Daimler pushes the pedal

“We feel we should always focus on our strengths which are big trucks — from 6.5 tonne to 49 tonne”

In the four years that Daimler has been in the truck and bus business in India, the company has been able to sell about 50,000 vehicles in the market, which is no mean feat. The company is ready with its next product line in both categories and is looking forward to more clarity on several regulatory issues currently confronting the industry. The top management of Daimler — Wolfgang Bernhard, Member of the Board of Management of Daimler AG, Marc Llistosella, Head of Daimler Trucks Asia, Erich Nesselhauf, MD and CEO, Daimler India Commercial Vehicles and Markus Villinger, Head of Daimler Buses India — discussed this and much more in a round table with Indian/Asian journalists at the recently concluded 66th IAA Commercial Vehicles Show 2016 at Hanover in Germany. Excerpts:

On current scenario and prospects for Daimler India Commercial Vehicles

Marc Llistosella: After only four years of operations in India, we have sold 49,000 trucks, of which about 7,000 units have been exports. We touched 50,000 units in production about two months ago. We are the fastest to reach 40-50,000 units in India; it took AMW eight years and now, they are struggling. Volvo, Scania and Man are far away. They are in the region of 10,000 units after many years of operations in India. This number we have achieved despite our ‘no discount’ policy. We now have more than 100 sales touch points and have started our third wave of dealerships — which is the small dealers — because we need to be in the rural areas. That is where India is growing. We have so far invested about ₹5,000 crore.

Wolfgang Bernhard: Volumes in India in the first quarter of the year (calendar year 2016) were excellent, showing a 35 per cent growth year-on-year. However, the government managed to bring this to a halt by announcing the move to a Goods and Services Tax (GST) regime without giving a number and a date of implementation. Secondly, there is uncertainty about when the Bharat IV fuel norms will be implemented pan India. These factors have caused much risk and uncertainty in the marketplace and people are hesitating to buy trucks now. They suspect that they might be able to buy a new truck next year at a cheaper price. But they don’t know.

Erich Nesselhauf: There are three or four main challenges for next year. Apart from BS IV and GST implementation dates, you might have a scrappage scheme. Besides, there is the question as to whether overloading will be banned. For all these issues, we would be ready. But uncertainty is what is making it difficult for everyone. If GST is implemented, you need trucks with more uptime, trucks which run faster and are more reliable. As of now, in long-haul transportation, if you have to wait at the borders for a long time, you don’t care so much for the quality. This will totally change post-GST calling for modern trucks. It will have an impact on overall volumes for the entire industry. We expect Daimler India Commercial Vehicles to break even in the next calendar year (i.e in 2017).

But it depends on the Indian economy and also what happens globally. Besides, there are several policy uncertainties like the ones we discussed. So, we are not in a position to spell out whether this will happen in the first quarter of 2017, or second quarter or when exactly.

On new product launches/entering new segments

Mark Llistosella: We will be coming out next year with our third product family — the sub-9-tonne trucks. Currently, this project is codenamed Titan. This does not mean that we will be in the sub-1-tonne segment (which is popular in India). The trucks will be in the 6-9-tonne category.

Erich Nesselhauf: We will produce these sub-9-tonne trucks both for India and also for exports from out of India. India might have a good market for 0.5 tonne but we feel we should always focus on our strengths which are big trucks — from 6.5 tonne to 49 tonne or even more if necessary. Anything smaller than this is a van or passenger car which is not our business. Currently in India, most people use a 25-30 tonne vehicle to deliver from the plant to the final customer. This will change in the future as the hub-and-spoke model catches on. Everybody is ordering things on Flipkart and Amazon and you will need smaller distribution trucks. This is also why we come out with smaller range below 9 tonne. So, from my point of view, higher-tonnage tractor (truck) will grow. At the same time, below 9 tonne will also grow. It is the middle segment that might shrink a little bit.

Markus Villinger: We started export of bus chassis (9 tonne) one-and-a-half years ago. At the IAA this year, we have showcased the first Mercedes Benz 9-tonne school bus which is meant to be sold in the Middle East or GCC countries. This marks the start of our fully built bus export business from the Chennai plant.

We continue to expand our portfolio on the bus side and beginning next year, we will start with the production of 16-tonne buses. We will look to sell to State Transport Undertakings (STUs) and government-related companies which are in the travel business from next year onwards. The government business is a big business and we are not underestimating it. Earlier, we were selling Mercedes Benz buses to STUs in a tie-up with a body builder named Sutlej. So, it is not completely new.

On observations and learnings from Indian market

Markus Villinger: The lesson we learnt is that we have to fully adapt to the India market. For instance, you don’t see too many front-engine buses here in the Hanover fair and my perception coming from this country was that a bus always has an engine in the rear and it is an integral (fully built) bus. But a front-engine bus and a chassis is what is required in India. According to Indian customers, a bus survives three body lives. That’s the reason they prefer chassis and select the body on their own.

Erich Nesselhauf: In India, if the customer is not the driver but the owner of a fleet, then pricing becomes more important than safety. For instance, a safety feature which more often gets the gun is the air-conditioning of the cabin. While it helps prevent the driver from falling asleep, the perception in India is that they don’t want AC cabins because AC consumes fuel. Giving drivers the right cabin and right braking systems is essential.

On another note, I will be happy if we have a deep-water harbour from which I can export my trucks easily. This is one of our biggest constraints. To increase our exports, we need to have port facilities as early as possible — access to deep-water harbour and access to shipping lines that can load several hundred trucks in one shot.

The writer was in Hanover at the invitation of Daimler AG

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