Daimler Truck plans to take advantage of free trade agreements by establishing a new manufacturing hub in Indonesia, built with considerable involvement from Daimler India Commercial Vehicles (DICV).
16 Jun 2025 | 714 Views | By Shahkar Abidi
If factories could age like people, the old Daimler Commercial Vehicle plant on the outskirts of Jakarta might be said to have earned its wrinkles. Sprawling, circuitous, and oddly sentimental, it required a full 16 kilometers of travel for components along the assembly line to become a truck. At Daimler ...
This is an Autocar Pro Plus article. Subscribe to continue reading.
If factories could age like people, the old Daimler Commercial Vehicle plant on the outskirts of Jakarta might be said to have earned its wrinkles. Sprawling, circuitous, and oddly sentimental, it required a full 16 kilometers of travel for components along the assembly line to become a truck. At Daimler Commercial Vehicles Manufacturing Indonesia (DCVMI)'s new Cikarang facility, the same job is done in a crisp 0.8 kilometers.
Everything about the new plant is sharper, sleeker, quieter—industrial production trimmed of its excess, its digressions. The plant will produce flagship models such as the Mercedes-Benz Axor Trucks as well as Mercedes-Benz bus chassis specifically designed for the Indonesian market.
The IDR 500 billion (approximately Rs 265 crore) factory—built with the help of engineers from Daimler’s Indian operations—represents the German CV-maker’s rising ambitions for the ASEAN market. It is designed to exploit Indonesia’s network of Free Trade Agreements (FTAs), most notably the ASEAN Trade in Goods Agreement (ATIGA) and the Regional Comprehensive Economic Partnership (RCEP).
These agreements eliminate or substantially reduce import tariffs on a wide array of goods, including commercial vehicles and automotive components, among member nations—mostly in the Asia Pacific. Under ATIGA, Daimler can potentially export its Indonesian-assembled vehicles to other ASEAN member states—such as Thailand, Vietnam, Malaysia, and the Philippines—with zero or near-zero import duties, providing a substantial price advantage over competitors importing from outside the bloc. The RCEP opens up an even larger market, including Australia and China.
The anticipated finalization of the Indonesia-European Union Comprehensive Economic Partnership Agreement (Indonesia-EU CEPA) is expected to open another significant market, creating a seamless trade corridor back to its home region.
India’s Role
A cornerstone of this strategic expansion is the role of Daimler India Commercial Vehicles (DICV), based in Chennai. Experts from DICV Chennai have been stationed in Indonesia to facilitate knowledge and experience transfer, highlighting India's pivotal role in setting up this new facility.
Moreover, Daimler Commercial Vehicles Manufacturing Indonesia (DCVMI) will report to the Indian management. Given the low degree of localization expected to be achieved in the Indonesian manufacturing operations initially, DICV will also supply Completely Knocked Down (CKD) kits to the unit.
“We will play a key role in building capabilities in Indonesia—transferring knowledge, developing talent, and strengthening the regional ecosystem,” said Satyakam Arya, Managing Director and CEO, Daimler India Commercial Vehicles, speaking on the sidelines of the inauguration of the new plant in Cikarang Industrial area, West Java (Indonesia) on June 10. The idea, Arya said, is to combine German engineering excellence with India’s production strength and the market understanding from the local set up.
Arya expects the plants in India and Indonesia to supplement each other, given the similarity in market DNA, particularly for the Mercedes-Benz Axor platform, which is produced and sold in both markets. There is also a chance to bring homologated mining trucks from India to the Indonesian market, with some already being done and future expansion planned.
Broader Picture
The establishment of the Cikarang plant must also be viewed within the broader context of Daimler Truck’s post-split transformation. Since becoming an independent entity in late 2021, Daimler Truck Holding AG has been actively restructuring to enhance agility, sharpen customer focus, and fund the massive investments required for the transition to zero-emission and autonomous technologies. This includes internal realignments, such as regional integration into a brand-agnostic management structure to streamline decision-making, and significant strategic partnerships.
Perhaps the most profound restructuring has been the landmark agreement in June 2025 to merge its Japanese truck subsidiary, Mitsubishi Fuso, with Toyota Motor Corporation’s Hino Motors. Daimler Trucks holds a majority stake in Mitsubishi Fuso.
This mega-merger aims to pool resources for advanced technologies like CASE (Connected, Autonomous, Shared, Electric) including hydrogen and achieve greater scale to compete more effectively in the global and Asian markets. Mitsubishi Fuso and Hino will integrate on an equal footing and cooperate in the areas of commercial vehicle development, procurement, and production. Daimler Truck and Toyota will each aim to own 25% of the (listed) holding company of the integrated Mitsubishi Fuso and Hino.
Commenting on the development, Karin Radstrom, CEO, Daimler Truck in a statement said, " We are bringing together two strong partners to form an even stronger company and to successfully shape the decarbonization of transportation. Together, Mitsubishi Fuso and Hino Motors have great potential to leverage scale―and scale is key to win in the technological transformation of our industry. Karl Deppen is an experienced and strong leader who comprehends the whole value chain of our business, and I'm therefore convinced that he can bring the new company to the next level."
DICV: From Strength to Strength
Daimler India Commercial Vehicles (DICV), a subsidiary of Daimler Truck AG, reported steady performance in 2024 despite a 10% overall decline in the Indian commercial vehicle market caused by macroeconomic pressures, elections, and erratic monsoons.
DICV recorded its highest annual bus sales at around 2,200 units, registering a 10.5% year-on-year growth driven by replacement demand and increased transportation needs. Bus exports also rose by 65.9% to nearly 1,000 units, indicating increased global interest in its India-made offerings. Customer service revenue reached Rs 1,381 crore with a 27.8% growth over the previous year, while aftermarket business grew by 18%. Combined, these segments now form a significant part of DICV’s revenue.
Satyakam Arya, Managing Director and CEO, Daimler India Commercial Vehicles, pointed out that the inauguration of a new facility in Indonesia does not detract from the central role envisioned for India in Daimler’s Asia strategy.
“India remains a cornerstone of our global export strategy. Leveraging Indonesia for the ASEAN region is about expanding our reach, not shifting our focus…The integration of India’s advanced manufacturing capabilities into our Southeast Asian operations highlights our unified global approach.”
The top executive highlighted that the new plant in Indonesia is not expected to negatively affect volumes from India; rather, it presents an opportunity to capture more volumes in the Indonesian market. As CKD kits are supplied from India to Indonesia, growth in the Indonesian market will directly translate to increased export volumes for DICV.
Indonesian Roots
Daimler's presence in Indonesia is not new; the company has a deep-rooted history spanning over 40 years, having been one of the first OEMs to establish operations in the country as Mercedes-Benz. Previously, Daimler utilized a common plant for Mercedes-Benz cars and trucks located approximately 40 km from the new Cikarang site, a facility that spanned over 100 acres. While this older plant had a theoretical capacity similar to the new one, it suffered from an inefficient layout. As an example, one kit traveled 16 kilometers from the start to the end of the assembly line in the old plant, compared to just 0.8 km in the new integrated facility.
This inefficiency was a key driver for the new investment. Daimler recognized Indonesia as a very promising market for the future, with its economy growing at about 5- 5.5% year on year, significant infrastructure investment, growing logistics volume, a very young and dynamic population, and abundant mineral resources. While the Daimler management had been thinking about setting up a new plant in Indonesia for the past few years, the construction at Cikarang started in February 2024, with the facility becoming operational within just 12 months. The fast pace at which the plant came up, surprised even the Indonesian government, prompting Agus Gumiwang Kartasasmita,Minister of Industries when he quipped, " I thought only the Chinese could do that so fast".
While the Indonesian market has been traditionally dominated by Japanese brands, Daimler Truck is confident in the enduring appeal of the Mercedes-Benz brand, noting a "separate segment of people who like Mercedes-Benz" and take "a lot of pride of ownership" Arya noted.
Future Trajectories
Looking towards future product segments, Daimler Truck maintains a clear stance on market entry. Arya emphasized that the company currently has no plans to venture into the light commercial vehicle (LCV) segment. This decision stems from the belief that the LCV market is a "very cost-sensitive segment" where Daimler Truck feels its "DNA is not best suited to make a difference". While acknowledging the potential for volume, the company's focus remains on areas where it can make a significant impact, rooted in its established DNA.
Regarding the crucial shift towards electrification, Daimler Truck is actively engaged in preparatory work. The company is currently conducting feasibility studies and proof of concepts. It is leveraging its global technological capabilities, utilizing available technology from its operations in Europe, Japan, and the US. Limited trials are already underway, including a fuel cell intercity coach that is undergoing trials with the government.
The company is also closely monitoring the market's readiness for electric trucks, specifically keeping an eye on infrastructure development and the bridging of cost parity. Beyond product development, Daimler Truck is also expanding its "global capability centers." This initiative aims to increase capacity and delve into new cross functions, benefiting both its operations in India and the Indonesian market.
By fusing German engineering precision, Indian manufacturing strength, and Indonesia’s strategic trade access, Daimler Truck is building a diversified, future-facing production ecosystem optimized for resilience, growth, and sustainability.