Auto sector to start picking up only in FY21: Daimler India's Satyakam Arya

Instead of crying about it, we should look at things which can build foundations for futures and cost structures, which DICV is doing, says CEO Arya

Daimler India Commercial Vehicles, a subsidiary of the German Daimler AG, has been increasing its focus on export, even as the domestic commercial vehicle market is going through a long slowdown. Its factory at Oragadam, near Chennai, is the only location worldwide that produces engines, transmission, trucks, and buses catering to four brands — BharatBenz, FUSO, Mercedes-Benz, and Freightliner. SATYAKAM ARYA, managing director and chief executive officer, speaks to T E Narasimhan. Edited excerpts:

What are the key issues affecting the medium and heavy commercial vehicle (M&HCV) industry?

Pressure is because of new axle load norms, which increased the capacity by 25 per cent. If gross domestic product grows at the 7 per cent annually, it would take two years to consume the additional load of 25 per cent. As India is growing at around 5 per cent, this would take more time. The other issues include the goods and services tax (GST) and the NBFC (non-bank finance corporations) crisis.

Will a GST rate cut (for the segment) lead to growth?

A rate cut for M&HCV will not push the demand. Today, customers don’t see any demand for trucks. When other sectors benefit through a GST rate cut, then it will push demand for CVs. 

Then, when do you expect an industry turnaround?

M&HCV will close the year with 25-30 per cent negative growth and another of 15-20 per cent next year before it starts picking up in fiscal 2021. Even in major markets (abroad), when BSVI (emission norms) were implemented, the market saw a 10 per cent drop before it picked up. So, in India also, demand will turn around naturally. I am being realistic about the future.

How is Daimler addressing the downturn? Are you holding back from investment?

Any crisis will offer opportunity.  Instead of crying about it, we should look at things which can build foundations for futures and cost structures, which DICV is doing. We have decided to focus on production synchronisation, cost reduction and increase in export to balance the downturn (in the home market). These would help the company's truck business to remain profitable. On production, we have reduced the number of (daily) shifts (at the Oragadam plant) from two to one. Each and every variable cost is being checked. Export, which saw eight per cent growth (last year), is likely to see double-digit (rise). For example, export of the sub-nine tonne small vehicle, which is not sold in India, has started from Indian facility.

Is DICV ready for BSVI?

Daimler’s experience of already bringing 1.4 million EuroVI (equivalent to BSVI here) trucks and buses on the roads means we are easily ready to transition our BharatBenz trucks and buses to BSVI by the April 2020 deadline. With this head start, we will begin exporting India-built trucks by 2021/2022.

DICV has invested around Rs 500 crore to localise EuroVI technology for India, completing two million kilometres of testing, developing facilities and over 1,000 new parts, and achieving a localisation rate above 80 per cent. The transition also opens more opportunities to export fully-built vehicles, engines and parts to countries like Mexico, Chile and Brazil that will soon migrate to similar emission norms. This strengthens India’s position as a global production network for Daimler trucks and buses. Depending on the availability of BSVI (compatible) fuel in India, DICV will launch its upgraded range of BSVI trucks and buses in the first quarter of 2020. We will begin exporting our OM926 engine series internationally by 2021/22. 

Is DICV profitable?

Last year, the truck business reported profit. We hope it will remain profitable.