semiconductor chip.

The aftermath of the pandemic, along with the slow manufacturing of chips caused the shortage in semiconductor chips.

This proved to be another challenge for the entire automobile industry and Ashok Leyland as the shortage mainly impacts the production of light commercial vehicles (CVs).

What next?

Ashok Leyland faced margin pressures in the previous quarter because of low demand and increasing costs. However, the situation is slowly changing.

Most of the headwinds are now receding for the top auto companies, aided by the absorption of cost inflation at the customer level, the realization of pent-up demand, and improvements in the supply chain. It looks like worst of the auto sector may be over.

A clear impact of that can be seen in company's sales figures. Recently it declared is sales figures for March 2023.

The company has reported a 19% rise in its sales in domestic and overseas markets at 23,926 units.

Cumulative sales made by the auto major till March 2023 grew by 50% to 192,205 units from 128,326 units sold in the corresponding period of last year.

Thus slowly but gradually demand, supply and margin of the company is improving.

How Ashok Leyland share price has performed recently

In the past one month, shares of Ashok Leyland are down around 5.3%. In 2023, the stock is down by 7.3%.

Ashok Leyland touched a 52-week high of Rs 169.4 on 06 September 2022 and a 52-week low of Rs 113 on 12 May 2022.

About Ashok Leyland

Ashok Leyland is an Indian multinational automotive manufacturer, headquartered in Chennai. It is owned by the Hinduja Group.

It is an integrated automobile company. It offers heavy and medium commercial vehicles and related components; light commercial vehicles, and power solution systems.

The company is the second largest manufacturer of commercial vehicles in India, the third largest manufacturer of buses in the world, and the tenth largest manufacturer of trucks globally.

With the corporate office located in Chennai, its manufacturing facilities are in Ennore, Bhandara, two in Hosur, Alwar, and Pantnagar.

Ashok Leyland also has overseas manufacturing units with a bus manufacturing facility in Ras Al Khaimah (UAE) and one at Leeds, United Kingdom.

It also has joint venture partnerships with Alteams Group for the manufacture of high-press die-casting extruded aluminum components for the automotive and telecommunications sectors, and John Deere for construction equipment.

The company also offers financial services mainly relating to vehicle and housing financing.

To know more check out the company's factsheet and quarterly results.

You can also compare the company with its peers:

Ashok Leyland vs Tata Motors

Ashok Leyland vs Force Motors

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