CV makers target defence business to drive growth

The Defence Expo 2012 held last fortnight at PragatiMaidan in New Delhi saw leading commercial vehicle manufacturers put up a strong display of their armoured vehicles and make a bid for lucrative defence contracts as part of their strategy to de-risk their business from its cyclicality.

Just how important defence is becoming for CV majors can be gleaned from the fact that about four industrial giants are in the running for bagging the prestigious Futuristic Infantry Combat Vehicles (FICV) contract from the Ministry of Defence. The prestigious FICV contract is part of India’s efforts to modernise its defence forces which still rely majorly on Soviet-era equipment.

Tata Motors, one of the bidders for the programme, plans to invest about Rs 600 crore on the development of the FICV and for setting up a manufacturing plant for the project if it wins the order.

“The development cost of the FICV could be around Rs 300 crore and a manufacturing facility for it could be in a similar range,” said Ravi Pisharody, president of CV business unit of Tata Motors. “The plant may be set up at Dharwad in Karnataka if we get the order.”

Tata Motors is one of the four companies which have received the Expression of Interest to supply around 2,000 units. However, since the tender process is yet to be completed, the final decision on setting up of the plant has been kept in abeyance.

The other bidders for the FICV contract are Ashok Leyland, Larsen & Toubro and Mahindra & Mahindra. The Ordnance Factory Board is also believed to be bidding. The chosen vendor will be expected to build 70 percent of the vehicle. Tata Motors also displayed its new Micro Bullet-Proof Vehicle, a mobile combat vehicle for indoor combat inside airports and railway stations at the Expo. The MBPV is being jointly developed by Vehicle Research & Development Establishment-Defence Research & Development Organisation and Tata, for providing the country’s elite commando forces with a protected mobility solution that will assist them during indoor combat against insurgents.

Besides, four other defence vehicles – the Tata 12x12 Prahaar Missile Carrier, Light Armoured Vehicle, Mobile Bunker and 6x6 7kl Refueler – were launched at the Expo with other concept vehicles being the Tata Quick Deployment Mobile Communication Terminal.

“The launch of our new combat and tactical vehicles and equipment, leveraged from our strength in design and development of a wide range of CVs, now enables us to cover the entire defence mobility spectrum. Tata Motors’ defence solutions already cover the complete range of logistics and armoured vehicles that have also been popular in supporting the police and paramilitary forces in counter insurgency operations,” elaborated P M Telang, managing director - India Operations, Tata Motors.

The company's defence business is expected to be in the tune of Rs 1,000 crore in this fiscal, a 50 percent growth over the last financial. The OE is also targeting supplies of landmine-protected vehicles in Maharashtra and Jharkhand and has an estimated order book size of around Rs 300 crore. Since its association in 1958 with the country’s off-road defence and security forces, Tata Motors has supplied over 100,000 vehicles to the military and paramilitary forces.

Big business beckons

While Tata is a regular, French vehicle major Renault is just starting its defence association with India and exhibited its Sherpa light military truck.According to Christian Daupras, international marketing manager, Asian Area, Renault Trucks, the company bid for a defence contract from the Indian army two years ago for a variant of the Sherpa family. The contract is believed to have been approved by the Ministry of Defence with vehicles to be delivered either by the year end or early next year.

Powered by an MD5 diesel engine with 292bhp, Sherpa light vehicles have a capacity of 1.5 to four tonnes. They are equipped with 4x4 systems, automatic gearbox, hydraulic power steering, retractable electric winch in the front and rear, anti-lock braking system and run-flat tyres as well as central tyre inflation system. Scout, Personal Carrier and Stationwagon variants of the Sherpa family are available as both armoured and non-armoured options. These trucks can withstand 50kg of RDX bombs and ballistic and mine kits can be fitted on them, according to Daupras.

Bhuj-based CV maker AMW is also a relatively new entrant in the defence field. The company has sold some 6x4 tippers to the Border Roads Organisation and these are expected to continue in terms of fire fighters, recovery vehicles and tippers but the OE is now targeting civilian variants as well. Orders from BRO and the paramilitary are quicker to materialise as they do not entail long trials as in the case of the army.

John Begg, Business Head - Defence Vehicles at AMW, agrees that the OE is using defence as a buffer as it is primarily into construction equipment and mining trucks. With problems in the allotment of coal blocks, sales of mining trucks have taken a beating. In the meantime, it is expecting RFQs from Border Roads and the paramilitary for light armoured vehicles and, ambulances and will be teaming up with another player for body building of the ambulance. While AMW will make the chassis for it, the bodywork is expected to be undertaken by BEML Ltd for which anMoU has already been signed, according to sources. AMW is also in discussions for technology with overseas players for specific future vehicle projects.

Countries like South America, Africa, Middle East, Far East, and Asia are potential markets for India for defence vehicles with Tata Motors marketing them in Africa, Middle East and Ashok Leyland targeting the South American and Thailand markets.

Another player at the Expo, Ares Security Vehicles that deals in security systems for vehicles also displayed its prowess with a ballistic steel support fixed around a Landcruiser starting right from the roof downwards.

This Dubai-based company imports bullet-proof glass and ballistic steel from Australia and Sweden. It opened shop in Chennai last August with an investment of Rs 5 crore. The plant can roll out two to four civilian bullet-proof cars daily. “We buy the car and do the armouring on it,” says Peter Augustine from Ares. The company hopes to be an outsource supplier for the army and police. The security company is now working on a cash and transit vehicle for banks for transporting cash.

Seen overall, bagging a contract with the big-spending Indian defence sector is clearly on the agenda of most vehicle makers and they are going all out to do just that.

SHOBHA MATHUR