Chennai: India’s second largest commercial vehicle maker Ashok Leyland Ltd said it has formed an equal joint venture with a Siemens AG subsidiary to develop electronics components, aiming to cash in on an increase in the use of advanced electronics in vehicles.
The partnership with Siemens VDO Automotive AG, a supplier of automotive electronics, will help Ashok Leyland incorporate infotronics products, or the combination of information technology, electronics and communications, in its vehicles and also offer it to other vehicle makers who want it.
Investment details of the venture were not disclosed ahead of what is likely to be a public offering of the VDO unit. The venture will not invest in manufacturing facilities, but will focus on designing, developing and adaptation of products. The venture is expected to generate €100 million (Rs557 crore) in revenue by the end of fifth or sixth year of operations, said R. Seshasayee, managing director at Ashok Leyland.
The presence of electronics components in a commercial vehicle in India is negligible, except in fuel injection, which was introduced because of emission norms specified by the government. In western Europe, electronics constitute a fourth of a commercial vehicle by value and is expected to rise to 40% of the vehicle’s value over the next five years.
In Asia, it constitutes between 3% and 5% of the truck and is expected to increase to 15% over the next five years, said Ramesh Krishnan, chief executive officer of Siemens VDO Automotive (commercial vehicles). The Asian market is estimated at $1.5 billion.
Siemens will offer its own technology to the venture and will allow Leyland to tweak it to their needs, thus bringing down the cost for developing the product from scratch, said Aravind Bharadwaj, head of automotive engineering at Ashok Leyland.
The two companies have already partnered to implement a telematics solution for government-run transport undertakings. This sort of fleet management solutions would form a significant portion of the revenue, officials said. Cockpit electronics, electronically controlled fuel injection and instrument cluster applications (the brain behind vehicle dashboards) are examples of infotronics.
This is the second joint venture announced by the Hinduja group in less than a month. Earlier, it had tied up with Finland-based Alteams group to manufacture aluminium-based die casting.