Five years after entering India through a joint venture with Force Motors, German commercial vehicle major MAN has now decided to go it alone in India. MAN paid 150 million euros to buy out 55,797,100 equity shares of Force Motors. MAN and Force Motors had a 50 percent stake each in the MAN Force joint venture which rolls out vehicles from the manufacturing plant in Pithampur, Madhya Pradesh.
In an exclusive interview with Autocar Professional, a MAN spokesperson says:
“We see this investment as a long-term commitment”. With Volkswagen becoming a majority stake holder in MAN AG last month, there’s a bigger gameplan globally, with special focus on Brazil, Russia, India and China (BRIC) markets. Volkswagen now holds 55.90 percent of the voting rights in MAN and 53.71 percent of its share capital. This clears the way for close cooperation between MAN, VW and Scania. Scania, which has a four-year partnership with Larsen & Toubro to sell mining tipper trucks, also set up an independent entity in May 2011 to assemble trucks from next year. Scania sells around 200 trucks a year in India. Volkswagen has a 100 percent subsidiary in India. So, will the synergies be at work in the Indian operations also?
“It is too early to comment on that because the closing of the deal of Volkswagen was just two weeks ago. We will now analyse the possible synergies with the Volkswagen Group. A closer cooperation of MAN with Volkswagen and Scania will form a basis for exploiting extensive synergy potential. The companies involved anticipate that synergies amounting to at least 200 million euros per annum can be achieved, mostly in the procurement sector,” says the spokesperson.
All set to enter the bus segment
While it may take some time for the results of the analyses for cooperation, MAN is getting ready to enter the bus segment in India. “We will run up the bus production this quarter. The first unit will be delivered already this year,” the spokesperson told Autocar Professional. Including the bus project, MAN will invest 200 million euros in India over the next eight years. This, along with other plans for India by MAN, should make component suppliers in India stand up and take notice of the potential business coming their way.
MAN is also planning to ramp up production of its CLA truck. “The share of localisation for the CLA production is around 90 percent. India is a very important market for MAN within the BRIC strategy. This holds also for sourcing,” says the spokesperson.
MAN admits that it has had a slow start in India. According to the spokesperson, “We needed some more time than originally planned to produce the trucks in the necessary quality level. But in the end we succeeded to build a plant from scratch with our partner, to develop a network of reliable suppliers, to introduce a network for sales and aftersales.”
It took MAN five years to reach a production level of 4,000 trucks last year. The plant at Pithampur has an annual installed capacity of 12,000 trucks.
MAN’s association with Force Motors started in 2003, when the Indian company started discussing with MAN to source engines, cabs and axles for a heavy commercial vehicle.
In a statement issued by Force Motors, Abhay Firodia, chairman, Force Motors, says: “On MAN’s request, with a view to achieve substantial exports, the project with Force Motors was converted into a JV with 30 percent stake with MAN.” The joint venture was founded in 2006 and produces heavy MAN trucks of the CLA type for the Indian market and for export to countries in Asia and Africa. After some initial difficulties in the starting phase, the production has been ramped up stepwise. The products range from chassis to tippers for the construction industry and semi-trailer tractors for long-haul transport.
With the acquisition of Force Motors’ stake, MAN Truck & Bus will assume sole responsibility for production and sale of the MAN CLA inside and outside India. MAN says it will continue to cooperate with Force Motors in the future. Force Motors will, for example, continue to supply parts and components for production of the MAN CLA.
MAN says it will also “show something new” at the Delhi Auto Expo 2012. Clearly, the CV sector is in for a lot of action.