Chennai, Pune, Haryana vie for Daimler-Hero JV’s plant

The world’s largest truck maker Daimler AG and Hero Group’s joint venture company Daimler Hero Motor Corp Ltd.

The world’s largest truck maker Daimler AG and Hero Group’s joint venture company Daimler Hero Motor Corp Ltd (DHMC), which will invest Rs 4,400 crore over the next five years towards setting up a greenfield facility for commercial vehicles in the country, has identified three locations for the proposed plant. The company has zeroed in on three locations — Chennai, Pune and Haryana — for the plant that will have an initial capacity of 70,000 units and will be operational by 2010. DHMC will finalise the location within the next two months.

“We are in the process of selecting the location for the greenfield production facility and are in advanced stage of negotiations right now. To start with there were a large number of locations which we were considering and have zeroed in on three now,” said DHMC chairman Sunil Kant Munjal. “The final location will be decided based on the infrastructure available for supply chain and workforce availability around the plant.”

Daimler AG which is the majority partner in the JV with a 60 per cent stake has invested Rs 1,386 crore while Hero Group has invested Rs 900 crore. The rest of the capital would be raised as debt the modalities of which are being worked out.

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“This joint venture will first focus on light and medium commercial vehicles which will be developed with specific Indian conditions in mind to be launched by 2010. By 2012 it will roll out heavy commercial vehicles,” Daimler Trucks Head Andreas Renschler said. “Our joint venture aims to have a localisation level of 80 per cent when our products start entering the market by 2010.”

Daimler already has a commercial vehicles operation in India in the form of Mercedes Benz India, which started importing the Actros range of off-road mining trucks two years ago but Renschler said that the JV with Hero will be responsible for products that are specifically developed for the Indian market and exports to other emerging markets without any cannibalisation.

“Any import of existing products to India from Daimler’s portfolio will go to Mercedes Benz India and the JV will develop new products for the Indian market,” he added.

He said as Daimler already has a research and development centre in Bangalore, the JV should be able to leverage from it. Asked about the intended spend on R&D, he declined a direct comment but said it will be significant. Renschler also said Daimler had no plans to exit from Tata Motors, where it has 6.6 per cent stake although it will “see” on how to go about the 3.6 per cent stake in Eicher Motors.

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The Indian commercial vehicle market valued at Rs 43,765 crore is largely dominated by homegrown Tata Motors with a commanding 65 per cent market share followed by Ashok Leyland and Eicher Motors. After a bull run in 2006-07 when the market grew in double digits, high interest rates stifled the industry in 2007-08 as growth almost disappeared.

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