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Daimler AG plans to increase its investments in India and enhance exports of vehicles and parts under the government’s production-linked incentive (PLI) scheme as part of efforts to improve its profitability, said a senior executive at the German automaker.

Satyakam Arya, managing director and chief executive, Daimler India Commercial Vehicles (DICV) said in an interview that the company already exports to more than 50 countries from its plant on the outskirts of Chennai.

The fresh investment “purely depends on how you design an entry into a market like India and that determines what you will make out of it, whether you will pull out of the market or stay put. There are some who came and went back, but we have invented close to 9,500 crore and we are right now thinking of investing more", Arya said.

The company plans to increase localization levels to 95% over the next two years and some part of the new investments can be used for this purpose.

DICV opened the India plant in 2012 with an initial investment of €700 million. It commenced exports a year later. The factory can produce up to 70,000 commercial vehicles a year. In May this year, the company signed an initial agreement with the Tamil Nadu government to invest an additional 2,277 crore to expand the plant capacity.

“We look at India as a competitive manufacturing hub and this will happen even more with the PLI scheme announced by the government," Arya said. “We are waiting for the finer details, but the scheme has been designed in order to push companies like us to grow globally by using India as a manufacturing hub. This scheme gives us the confidence that the government is also thinking in the same direction."

The government on 11 November announced the PLI scheme for companies in 10 sectors to increase local manufacturing and improve exports subsequently. The automotive sector, comprising automakers and parts suppliers, will get subsidies worth 57,000 crore—the biggest chunk—as part of the scheme.

Commercial vehicle sales in India plunged 42% in FY20, hit by factors such as economic slowdown and revised load-carrying norms. The pandemic exacerbated the situation as sales fell nearly 49% from the year earlier to 24,552 units in the first half of this fiscal. Daimler recorded a 26% decline in sales till date in calendar 2020.

Arya said growth in the next few years look uncertain, but the commercial vehicle industry may take at least five years to go back to the 2018 level when sales peaked to a record high.

“We stayed profitable in 2019 and did better than 2018 despite a decline in volumes. This was mainly because we stayed focused on cost and had a healthy 14% increase in exports. We are expecting a sharp rebound in 2021 in domestic and exports and in our financial performance," he said.

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