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The Indian market has been both positive and negative

The Indian market has been both positive and negative
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First Published: Sun, Aug 30 2009. 09 28 PM IST

Mixed reaction: MAN’s chief executive Hakan Samuelsson. Ramesh Pathania / Mint
Mixed reaction: MAN’s chief executive Hakan Samuelsson. Ramesh Pathania / Mint
Updated: Sun, Aug 30 2009. 09 28 PM IST
New Delhi: MAN SE, the world’s third-largest maker of heavy trucks, has had a slow start in India, where it sells heavy trucks in a joint venture with Pune’s Force Motors Ltd.
MAN is now set for a more active role in the country after it raised its stake in the joint venture, MAN Force Trucks Pvt. Ltd, to 50% from 30%. It would still take the firm some years to fully utilize their installed capacity of 25,000 units, MAN’s chief executive Hakan Samuelsson said in an interview on Friday on the sidelines of a convention held by the Society of Indian Automobile Manufacturers, or Siam.
Globally, too, MAN is riding a rough patch. Its second-quarter profit fell 95% and Samuelsson, also chairman of MAN’s management board, had said in July that the next six months would be tough.
Edited excerpts:
What brings you to India?
Mixed reaction: MAN’s chief executive Hakan Samuelsson. Ramesh Pathania / Mint
I am here to refresh my picture of the joint venture we have with Force Motors, to update myself on where we are.
In the last couple of years we have worked a lot towards vehicle development, investment and localization. Now, the next phase is to bring it out to the market. For this phase, we increased our commitment into the joint venture. We owned 30% earlier; it has now gone up to 50%. This is a sign of the interest we have in the Indian market and our commitment.
What kind of arrangements do you have in other emerging countries? Why are you looking at a calibrated approach for the Indian market?
We do not have too many joint ventures. What we have done in China is in the other direction. In Sino Trucks, we only have 25%. In India, we have 50:50 and in Brazil, we have 100%. We don’t have any real principle; we do it pragmatically from case to case.
What always is more important than how much percentage you have is that you have local competence you can trust...A greenfield is very difficult in an emerging market. You have to rely on the local know-how that is available.
How has your experience been in the Indian market so far?
It has been positive and negative. Positive in the sense we have a vehicle, which is 90% locally built. We are ahead of most other manufacturers. However, as initially planned, I would have liked to see a faster ramp up of volumes...This will be the next step.
What are your plans for the bus segment?
Our priority now is to bring to the market what we have developed. After that we can see what more truck and bus models can be considered. Now the focus is on the 6x4 and 8x4 tippers. We are looking into the bus segment but we do not have any concrete scheduling.
How much additional investment would the partners commit into the joint venture this year?
We have already made the investments. We have a factory with 25,000 vehicles capacity. There are no major investments planned for the current year.
Now we plan to invest in hard work and dealer and customer contacts and present our products out in the market. As a newcomer (in this segment), we have to tell people who we are. We are a 250-year-old company in Europe and over a 100-year-old company in India. We came here in 1902. We are now the number three-truck manufacturer globally. That is a position integrated in the brand but so far not known in India.
What roadblocks have you been facing in India? Are there concerns with respect to localization?
Yes, you could say it’s localization. It has been a challenge with regard to finding the suppliers and reaching the quality levels you need, not just with the suppliers but also internally. Producing an engine, casting and machining parts was more tricky than we had planned. But I would still summarize, being able to localize the cabin, engine and axle in two years is not too bad.
Now, we have a real challenge in the new combination (50:50 joint venture) to bring it all. We are now expecting to see some rapid progress.
What kind of volumes are you expecting from India?
We hope to get reasonable market share in the forthcoming years. It will take us some time, may be five years, to utilize the 25,000-vehicle capacity we have.
Do you have any plan to buy out Force’s stake or increase stake substantially?
We have no such plans. We now have the concept and commitments from both sides.
What are your plans on exporting vehicles and components?
Exports are part of the joint venture. In the next 12 months, one third of the total produce will be exported. We will like to utilize the capacity, which is currently 1,000. The parts we are looking at exporting include engine, axle and chassis components. Indian suppliers will now be qualified to deliver not only to Man Force but also to Europe. The joint venture will mean growth for good Indian suppliers.
There have been spates of new entries in the commercial vehicle space in India in the recent past. Where do we see MAN?
We are the only ones who have products locally built in India. There are two strategies one can chose from: either you import or make CKD (completely knocked down kits for assembling vehicles) and then participate in the very high premium segment, but then the volumes are very low, or you participate in the main business—in that case, you have to localize, which is much more complicated. We chose to be part of the main business.
You need to have value for money and reliable vehicles with not too many electronic features but simple products for the Indian market. We, of course, also import vehicles for the premium segment, but it will not give us any volume.
What’s the contribution of emerging markets to your company? Do we see it growing?
It’s currently 20-25%. It should be 50% in the next five years, if we see continuing growth in the expanding markets.
shally.s@livemint.com
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First Published: Sun, Aug 30 2009. 09 28 PM IST