Chennai: It has been seven months since Germany’s Daimler AG started making trucks at its Chennai factory that cost Rs.4,400 crore to build. It has introduced three models of heavy trucks under the BharatBenz brand and plans to roll out 14 other makes in as many months. It is the first time Daimler has introduced products specifically for a market. Marc Llistosella, 45, Daimler India Commercial Vehicles Pvt. Ltd’s CEO and managing director, spoke in an interview about competition and the challenges he faces. Edited excerpts:
You spearheaded the decision of bringing Daimler trucks to India. What made you place such a big bet in India?
We started seven years ago in 2005-06, when we were thinking about the white spots of Daimler trucks, and we began to question what lies ahead in the next five to 10 to 15 years. We asked ourselves the question of where we are and where we should go. It became very clear to us that we needed a presence in markets like Russia and India.
How did you decide on an investment?
We did a market study, a specification study on the existing products, an investigation into the industry, the competitiveness of the market, and the potential customers. We explored both the routes of greenfield and brownfield. Brownfield would be the classic approach where you acquire and enter. We were even in talks with Eicher, Ashok Leyland, Tata Motors for that. But after one-and-half years, it was clear to us that we should go by ourselves and have a partner who has a certain capability of network, which is why we chose Hero Honda (now Hero MotoCorp Ltd). But the financial crisis happened and we had a clean separation.
Was it a blessing in disguise?
It was. We have been able to adapt ourselves well. If you have many partners, you have too many views. Also, it would have been a mix of two different cultures. We are trying to have a single BharatBenz culture.
Do you think you should have been here sooner?
No. Not a day earlier. The market was not suitable during the last five years. We are seeing even now that the market is very slow in changing. It is not a revolutionary market. You need a certain minimum amount of infrastructure and financing for a business. Now you have professional financing institutions, but 10 years ago there were hardly any.
The competition is not sitting silent with your presence.
It is an oligopolistic market. We have seen two or three players with very clear market share, and this has been so for the last 25 years. Now that we are here, the competitors in the last two months have tripled their discounts. Why are they doing this? Is it because the market is so weak or is it because they want to make sure no one is coming to us? This is a historical peak of discounts from the existing competitors. They did not go this way even in the financial crisis in 2008-09. So looks like without even having a real presence in the market we are changing the market.
Now there is an alternative for people. We have very good fuel efficiency, a low TCO (total cost of ownership), good quality, good specifications on the trucks, and focus on safety.
But they are also stepping up their products, so what edge will you have?
If you are so confident and secure about your product, why should you triple discounts?
What if they are using price as their trump card?
The reaction of our competitors is very clear. They are also changing their business model. They are changing the price of what remained unchanged in the last 10 years. Playing by price will only hit their margins. You can’t keep this up for more than a year, and we are not shaken by this.
Have you seen a market as challenging as India?
India is a unique market. There is a lot of diversity and dispersion in the market. You don’t see this anywhere else. You have a state like Gujarat, where applications are processed through the Internet in 2 minutes and states where you have to wait for a year to process an application.
What do you make of the commercial vehicle market now?
If there is blood on the road, you have to start your business. The market is contracting by 22%, and we are seeing a historic peak in discounts. But we should see a revival next year. We also hope the government rolls out GST (goods and services tax). We absolutely need GST. We need more liberalization, we need more free markets. Next year, we hope will be a reboot or revival of the economy.
In the commercial vehicles market, right now big sales are coming from the light commercial vehicle segment. Since you don’t have that in your product portfolio, do you see that affecting you?
So far, we have no plans for that. This is a market we have not addressed anywhere in the world at all. It needs another three-four years. I cannot deny it (the growing number of small trucks and pickups). It is a different business. But, we want to concentrate on the above six tonne market now. Let’s see how the LCV (light commercial vehicles) market turns out.
Moreover, you can mess up a new business dramatically if you end up concentrating on too many things, the quality suffers. We will first concentrate on what we know best.
Do you see the Chennai plant playing a big role for Daimler trucks globally?
I do. But this is a question to my shareholders. If the top management decides to leverage this plant, it would be highly recommended. But it is their call. I personally see it as an export hub. Our competitors have a hub for engines export, we could do this too. But first, the product should settle, get the reputation; make sure the customers are happy. Then we can think of exports.