Mumbai / Pune: Despite slowing sales of commercial vehicles (CVs), at least two firms, including a unit of Toyota Motor Corp., are readying to launch new products in India this year.
Hino Motors, the CV-making arm of Toyota Motor, will be launching its tippers, tractors and luxury buses in May, according to Amol J. Sandil, executive vice-president, Hino Motors Sales India Pvt. Ltd.
Uninterrupted: Hino Motors trucks in Japan. The company, which is the commercial vehicle-making arm of Toyota Motor, will be launching its tippers, tractors and luxury buses in May. Toshiyuki Aizawa / Bloomberg
Another launch expected by December is from Mahindra International Ltd, a venture of Mahindra and Mahindra Ltd and Illinois, US-based Navistar International Corp. It will manufacture heavy duty trucks at a factory being built at Chakan, Maharashtra, near Pune.
A third auto maker, Daimler Hero Commercial Vehicles Ltd, a joint venture of Daimler AG, the world’s largest CV maker, and India’s Hero Group, is also pushing ahead aggressively with plans to produce a wide range of trucks in the country.
Also See Brakes On Growth (Graphic)
The activity in this auto segment comes at a time when an economic slowdown has seen an unprecedented fall CV sales. Truck and bus makers Tata Motors Ltd and Ashok Leyland Ltd, which dominate the domestic market, have reported that CV volumes fell 22% and 35%, respectively, between April and February over the year-ago period, in a market that is the world’s fourth largest by volumes, after the US, China and Japan.
Hino’s Sandil said volume targets initially were set at a modest 1,200-1,800 a year but early signs of success for Mercedes, Volvo and Scania trucks and buses show that despite the slowdown, Indian customers prefer to pay more as these products offer them a better value proposition.
In the initial phase, Hino would be importing chassis of the vehicles from its factory in Thailand and have bodies mounted on them by local partners by end-April. With fuel efficiency 10-15% more than current CV models, Hino vehicles will be pitted against Mercedes Actros, Scania and Volvo trucks and tippers, Sandil said. Hino’s entry next month makes it the third Japanese CV maker after Isuzu Motors Ltd and Nissan Motor Co. Ltd to enter India.
Rakesh Kalra, managing director, Mahindra International, said the firm knows it will take at least two years for the CV industry to reach last year’s levels and it may see only a marginal to flat growth in the current year after the elections are over. A growth of couple of percentage points will be seen only in the second half of the year. However, the year after may see growth, and that’s when it wants to ride the trend, said Kalra.
Meanwhile, Daimler Hero has firmed up plans to make a range of light and medium-duty trucks based on the Mitsubishi Fuso Canter brand in the 6-16 tonnes segment. For the heavy-duty trucks, the company will make trucks in the 25-, 32-, 40-and 49-tonne categories, with the range branded Mercedes-Benz Axor, according to two people familiar with the development, who spoke on condition of anonymity.
The positioning of the venture’s products will be in the value-for-money segment, they added. Daimler on its own already sells its Mercedes-Benz Actros brand trucks in India and has started selling buses here. Both these products are in the premium category.
One of the two people said that Ricardo UK Ltd, a provider of product and engineering solutions to global auto firms, has been commissioned by the venture to help develop engines and other cost-saving products so that the vehicles be sold not just here but also be exported to markets in Africa and Asia.
Daimler is interested in developing India as a low-cost export hub for not just vehicles but component sourcing, this person said. Ricardo declined comment. A spokesperson for Daimler Hero said construction of a factory at Oragadam, Chennai, is on track but declined comment on details.
Separately, the Hero Group said last week there could be some changes in the Daimler venture. “There can be some minor tweaking,” Hero Corporate Services chairman Sunil Kant Munjal was quoted by PTI as saying. He, however, also said: “The product is on schedule and production will begin in 2010-11.”
The ambitious plans of the entrants come at a time when those who are relatively new in the market continue to be fringe players at best.
German CV maker, MAN Nutzfahrzeuge AG, which has a joint venture with Force Motors Ltd, has been struggling to find its feet in the Indian market. Its February sales halved to 1,115 units.
Asia MotorWorks Ltd, an Essar Group company that entered the high-end of the CV segment in 2006, has seen declining volumes since October. The Bhuj, Gujarat-based maker saw its February sales fall 63% to 156 units.
Anirudh Bhuwalka, Asia MotorWorks’ managing director, said his firm has put plans of launching buses and light cargo vehicles on hold. “While our sub-1-tonne small truck is ready, we are relooking at the market owing to the current volatility,” he said.
An analyst said the timing of the new CV makers coincided with truck demand shifting towards vehicles with higher gross vehicle weight. “This offers them an opportunity to create differentiation in terms of products and performance in a market which is very consolidated with few players,” said Manoj Mota, head of research at Crisil Research, a subsidiary of Crisil Ltd.
But the key to success in the Indian market, Mota said, was in the width and depth of sales, distribution and service network of a CV maker, and availability of competitive financing options. Companies with in-house finance arms have an edge given that 90% to 95% of CV purchases in India are financed by loans.
Graphics by Ahmed Raza Khan / Mint