Daimler: Stepping on the gas

The world’s largest truck maker Daimler recently unveiled BharatBenz, a brand, as the name suggests, tailormade for the Indian market. This will be the auto behemoth’s fifth brand in the global truck portfolio which includes Mercedes-Benz, Mitsubishi Fuso (Japan), Freightliner and WesternStar (United States). In India, Daimler also handles the sales and after-sales of Mercedes-Benz Actros, a premium range of trucks targeted at the mining segment. Actros is assembled at the company’s facility at Chakan, Maharashtra. The plant has an installed capacity of 1,200 units of buses and trucks every year.

Daimler plans to invest Rs 4,400 crore in its new production capacity in Oragadam, Chennai, from where trucks between 6 and 25 tonnes will be rolled out post 2012. Closer to the launch, the company will set up 20 dealerships and ramp up presence to 75 locations by 2013-14. “Some of the key regions where we will establish our presence include states like Tamil Nadu, Karnataka, Maharashtra, Rajasthan, Uttar Pradesh besides the north east,” says Marc Llistosella, managing director & CEO, Daimler India Commercial Vehicles.

The commercial vehicle segment, where BharatBenz intends to compete, is growing at a notch above 25 per cent year-on-year. Local manufacturers like Tata Motors and Ashok Leyland lead the segment with 65 per cent and 30 per cent share respectively. The balance is shared by Volvo (Eicher Motors), Man (Force Motors), Asia Motor Works and Navistar (Mahindra & Mahindra). Says PINC Research Vice-President, Vineet Hetamasaria, “While the bulk of sales in the commercial vehicles segment comes within the 25 tonner segment, the demand is slowly moving towards higher tonnage vehicles. Last year, the 31 tonner segment grew 200 per cent.” The market for trucks is linked to economic growth in the country, and highway and infrastructure development will facilitate plying of heavy duty trucks on roads.

While auto analysts agree the launch of BharatBenz shows the company’s commitment to the Indian market, Hetamasaria of PINC Research believes pricing will play a key role in helping Daimler make inroads into the largely volume-driven market. Currently, truck sales are concentrated in the Rs 10-20 lakh price band and a large cross-section of buyers are drivers, who are very price sensitive, claims Hetamasaria. Fleet owners and corporate houses form a small fraction of consumers. Daimler says the product will be competitively priced but says is too early to divulge details.

Daimler will have to tackle another challenge — the stickiness of fleet owners, who are often committed to a brand. “Fleet owners have their own workshops dedicated to a particular vehicle brand which dominate their portfolio, and are reluctant to make the switch,” says Hetamasaria.

PricewaterhouseCoopers leader (automobile practice), Abdul Majeed believes it is essential for original equipment manufacturers to build a supply chain of local vendors to enable easy sourcing of spares and reduce the cost of vehicle maintenance. Llistosella of Daimler claims the company has 250 suppliers on board. “We will focus on tier 1 suppliers and in select instances focus on tier 2 vendors,” he adds. Despite huge localisation, Hetamasaria says, the success of the brand will also depend on effective after sales.

Majeed says that India is the world’s second largest market for medium-and heavy-duty trucks and given the long-term opportunity in the market, Daimler’s move makes immense sense. “It will not only allow Daimler to capitalise on India’s economic development, but in the future the country can serve as global sourcing hub,” sums up Majeed.