Daimler Trucks, a division of Daimler AG, the largest commercial vehicles maker in the world, has said it will partner with Hero Group to make a range of trucks for India, the world’s fifth largest market for such vehicles.
The German firm joins a slew of overseas vehicle makers who have inked partnerships in the last two years to enter the Indian market.
Financial details of the transaction were not revealed and the company will give final shape to the partnership by the first quarter of 2008, Daimler said in a statement.
Daimler Trucks and the Hero Group, which owns 26% in the country’s largest two-wheeler maker Hero Honda Motors Ltd, have signed a shareholder agreement and are in the process of submitting an application to the Foreign Investment Promotion Board (FIPB), a government body that clears foreign investments in India that require permission. The company’s proposal is slated to come up at the board’s meeting on 14 December.
“Hero has a proven track record of managing long-term relationships with global and domestic partners,” Andreas Renschler, Daimler board member and head of Daimler Trucks, said in a statement.
Hero makes bikes in partnership with Japan’s Honda Motor Co. Ltd, an alliance it has had for 23 years.
“This is a positive move for the Hero Group because it gives them the opportunity to enter the commercial vehicles segment, where they do not have any presence at the moment. However, the deal will not have any impact on Hero Honda...,” said an automotive analyst at brokerage Religare Securities Ltd, who did not wish to be identified.
Hero Group, which began operations as a cycle maker in 1956, has today transformed itself into the country’s largest two-wheeler maker, thanks to a transfer of technology from its partner Honda Motor, which helped it to bring out successful motorbikes.
The trucks made under the partnership will be targeted at the mass market, currently dominated by Tata Motors Ltd, which holds 60% of the market share in this segment and makes popular models such as the Ace light commercial vehicle. About 468,000 commercial vehicles were sold in the country in 2006-07.
Meanwhile, Daimler’s specialty trucks, such as the Actros, which are targeted at specific applications such as mining, will continue as a separate venture under DaimlerChrysler India Pvt. Ltd.
The Actros, of which 150 units have been sold since its launch in July 2006, is being built at Pune.
Daimler, which also has a partnership with Sutlej Motors Ltd to make luxury buses in India, isn’t alone in wanting a share of the commercial vehicles pie in the country as sales in more mature markets overseas grow at a slower pace.
With an economy that is growing at more than 8% a year and a record number of infrastructure and construction projects coming on stream along with manufacturing, demand for transportation vehicles is set to soar.
In recent months, Nissan Motor Co. Ltd has formed a venture valued at $500 million (Rs1,970 crore) with Ashok Leyland Ltd for light trucks, engines and components, and technology development.
This week, Volvo AB said it would buy a 50% stake in the commercial vehicle unit of Eicher Motors Ltd. Germany’s MAN AG and International Truck & Engine Corp., a Navistar Inc. unit, already have ventures with local firms Force Motors Ltd and Mahindra & Mahindra Ltd, respectively.