Turnaround Man: How Johan P. Schlyter is streamlining Scania India

The year couldn’t have begun on a better note for Johan P. Schlyter. The managing director of Scania Commercial Vehicles India has just pulled his company out of the trough. Over the last couple of years, Schlyter has been actively realigning the Swedish commercial vehicle manufacturer’s product offerings, after-sales service, and sales network. The tough decisions he has taken have borne fruit; in FY23, Scania India registered operating profits for the first time in over a decade.

"The first aim was to make the company profitable. Last year (FY23), we had our first profitable year. We will continue our streak this year too (FY24)," claims Schlyter, who refrained from specifying details of the financial turnaround.

Schlyter is an old Scania hand who earned his spurs in the late 1990s and the aughts in the truck, bus, and services industry in Europe. On his LinkedIn profile, he describes himself as someone who is passionate about effecting “turnarounds in specialised complex markets.” In Scania India, Schlyter, who arrived in the country in early 2022 after being pulled out of retirement by his former employers, found a daunting yet compelling challenge.  

Shaky Stint

Scania is among the world’s largest manufacturers of trucks and buses for heavy transport applications. It sold over 85,232 units globally in 2022, but its 17-year stint in India has been largely forgettable. Besides its lacklustre performance, it has also had to battle allegations of bribery. In March 2021, news agency Reuters reported that Scania paid bribes to win bus contracts in seven different states between 2013 and 2016.

The report was based on an investigation conducted by three media outlets, including Swedish news channel SVT. An internal Scania investigation, which began in 2017, showed serious shortcomings by employees, including senior management, a Scania spokesperson told Reuters. There were also reports of Scania allegedly gifting a luxury bus to Union Minister Nitin Gadkari, a charge denied by both parties.

The Scania India slide began in 2017, when it registered losses of Rs 261 crore. The next financial year, it seemed to have hit its nadir, with losses ballooning to Rs 450 crore, according to information sourced from data analysis firm Tofler. FY19 and FY20 were more forgiving, with losses pegged at Rs 76 crore and Rs 71 crore, respectively. But with losses of Rs 170 crore, 2021 didn’t exactly end well for the company.

The severity of Scania India’s losses was closely tied to the company's decision in 2018 to shut down its in-house bus body-building operations at its plant in Narasapura, near Bengaluru. The realisation that its products were ill-suited to the very specific demands of the Indian market came about four years after it set up the bus business.

Over 100 employees were reported to be directly impacted by the move and lost their jobs, while 44 staffers were relocated to Scania’s manufacturing facilities across the globe.

Schlyter bluntly acknowledges the many missteps. “It was not possible to sell those buses to customers at the right prices,” he says.

Industry insiders pegged Scania buses at 2 percent to 5 percent on the expensive side on average as compared to its rivals in the business back then. Moreover, the company's after-sales service was said to be not at par with the likes of market leaders such as Volvo. Scania deployed cost-saving measures and downsizing to stem the losses, but just as things were falling into place, the pandemic struck.

Partnering with PPS

Schlyter has played a huge role in ridding Scania India of legacy problems. Some of these date back to 2007, when the company entered India through a tie-up with engineering and construction major Larsen & Toubro (L&T) to market its tipper range. But the marriage between the two companies was, at best, tepid. The first cracks appeared with the setting up of Scania Commercial Vehicles India Pvt Ltd in 2011 and the building of the automotive assembly facility at Narasapura, which saw Scania take on major responsibilities ranging from manufacturing to product marketing to warranties. This made L&T more of a retailer for Scania. L&T was also averse to getting into a manufacturing tie-up with Scania, a route taken by the latter’s competitors such as MAN
and Daimler, among others. In 2013, the wobbly partnership ended.

"They (L&T) wanted to concentrate on their own products, we wanted to focus on ours. So we kind of came to the same conclusion at the same time," said Schlyter.

Schlyter accelerated the search for a new partner, and the company had talks with several potential candidates, including start-ups. In December last year, Scania India finally entered into an exclusive partnership with the Hyderabad-based PPS Motors, designating them the sole representative for the company's mining tippers.

PPS Motors operates across 18 states with over 650 touch points, representing a diverse spectrum of auto segments, including passenger vehicles, light and heavy commercial vehicles, and construction equipment. The group represents 19 brands and has an annual group turnover of Rs 13,700 crore.

PPS Motors has over seven decades of experience in selling mining trucks, and Scania, on its part, is helping them by deputing a number of its own staff at their different workshops and sites.

"We have people out in the field to earn the confidence of the customers because selling the vehicle is almost the easiest thing. But the most important and difficult thing is to safeguard customer support, which has to be extraordinarily good," said Schlyter.

Focusing on uptime

Under Schlyter, Scania India has also kind of pivoted towards focusing on mining solutions and making them the core focus of its operations in India. In line with its assurance to offer comprehensive support, it has bolstered its service excellence with its Central Parts warehouse in Nagpur. The warehouse, which was launched in 2019, is spread across 30,000 sq ft and has over 8,500 keeping units.

Though Scania's warehousing setup seems to be much larger than its actual needs at present, Vehicle uptime is important to customers, Schlyter said, with no one ready to wait for several days for their purchase. To emphasise his point, he offers the analogy of aircraft maintenance. "One has to look at it like an aeroplane. You change things and repair things in order to not have a breakdown because when you have a breakdown and you lose 5 percent efficiency, that is a lot of money. So, to avoid such a situation where we don't have the parts, we have a wider and deeper parts stock."

With the demand for heavy-duty mining trucks hovering at around 2000 units per year, how does Scania India see the competitive landscape, especially with rival Volvo trucks holding a dominant position? Schlyter offers a nuanced response. He says that, on simple terms, his company can have over half the market share of total demand. But his aim has never been to get into the market share race. "With volume, we need sustainability and profitability. It will take the time it takes, and if it happens in five or ten years, it does not really matter," he said.

This feature was first published in Autocar Professional's February 1, 2024 issue.