Swedish commercial vehicle manufacturer Scania AB is planning to enter the rapidly-growing Indian bus market in an effort to tap into the growing demand in one of the world’s fastest growing major economies—especially from city transportation networks looking to move to more modern and environment friendly buses for travel within and between cities.
According to a person familiar with the development who did not wish to be identified, the company is close to finalizing a joint venture (JV) with Gurgaon-based auto component manufacturer, Jay Bharat Maruti Ltd (JBML), which ended 2006-07 with Rs5,19.5 crore in revenue and Rs11.97 crore in net profit.
The JV will manufacture a range?of buses in?India that will be available 18 months from now, added this person who said that a team of senior executives from Scania recently visited JBML’s facilities, which makes a range of parts for supply to India’s largest car maker, Maruti Suzuki India Ltd.
Leif Oestling, chief executive officer of Scania AG
JBML officials declined to comment on the JV. In an e-mail response, a Scania spokesperson said the firm “does not respond to rumours and speculation.”
The person familiar with the development said the two parties are conducting a feasibility study that will be completed by the end of the current fiscal year. After this, the two firms will take a decision on which segment the proposed JV will target, this person added.
Scania is looking to build a chassis manufacturing facility as well as a bus-body building factory in north India, said the person. The JV will initially manufacture buses at JBML’s current facilities.
A Scania executive had said in April it was looking to India as a potential market. “We will go into India one way or another, but I can’t say more. My definite feeling today is that the business prospects are coming there,” Scania chief executive Leif Oestling had said at a news conference after the firm released its first quarter earnings report.
Scania is one of the last of the European companies in the commercial vehiclesbusiness to enter the Indian market.
In November, it announced a partnership with engineering and construction company Larsen and Toubro Ltd (L&T) to sell its trucks. The company manufactures and sells its trucks mainly in Europe and Latin America.
India’s large and fast paced infrastructure building exercise has attracted a number of global commercial vehicle manufacturers.
German commercial vehicle manufacturer Daimler AG has already announced plans to bring its Mercedes buses to India in collaboration with a local partner, Sutlej Motors Ltd.
India’s largest commercial vehicle manufacturer Tata Motors Ltd, which currently dominates the bus market with an estimated 60% market share, has a JV with Brazilian bus manufacturer Marcopolo SA. The second largest player in the domestic market, Ashok Leyland Ltd, has also announced plans for top-end buses.
In India, 28,738 medium and heavy buses were sold in 2006-07,?up?2%?from a year ago.
“It’s a step in the right direction in terms of India being an attractive destination,” said S. Ramnath, vice-president at SSKI Securities Pvt. Ltd. But it will be difficult for them to significantly impact the market, since a majority of buses in India are bought by state transport undertakings that are running losses and haven’t started buying, he added.
Shares of JBML closed at Rs59.25 each, down 1% on the Bombay Stock Exchange on Thursday. In the past year, the shares have touched a high of Rs61 each.