These manufacturers, which have a footprint straddling markets the world over, discovered India too scorching to deal with. For one, it’s a cost-conscious market. Native gamers Tata Motors and Ashok Leyland, who’ve a stranglehold over the market, manufacture and promote vans at value factors which are too low for the multinational (MNC) gamers to match. During the last 5 a long time or extra, the duo has additionally constructed a formidable service community throughout the size and breadth of the nation, which isn’t simple for a brand new entrant to copy. This can be a vital psychological want in a market the place the reliability of a truck is at all times examined by rampant overloading and poor street circumstances.
Regardless of this, many international gamers, together with Daimler, the world’s largest truckmaker, bravely ventured in. All of them had been drawn to India as a result of it was a market that was unimaginable to disregard—India has a big inhabitants and a protracted street community. The nation’s quickly rising financial system relies upon closely on roads to maneuver items. And but, regardless of the street sector’s primacy, the amount of business automobiles bought yearly was low—it was lower than 200,000 models in 2006, whereas China was 10 occasions greater. This supplied loads of headroom for progress. And most of all, after over half a century, the Indian industrial car sector was on the cusp of modernization, a lovely proposition for international gamers.
The board of Daimler AG grappled with these components earlier than greenlighting, in 2006, the truckmaker’s entry into India. The German firm has established its presence right here at the moment, regardless of witnessing one international peer after one other chew the mud.
Wallowing within the purple
Seventeen years and an funding of ₹9,650 crore later, Daimler India Industrial Automobiles (DICV) has managed to determine a foothold within the Indian market and make it a hub for its exports. Its native gross sales common 15,000 models yearly; the corporate’s cumulative gross sales in India thus far exceed 140,000 models. The corporate, a wholly-owned subsidiary of Daimler Truck Holding AG, ended 2020-21 with ₹5,271 crore in income (it’s but to launch the 2021-22 numbers). Of that, exports of vans and parts, amounting to ₹1,629 crore, account for barely lower than 30% of its income. “Right now, DICV has grow to be a vital hub for Daimler’s international operations,” says Satyakam Arya, CEO, DICV.
To make certain, Daimler has come a good distance in comparison with different international gamers. Nevertheless, when it comes to market share and profitability, it’s nowhere close to the Large 2. A decade after launching its first vans within the medium and heavy industrial automobiles (M&HCV) phase, DICV’s general market share is a mere 5%. As compared, Tata Motors has a 51% share, whereas Ashok Leyland is at 26%. It doesn’t assist that every one of them have been working in a market that has shrunk to a degree final seen in 2008.
As for profitability, the German firm continues to wallow within the purple. In 2020-21, DICV posted a lack of ₹426 crore. In reality, within the final three years (between 2018-19 and 2020-21), it has incurred a lack of ₹766 crore. The guardian firm has needed to periodically infuse cash to make up for the losses. Its bigger rivals have additionally struggled with profitability, however that’s no comfort.
DICV’s home gross sales touched a excessive of twenty-two,532 models in 2018 however have since declined. They dropped to a low 9,624 models in covid-hit 2020 and recovered to 14,222 models in 2021. The corporate is but to launch its 2022 numbers.
“Daimler badly wants to enhance its volumes and for that it must promote extra in India,” says an automotive skilled from a global consultancy agency who didn’t wish to be recognized. With gross sales not residing as much as the corporate’s expectations, capability utilization at its 400-acre manufacturing facility at Oragadam, close to Chennai, is low, at barely 35%. Whereas the plant has the capability to supply 70,000 vans every year, its output averages round 25,000 models (each for home gross sales and exports).
Martin Daum, chairman, Daimler Truck Holding AG, who was in Chennai late final yr to rejoice the tenth anniversary of BharatBenz vans (DICV’s model in India), blamed the sluggish tempo of the business’s modernization for decrease volumes. “We thought the marketplace for refined vans would develop a lot quicker. However it didn’t. It’s far behind preliminary estimates,” he has been quoted as saying within the media.
Daimler can also be a sufferer of unhealthy timing. Whereas it had anticipated a number of challenges on its India journey, what it didn’t foresee was a speedy contraction of the market. This was resulting from a sequence of setbacks, which started with the financial slowdown, adopted by demonetization, the revision in axle-load norms (which, in impact, regularized overloading and added enormous trucking capability, hurting demand for brand spanking new vans), and culminated with the covid pandemic.
“After we entered India, M&HCV demand was anticipated to the touch 500,000 models by 2015 and 1 million models by 2020. Right now, the business quantity, at round 241,000 models, is at 2008 ranges,” says Arya. This contraction has, after all, impacted all of the gamers.
New strategy
Wanting again, Daimler has laid a superb basis for itself in India and has accomplished some issues effectively. “DICV has invested and put in place all of the constructing blocks which are wanted to succeed as soon as the industrial car market in India, which usually operates in cycles, revives,” says the automotive skilled cited above.
Establishing these constructing blocks was no imply feat. Regardless of a powerful product portfolio, an automotive historical past of over 100 years, and a presence in over 150 nations with market management in lots of creating nations, it selected to not take any probabilities with India. The corporate put aside ₹1,200 crore for India-specific product growth. In reality, the primary infrastructure it constructed at its Oragadam facility, in 2009, was a 47-acre check observe—solely its third after Germany and Japan—that simulated India’s numerous street circumstances.
“We launched our merchandise in September 2012 after testing them for greater than three years,” recollects VRV Sriprasad, former vice-president (advertising, gross sales & after gross sales) and DICV’s second worker.
Daimler additionally put an excessive amount of thought into the model identify for its automobiles. International manufacturers unnerved Indian truckers. They had been seen as expensive, with little product help. Many had give up India prior to now, leaving patrons excessive and dry. After many months of deliberation, DICV settled on ‘BharatBenz’ because the model. “It was the primary time within the German automotive main’s historical past that Benz was related to a reputation aside from Mercedes,” recollects Arya.
Altering the identify was comparatively simple in comparison with establishing a gross sales and repair community. In 2006, market chief Tata Motor had over 500-plus contact factors whereas Ashok Leyland boasted of 400-plus such services. That aside, their greatest energy was that there have been 1000’s of roadside mechanics throughout the nation who may simply restore their automobiles.
After conducting a research, DICV took a radical strategy, driving on its repute for high quality. “We supplied automobiles that required oil and filter modifications solely as soon as in 50,000 km. That aside, our automobiles had excessive reliability. To drive house this level, we had been the primary within the business to supply a three-year guarantee,” recollects Sriprasad. This ensured that it didn’t should arrange too many dealerships. Knowledge mining additionally helped. In September 2012 when the corporate launched its merchandise, it had simply 20 dealerships in place. By 2014, it addressed 88% of the market with simply 73 dealerships. Right now, DICV has about 300 contact factors.
Export focus
After an abortive try to tie up with Eicher Motors and a short-lived marriage with the Hero group, Daimler’s native group recast the marketing strategy and satisfied the Board to go it alone. DICV thus got here into existence.
Work on independently constructing an area provide chain started quickly thereafter. “We set a excessive localization degree of 85% because it was vital to convey down the price of the car,” says Arya. The corporate chosen suppliers and, in lots of circumstances, transferred know-how to them. “Many applied sciences that had been until then used in-house by Daimler had been transferred for the primary time,” he provides.
DICV additionally determined to ‘Make in India’ lengthy earlier than the time period was coined. Right now, it has over 400 suppliers and its localization degree has reached 95% in worth phrases. In a transfer to profit from economies of scale and cut back prices, not only for Indian operations however globally, the corporate selected early on to deal with sourcing elements for Daimler’s crops elsewhere on the planet. “Over 100 suppliers have thus far exported greater than 200 million elements to Daimler’s operations worldwide,” says Arya. As an illustration, DICV is at the moment the hub for transmission elements for the entire of Europe and Brazil.
The exports weren’t restricted to simply parts; DICV began exporting vans early on. “In reality, Oragadam is the one Daimler facility the world over that manufactures and exports a number of truck manufacturers — Fuso (to Japan and the remainder of Asia), Freightliner (to the Americas) and Mercedes Benz (to varied elements of the world),” says Arya. The corporate claims to have exported over 60,000 models to over 60 nations thus far.
Whereas auto analysts laud all these efforts, they haven’t been sufficient to raise Daimler out of the also-ran league and it stays a bit participant on the planet’s hardest truck market. If it has to determine a bigger presence and switch worthwhile, DICV must solid a wider web for purchasers and look past massive fleet operators. It wants to succeed in out to the price-sensitive single-truck house owners and small-fleet operators who dominate the market.
Rajinder Singh, managing director, Janta Roadways, a Chennai-based fleet operator with over 200 vans (together with 10 BharatBenz automobiles), sums up DICV’s predicament. “In relation to value of operations (TCO), BharatBenz is far decrease than Tata Motors or Ashok Leyland,” he emphasizes. However, he complains, Daimler vans are filled with options which are far more than what the market wants, which makes them 10-15% costlier. “Individuals can recognize the decrease TCO provided that they purchase and use BharatBenz vans. However for that, the value has to come back down,” he says.
Whereas it could have accomplished sufficient to keep away from ending up as yet one more tombstone alongside India’s trucking freeway, Daimler actually must pay heed to the market whether it is to go the gap on this nation.
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