New Delhi: The world’s largest truck maker, Daimler AG, and Hero Group, which partly owns India’s largest two-wheeler maker Hero Honda Motors Ltd, said on Monday they will spend €700 million (Rs4,417 crore) to build a lorry-making facility to tap growing demand in the planet’s fifth largest truck market.
The companies have formed a new joint venture (JV) called Daimler Hero Motor Corp. Ltd that will make 70,000 trucks a year starting 2010. The firms said they might also export once the plant starts rolling.
“India is one of the fastest growing commercial vehicle markets,” said Andreas Renschler, head of Daimler’s truck division. “There is commitment to develop its transportation infrastructure, including the highway development programme, and enforcement of regulations (such as safety and emission)...will trigger demand for trucks.”
Despite six-year high lending rates slowing the rate of growth for the truck market last fiscal year that ended 31 March, domestic sales of medium and heavy commercial vehicles alone are set to increase to 386,000 units by 2012 from around 286,000 in 2007 as economic expansion and higher fuel prices make truckers replace their ageing fleets with newer, fuel-efficient vehicles, says a report from consultancy firm Global Insight Inc.
This has prompted global truck makers such as MAN Nutzfahrzeuge Group and Nissan Motor Co. Ltd to enter alliances with local players and invest $10 billion (about Rs40,000 crore) in building new factories.
In recent months, Nissan Motor has formed a JV valued at $500 million with Ashok Leyland Ltd for light trucks, engines and components, and technology development. In December, AB Volvo had also said it would buy a 50% stake in the commercial vehicle unit of Eicher Motors Ltd.
Daimler will invest €220 million in the JV that will give it a 60% stake. The Hero Group will invest €140 million and hold the rest of the equity. The firms said they will raise the remaining €340 million in debt, without disclosing the details. Daimler, which has a base in India for more than a decade through its Mercedes-Benz luxury cars division, sells its premium Actros range of trucks, which are imported as fully-built units. Renschler said the JV will develop trucks from scratch to suit India.