Daimler targets all truck segments in India

Daimler India Commercial Vehicles (DICV) is slowly, but surely, revealing its India gameplan.

Autocar Pro News DeskBy Autocar Pro News Desk calendar 14 Mar 2012 Views icon4834 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Daimler targets all truck segments in India
Daimler India Commercial Vehicles (DICV) is slowly, but surely, revealing its India gameplan. The world’s largest truck maker recently showcased its India product range at a media meet held in Hyderabad on March 2. Of the 17 products that (DICV) will roll out, the biggest one is a 49-tonner and the smallest a nine- tonner. At more than 300,000 units sold in 2011, the nine- to 49-tonner truck segment in India was one of the world’s top three truck markets last year.

The BharatBenz heavy-duty trucks are built on the Mercedes-Benz Axor platform, while the light- and medium-duty trucks are based on the Fuso Canter series. All the products will be rolled out by 2014. Given the opportunity that the India market offers, DICV also plans to enter lighter segments. It is “discussing” to have a six-tonne variant.

Will an entry level truck like the Tata Ace also feature in the company’s portfolio in the future?

“We will go for exactly these kind of segments in terms of taking it seriously. Can’t say when though. First, we have to find out if we can do it. Because I will not test it out on someone, but test it first internally and see if it is better (than the competition). I will then just ask the customer to take the key, drive it and compare,” says Marc Llistosella, MD and CEO, DICV.

That is just what Llistosella’s team did during the six-day premiere of its products in the 9, 12, 25, 31 and 49-tonne categories. DICV hosted no less than 2,000 truck customers and business associates to experience its range of products which it feels is the best that customers can get in India. Is that a good enough strategy to break into the strong and, perhaps, loyal customer base of Tata Motors or Ashok Leyland? Llistosella begs to differ on using the word ‘loyalty’. “Is it loyalty or is it desperation of no choice? What is it? Loyalty is when you have choice. If there is no choice, sorry to say, is it loyalty? I don’t think so,” says Llistosella.

To give Indian customers the ‘choice’, DICV has tested its trucks for over 45 lakh kilometres in actual driving conditions, on its test track, and also in its quality lab which DICV claims “is the most innovative quality lab in South East Asia”.

People across the ranks are equally working hard to make inroads into the Indian truck market. AydoganCakmaz, vice-president, product engineering at DICV, himself drove a truck from Chennai to Hyderabad (over 700km) for its premiere. The company’s engineers also drove and stripped apart all competitors’ vehicles as part of the development process. The company is not leaving any stone unturned. Llistosella and his team internally may be working towards achieving certain numbers, but his strategy to achieve them is based on a philosophy.

“We want to change the philosophy of trucking. We are always saying we are not targeting any market share because it is, from my point of view, very arrogant and snobbish. How can I say that I want a 25 percent market share? Twenty-five percent market share means I can pre-judge and forecast what the customer’s choice will be. How can I say that? That would mean I know your choice better than anyone else,” says Llistosella.

Math works

No numbers in terms of growth or market share, but the numbers DICV would share are the ones that would be highly valued by the customer. According to the company, a BharatBenz truck owner can expect returns on his investment as early as six months of purchasing the truck. That is because, DICV claims that its trucks will offer, in terms of percentage, “double-digit” better fuel efficiency, but the premium the customer will have to pay for a BharatBenz truck over its competition will be in “single-digit”.

The selling pitch to prospective customers will be based on the numbers, while to those who can’t afford, it will be purely the softer appeal. “So if we come into the mind and heart of the customers, they (small truck owners) say ‘look, today we could not go for it, but I would work towards it because I want it,’” adds Llistosella.

It’s not only the overall population but Llistosella wants to tap the youth of India to build DICV. “You have 25 years as the average here in India. In Germany it is 44. What is the difference between a person who is 44 and another who is 25? A person who is 44 has reached and has to secure his position, a person of 25 is hungry and he wants more,” says the outspoken DICV chief.

Indian competence for international success

“To be competitive here prepares Daimler to be competitive everywhere. Because to be competitive only in North America or in Germany is not enough,” Llistosella says candidly. Which is why DICV is also being built to be an export base. “The exports of trucks out of India at the moment are very poor. We are prepared to export in the (Asian) region, starting from 2013. A significant part (of the production) is prepared for exports,” says Llistosella. The formal inauguration of the plant is scheduled for April 18. The production capacity will initially be 36,000 units per year which can be ramped up to 70,000 units. "If the business will grow as we aspire it to, then we will have a problem of shortage,” says Listosella. Trial production of engines and transmissions at DICV’s 160-hectare Oragadam facility has already begun.

Good partnerscrucial for success

The team at DICV is putting equal efforts in building good partnerships as it is in developing the products. The company has identified 450 vendors to achieve its target of a localisation level of 85 percent in its trucks. Components worth 41 percent of the truck’s value are sourced from vendors within a radius of 50km. That also helps to contain costs.

Efficient vendors are as important in building a product as financiers and dealers to sell them. Daimler Financial Services, the German major’s finance arm, has rolled out a captive financier for DICV — BharatBenz Financial — which will offer finance solutions, insurance and service contracts to DICV's customers. Others like HDFC Bank, ICICI Bank and Sundaram Finance have also joined hands with DICV.

For dealerships, Llistosella says he has received “more applications than the number of partners” his company needs. The plan is to set up over 100 dealerships by 2014. “We don’t want people who cannot respect customers. We have to fight for each customer. That’s the right attitude. It’s all about attitude,” adds Llistosella.

The half-German, half-Spanish chief of DICV and his team have done the groundwork over the last seven years. In his candid style, Llistosella says at the end of our meeting,

“the consumer can say finally the game is here. Now the game starts. How boring will it be if you see only one cricket team on the field? Competition brings energy. I am an absolute fan of competition.”


On the investment in India breaking even.

Break even is business plan-related and so it is confidential. The only thing I can tell you is that we have no intention to sub-vent or subsidise this business any longer. That means, if you take out the initial investment, this company will run very soon to sustain itself. That means cash-in and cash-out will be done. We don’t want to be a subsidised child of Daimler. Because some of what you see and hear today is a little bit different from what you are used to from European automotive companies.

So to keep up this different kind of approach, you need to have some kind of efficiency and success, because if there is no success then you will be asked to change back to what you were used to. That means we have an increasing interest that this runs fine immediately.

On the plan to make BharatBenz a preferred brand.

There are a lot of entrepreneurs in this country. They start with the Tata Ace and then they grow. They have ideas, dreams of how the business will look like. And we must be part of that aspiration.

There was a moment in my career which showed me the difference in how I worked before. In a town hall (monthly gathering), a 27-year-old sang a hymn on BharatBenz in front of 1,400 people. That is commitment. We did not ask him. He was just six months old in the job.

People should be proud to be part of BharatBenz. We don’t want people who cannot respect customers. We have to fight for each customer. That’s the right attitude. It’s all about attitude.

On the top player and market share.

What is the choice over Tatas in Punjab? They have 90 percent of the market share. Tata is an institution, it is absolutely there. How come there is no change in more than 40 years? Do you think there is a change in roads or trucking? I don’t think. You need someone to push the old players. They are just happy and content with how they are now. The rule is set. I can keep 64 percent here, the other one gets 23 percent, while the other one gets eight percent and so on. There are new players, rookies in the block like AMW and MAN now. But they are just 2-3 percent and they keep to themselves.

This is not a change. In the trucking industry, we haven’t seen any competition and there has been clear allocation of market shares. In Uttar Pradesh, what is the share of Ashok Leyland? Below 10 percent.Insignificant. For a player who has been in the country for more than 40 years, Leyland, where are they? So you need competition.

On choosing India for one of Daimler’s largest investments outside Europe. It is very analytical. The forecast for 2020 worldwide for the trucking industry is 4.7 million. So the question for a company like Daimler is, we were number one, but even for a number one, we have only 500(000) out of 3.1 million and so never had what Tata has, for example, a 90 percent market share in the North. Now even this share is under deterioration, since everybody is coming to the country. Last year, China built and was responsible for a million of the three million trucks, with almost 33 percent of the market. Of course there is growth in China, but people there speak of more growth, so I would say let’s be careful.

India has the same population as China but has only one-third or one-fourth of the truck population as China. Why is that? There is no infrastructure coming up and there are other reasons. Everything is dependent on your own habits, which change. We have experts who know exactly how the mining industry (in India) looks like and they say it absolutely doesn’t look good. We have a power shortage because of that. So that means the customers cannot afford a new truck. So the shipment is currently stagnating, I would say starving. So the middle class of 329,000 trucks will grow. But they don’t grow like a revolution. It will be an evolution. We don’t want to wait for 10 years and then come back with superb products but we are adapting for India. We have to adapt to the cost structures, we have to adapt to survive on the roads.

But I’m not concerned, as I’m not a politician and am only interested in results. I have seen Hyderabad and some of its parts are absolutely world class. Then you see some parts of Chennai and you say ‘What is this?’ There’s disparity and this disparity will get erased. That is my belief in India.

On the risk of subsidising diesel fuel.

You cannot go on subsidising. The longer you go on subsidising fuel, the bigger the deficit will be. The bigger the deficit, the bigger the jump.The bigger the jump, the bigger the challenge. Economy is about psychology. If the jump is Rs 10 per litre, then it will be a killer. You need some form of political direction. You need more and more fuel efficient, alternate fuel technology. You will need more and more enablers for these kinds of things.

On India

This country is so rich but it is not leveraging its richness. We are preparing for new technologies like hybrids for the world, not only for India. Tata and Mahindra are good companies. With us (entering the fray), we will push each other. Tata will think, Ashok Leyland will think. They are hungry. They have hungry engineers.

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