Mumbai: The Indian truck market, which has been dominated by Tata Motors Ltd and Ashok Leyland Ltd for decades, now has a formidable third contender.
The implementation of the Bharat Stage IV emission standards may usher in several changes in the market that has been relatively slower in upgrading technology compared to cars and two wheelers. Daimler India Commercial Vehicles Pvt. Ltd that sells the Bharat Benz brand of trucks, is looking to make the most of the switch to the stricter emission norms. On Friday, the company launched its new range of BS-IV compliant trucks at the price of the now phased out BS-III. The move, said analysts, is likely to set off a price war in the value conscious market and may give the local arm of the German truck and bus maker an edge over its Indian rivals.
Depending on the load carrying capacity, BS-IV heavy duty trucks (16 tonne to 49 tonne) command a higher price—around 8-11% more as compared to BS-III models owing to technological advancements in engines and other areas. But Daimler India has launched the new range at the BS-III price. Erich Nesselhauf, managing director, Daimler India, in an interview over the weekend, said the company has managed to do so by deploying cost efficiency measures. The BS-IV vehicles, otherwise, are expensive by 7-10% owing to a more complex technology. “We turned everything down," Nesselhauf said, adding that the company looked at all aspects, ranging from production process, supply chain, material costs, etc. “All steps together helped us in pricing the new range competitively," he added. Prices of heavy duty trucks ranges from Rs16 lakh to Rs75 lakh.
The company, which has been in the Indian truck market for five years, has been selling its products at a premium of 15% to rival offerings. The new emission standards and the aggressive pricing strategy may change that forever—not only now, but even in the future when Bharat Stage VI norms kick in 2020, said analysts. “For global automakers, every single change in the emission norms, is an opportunity to enhance competitiveness of their products in the Indian markets," said V.G. Ramakrishnan, managing director and managing partner at Avanteum Advisors Llp, a Chennai-based management consulting firm. This is because the technology solution is already available in other markets, and bringing it to India means that they can amortize the cost of the technology over larger number of units. Therefore, global firms will have an edge over Indian rivals, at least till the latter develop low-cost, India-made solutions to suit the local needs, he explained.
DICV’s rivals are not willing to comment on the pricing strategy of Bharat Benz trucks as yet. Tata Motors, market leader in trucks, has yet to release prices of the Bharat IV compliant trucks, said a dealer. In an email response, the company’s spokesperson said Tata Motors has been selling a wide range of BS-IV vehicles across segments since 2010 and the prices remain unchanged.
Anuj Kathuria, president global trucks at Ashok Leyland said the company’s BS-IV compliant trucks are expensive by 5-10% as compared to BS-III. “It’s not just the acquisition cost that needs to be taken into account but also the cost through the life of the vehicle." He declined to comment on the impact of Bharat Benz prices on Ashok Leyland’s range. Nalin Mehta, managing director and chief executive at Mahindra Trucks and Buses Ltd said prices of company’s trucks (above 16 tonne) have gone up by up to Rs2 lakh as compared to BS-III.
“Bharat Benz has always refrained from direct discounts. It’s the first time they have adopted an aggressive pricing strategy, It will force others to price the BS-IV compliant trucks more competitively unleashing a pricing war," said S.P. Singh, senior fellow at Indian Foundation of Research and Training, a think tank.
DICV’s Nesselhauf is optimistic that the regulatory changes will help the firm scale up faster and turn in profits in India. “We are extremely confident that the new range will boost our volumes not only because of the price but also due to the performance of the vehicle," he said.
DICV sold 13,100 trucks in 2016 against 13,997 in 2015. He declined to comment on the expected volumes in the current year. The implementation of goods and services tax in July will eliminate in inefficiencies in the transport and bodes well for the industry, he said. Any further postponement will be a big setback, he added.
A person familiar of company’s plans said DICV is looking to sell over 18,000 units of trucks in the current year. It plans to launch a new bus and a truck in the sub-9 tonne category, later this year.