Daimler Trucks bets big on BRIC markets

Daimler Trucks has set itself a target of selling 700,000 vehicles in 2020. That’s a 64 percent projected jump over its sales of 426,000 vehicles in 2011. Even before achieving that ambitious goal, the German major has set its sight on clocking its best-ever profit margin of eight percent in 2013. Last year’s figure was 6.5 percent.

Given the weak-to-moderate demand in various European markets, many companies there may not share or perhaps even plan such ambitious targets. Part of the confidence to share these figures by Andreas Renschler, the chief of Daimler Trucks, may stem from the prospects his company sees in India and China. Daimler’s truck business in China rolled out the first truck from its joint venture with BeiqiFoton in July. The first set of BharatBenz trucks (2523R, 2523C and 3123R) was commercially launched in Mumbai on September 26.

“Growth in the TRIAD (Japan, US and Europe) markets is limited. Volume growth will come from the emerging markets India, China, Russia and Brazil. Our strategy is to be in the market, be aware of the risks but somehow deal with it and beat local competition. We will do this in India and China,” says Andreas Renschler, board member, Daimler AG and Head of Daimler Trucks Division. Renschler feels that the BRIC economies will keep growing and freight volume will keep growing too. “We are putting the different emerging markets in Asia more together for platform and engine sharing. In the next 5-8 years, we will see more potential,” says Renschler.

Global mantra

Daimler has charted out a mantra of ‘as global as possible, as local as necessary’ to expand volumes, profitably. “We want to be regional champions,” asserts Renschler. In India, where it has an installed annual capacity of 70,000 units, it is looking at a “significant” market share by 2020. The figure could be in the range of 15-20 percent. Reliable, fuel efficient products aside, what will be crucial is sales and service network. It currently has 28 dealers. Daimler India Commercial Vehicles' (DICV) managing director Marc Llistosella, reflecting his highly objective approach, says “We will have 45-50 dealers by the end of this year. We have 28 dealers under contract in roughly 100 locations. We will launch seven products this year.” The next 10 products will start hitting the market from January 2013.

New possibilities

Medium and heavy trucks are Daimler’s areas of expertise. But in India, there’s a huge light commercial vehicle market that cannot be ignored. Of the 710,000 commercial goods carriers sold in 2012-13, over 400,000 were light commercial vehicles. Autocar Professional had reported in its March 15 issue that DICV will look at lighter trucks than the 17 it plans to launch by next year. A six-tonner was being considered, while lower entry-level segments are being taken “seriously”.

The company is learnt to be working on such projects. “We cannot just strip down a vehicle like Citan and introduce it in India. We have to develop them bottom up,” says AydoganCakmaz, vice-president, Product Engineering, DICV. The Mercedes-Benz Citan was one of the global launches at last month's IAA commercial vehicle show in Hannover. The product, the result of Daimler’s alliance with Renault-Nissan, is based on the Renault Kangoo. Some see it as a step that may dilute the brand equity of Mercedes-Benz. But Georg Weiberg, head of truck product engineering at Daimler, says, “To develop such a vehicle alone is very expensive. With our cooperation, we bring an existing vehicle with our technology, styling. You save money in development and production."

What Weiberg sees as a good product for India is a mix between Daimler’s Fighter and Canter light duty trucks. The truck will have the (Fuso) Fighter’s chassis and Canter’s cabin. “The reason for that is we need overload capability of the truck, along with the small engine of a Canter. The engine is big enough for India. This vehicle, in my opinion, is ideal for India because you have the right powertrain and the overload capability,”saysWeiberg. The Fighter platform can help DICV to introduce a five-tonner in the Indian LCV market. DICV, which has 260 engineers, has just started business in India. But in a couple of years, it plans to build product development capabilities. “We think two years from now we will have local development for local products,” says Weiberg.

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INTERVIEW WITH GEORG WEIBERG, HEAD, TRUCK PRODUCT ENGINEERING, DAIMLER TRUCKS & AYDOGAN CAKMAZ, VP, PRODUCT ENGINEERING, DICV



How do you see the evolution of product engineering in the automotive world?

Weiberg: In the future, we will have two worlds — the TRIAD and the middle market. Those different customer and regulations requirement bring us two different directions. One is a middle market truck with Euro 3, 4 and one is TRIAD with Euro-6 and trucks with high levels of technology. Also, on the cost side, the middle market truck is not a high-cost truck. It can be operated with sub-standard fuel. We need two classes of trucks. That is our strategy now.

Will we see some examples of Daimler’s alliance with Renault-Nissan in India?

Weiberg: Such cooperation is necessary, for example, for a delivery city van like the Citan. To develop such a vehicle alone is very expensive.

With cooperation, we can bring an existing vehicle with our technology, styling. One can save money in development and production. Nissan’s light duty truck is similar to the Canter. Renault doesn’t have a light duty truck. Therefore, the alliance with Renault-Nissan may not give that opportunity (in India). There may well be a development on the next generation of the Canter platform to cut costs. But that is still far away.

Will Daimler look at small CVs? Cakmaz: There’s no action in this direction yet. The Dost and Ace are produced in huge numbers just for the Indian market. In my opinion, these products are not suitable for all markets easily. There could be a few neighbouring markets. We have to learn first of all, how to create these products in this level. We don’t have such products.

But new markets like India give you an opportunity to broadbase your portfolio. Cakmaz: What you see in the Citanfulfills all safety regulations. I cannot put all those technologies in an Ace or Dost kind of vehicle. We cannot just strip down a vehicle like Citan and introduce it there. That we have to develop from bottom up. That is definitely possible. But no action so far.

There’s a restructuring happening in the automotive world. Do you see a shift in the way technology is developing?

Weiberg: In terms of looking at India, we must take on the environmental issue. There will be change in infrastructure and roads. That means more European-like trucks will come to that market. For the next step, we can consider exports. Right now, our focus is the domestic market, especially the middle market segment in Asia, for example, has big potential.

Any particular strength of suppliers and engineers in India that can be applied by Daimler in other geographies as well?

Cakmaz: Engineers in India are less complex in their mindset and thinking. For me, the ideal picture would be conceptual work in India. There isn’t much capability now for conceptual work in India. The realisation of the concept and execution is very fast in India. Our strategy in the future will be to how we can optimise the overall R&D work in India.

Weiberg: We have started in India four years ago to create an engineering centre with foreign expats and Indian engineers. The expats have more or less come back. In the meantime, the employees in India have adopted the same processes we use.

This is how they can be increasingly integrated to the global engineering setup. We have a strategy of global footprint. The final target is full integration of these people.

Will you continue to tap Mercedes-Benz R&D India or have independent R&D for Daimler India Commercial Vehicles?

Weiberg: We think that two years from now we will have local development for local products. There are capacities in India for the entire organisation. Part of Mercedes-Benz RDI works exclusively for trucks.

SUMANTRA BAROOAH