India’s third largest maker of trucks and buses, Eicher Motors Ltd, said it might look at multiple partnerships for different parts of its business such as engine technology, specialized goods carriers and luxury buses to better compete on technology and to grow in size.
“We are open to all kinds of partnerships,” said Siddhartha Lal, chief executive officer of the company. “In any one of these areas, I could have a partnership… with someone who can support us...”
Multiple options: Eicher Motors CEO Siddhartha Lal.
He declined to say which international truck makers he was talking to for these partnerships, although recent reports had linked Eicher to various players such as Hyundai Motor Co. and Mahindra & Mahindra Ltd.
Lal says he is more interested in partners who could bring to the table, technology or skills where Eicher is lacking, such as engine technology after Euro IV stage emission norms kick in, which mandate tighter norms for exhaust emissions from vehicles. “The biggest technology challenges are engines,” said Lal. “Going beyond Euro IV, the hills start becoming steeper.”
Rivals such as Mahindra International Ltd, a unit of tractor maker Mahindra & Mahindra, and Ashok Leyland Ltd have signed separate pacts with their respective joint venture partners for just engine development and manufacture.
Domestic sales of medium and heavy commercial vehicles alone are set to increase to 386,000 units by 2012 from around 286,000 last year as robust 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 foreign truck makers such as MAN Nutzfahrzeuge AG and Nissan Motor Co. to enter a host of alliances with local players and invest as much as $10 billion (Rs39,400 crore) in building new factories to tap into the market. Others such as DaimlerChrysler AG, which recently started selling its imported Actros range of trucks, and Volvo AB are scouting for partners to boost their presence in the world’s fifth largest commercial vehicle market.
Eicher, which in 2004 sold its tractor business to Tractors and Farm Equipment Ltd, has since focused on its commercial vehicle business. Still, analysts feel it remains vulnerable in a market dominated by Tata Motors Ltd and Ashok Leyland, that have about 90% of the sales.
“They’ll have to do it sooner rather than later,” said Amit Kasat, analyst with Motilal Oswal Securities Ltd. “They don’t have a balanced portfolio and need a technical partner since, going forward, competition is going to become more aggressive.”