subopottsboyle: It's self evidently not the case that Optare don't have the capacity to meet any significant volume increases. The factory's capacity can manage 1200 units pa and even increase that to 1500 if necessary. On your point about finance, it was AL's objective to increase global revenue in commercial vehicles and buses and Optare was and is a component of that strategy. Therefore, if Optare had been successful in winning bulk orders in the export market , I'm sure AL would oblige with any additional working capital funding. After all, it did a deal earlier in the year with Dawson Rentals facilitated by AL. Neither do I believe that the company's production efficiency is an issue as there is no evidence of it and the South African order for 190 kits was delivered on time.
It's simpler than that. It's a downturn in the market, nationally and globally. The company itself has commented that the UK market is flat and that is the case with registration volumes well down in the UK with ADL and Volvo as well Optare. Overall, UK regs were down about 10% in the 5 months to August but Optare was down about 27%.
Additionally, the global market has declined. I've commented on AL's home market in India for commercial vehicles declining due to a significant economic slowdown there and a decline in the Rupee.
This is what Volvo buses had to say when it reported on FY 2012... .
"Demand for buses during the year was low in most world markets except for Asia." They also reported "severe price pressure continues in all European tenders."
"In North America, the transit market is still weak due to the fiscal situation in the US, and recovery in the coach market remains slow.
The South American market is still low, partly due to the pre-buy effect before Euro 5 standards and hesitance among operators in conjunction with municipality elections in Brazil."
They reported "Asian bus markets keep growing, but at a slower pace due to the global financial situation. The Indian market grew by 3%. In China, the total market increased 6% compared to 2011."
It's just a shame that Optare are ready with products and capacity but its market has slowed significantly.
Could it be Optare haven't the finances to be able needed to be able to hit the global market. Or could it be they haven't the capacity to be able to supply kits in ample quantities. Or could it be they're too inefficient to meet sales targets and deliveries.
Newyorker: They are not looking for exports as the UK market is flat at the moment. "To be a significant exporter of buses" was a stated strategic objective of the company reported in the 2010 Financial Report as this was Ashok's own global objective. Why else would they seek a factory with a production capacity of 100 per month (1200 units pa) ?
That is an obvious objective since no major manufacturer can rely on a single market just as it cannot rely on a single product.
The problem is filling that capacity as UK registrations presently account for little more than 25% of total capacity and were running at just 30% last year.
Given that the Middle East and India markets have also been on Optare's radar since 2011 when they were preparing knockdown kits for those geographies and tendering for contracts, I think the point is that there have been few signs of success of achieving the objective for exports the company set itself. The only export success of any real significance has been the £18m order for 190 Solo kits to South Africa won in 2011 (two years ago) that was completed in H2 last year.
On the wider scene, AL itself is under pressure, as it reported its first quarterly loss in 10 years in Q1 and from what I can gather sales of commercial vehicles are down by between 20% and 30% in August and September. Even though they say they are "future ready", the Indian CV industry as a whole is facing multiple headwinds.
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