Come Wednesday and there will be a new competitor driving into the commercial vehicle (CV) market: Daimler India with its Bharat Benz brand. Daimler A.G.’s Indian subsidiary will be launching the first model produced from its Chennai plant in what observers say is a defining moment for the CV industry. Daimler has a formidable reputation for product quality and its technology edge. And, it will enter an industry that has somehow not kept pace with the global market in terms of product evolution, unlike its sibling, passenger cars.
Daimler is expected to shake-up the market with its two-pronged strategy: offer quality trucks that give higher mileage than the existing models and second, do so at competitive prices. That extensive planning and thought has gone about in framing its India strategy is evident from the way it has unravelled in the last couple of years.
First, Daimler chose to design an all-new product for India based on its Mercedes Benz-Axor platform though it could have picked up any model from its vast portfolio and introduced it with a much smaller investment than the Rs.4,400 crore it has invested in India now. The game-plan is clearly larger than just India and this is evident from what Andreas Renschler, Member of the Board of Management, Daimler AG and Head, Daimler Trucks, told The Hindu in Hanover last week: “This is like a global platform rollout in markets where it makes sense.”
Second, it involved customers at every stage of the project by consulting them on what they look for in a truck and what they missed now from the available brands. It tested its models by driving them over 4 million kilometres, in its test track and in real road conditions. The company chose select buyers who bought its trucks pre-launch and some of them were driven over 50,000 kilometres giving it valuable feedback on the product. “We already have 90 dealers and more than 100 dealership locations in place and all of them are people with experience in the industry,” says Mr Marc Llistosella, Managing Director and CEO, Daimler India Commercial Vehicles Pvt. Ltd.
Daimler’s financial services arm followed it into India and will finance buyers along with a host of other banks that have been co-opted such as HDFC Bank and ICICI Bank, apart from Sundaram Finance.
Yet it will not be an easy battle. The incumbents, Tata Motors and Ashok Leyland, are well entrenched and command tremendous brand loyalty. Fleet operators are familiar with these trucks and the two players boast an extensive service network. “We have more than 700 touch points across the country and we are well prepared for the competition,” says Dheeraj Hinduja, Chairman, Ashok Leyland, whom The Hindu met at the Avia pavilion in the IAA Commercial Vehicles expo at Hanover.
Mr. Hinduja is clear that price discounting is not a strategy that Ashok Leyland would adopt. “Our trucks are already priced at a small premium to the market and they still sell,” he points out, underlining the strength of the brand. There are competitors though who have already started discounting prices in preparation for Daimler’s entry.
Ask Mr. Renschler if Daimler would follow them, and he is clear that is not an option. “We offer 10-15 per cent better fuel efficiency, different engines. I don’t know what the customer would do but our experience from around the world is that he would go for the modern truck because it helps him to make money in the medium-term and not for a discount and end up on the wrong side,” he says, quipping, “I know Ratan (Tata) a little bit, he will not accept this in the long-term.”
Both Tata Motors and Leyland have been gearing up on the products front. The different models based on the world truck platform of Tata Motors and the U-series trucks of Leyland along with its new Neptune engines are all products positioned to take on Daimler.
But what about the service network, aren’t the incumbents better placed there? Yes and no. Yes because both Leyland and Tata Motors have extensive sales, service and spares centres across the country and emergency breakdowns on highways can well be serviced by the local mechanic. But Daimler’s answer to this is that given the technology platform of its trucks and their quality, they would not need frequent servicing.
Says a Daimler dealer: “Unlike existing truck brands which need oil change at 50,000 km, Bharat Benz trucks can run over 1lakh kms before the first oil change.” Of course, other new brands such as Mahindra Navistar are similar but the point being made is clear.
Total cost of ownership
According to dealers, Daimler is pricing its trucks almost at similar levels of comparable Tata and Leyland models. Daimler says that the total cost of ownership (TCO) of its trucks will be lower than competitors. This means that fuel efficiency will be high, downtime low and service needs negligible. So an operator can hope to earn more by deploying Daimler trucks even if they were to be priced higher than competition. At a time of rising fuel prices, the higher fuel efficiency platform that Daimler hopes to occupy, can be a big advantage. The pinch will come though when emission norms move forward in the country. Bharat Stage IV norms, equivalent to Euro IV, were introduced in 13 cities in June this year but Europe is already in the sixth stage. This is where Daimler has the edge.
Mr. Renschler is clear that this “leap forward” in technology is a big challenge for OEMs in markets such as India simply because they do not have the technology yet. Significantly, he sees this as an opportunity to capture market share.
There will be a total of 17 models in the market from Bharat Benz in the next one year across the range from 6 tonnes to 49 tonnes. Clearly, the CV market is set for an exciting period ahead as the powerful German company tries to establish a toe-hold. Going by the passenger car market experience, the incumbents are sure to concede market share. How much will that be is the question.