Daimler AG has been active in the commercial vehicle business in India since the 1950s. However, it only started manufacturing in the country in 2012 through its subsidiary Daimler India Commercial Vehicles (DICV). And since then there has been no looking back. The Dollar Business caught up with Erich Nesselhauf, MD & CEO, DICV, to know the secret to DICV's success.

Deepak Kumar | December 2016 Issue | The Dollar Business

TDB: Daimler has been in the Indian market since the 1950s. How has the journey been so far?

Erich Nesselhauf (EN): The 1950s marked our maiden entry into the Indian market. For an entire decade, we worked in cooperation with Tata Group to produce Mercedes-Benz trucks for the domestic market. Speaking about Daimler India Commercial Vehicles (DICV), our journey actually began in 2009 when the company was founded. By the way, India is also home to several other Daimler group companies, like Mercedes-Benz India headquartered in Pune, Mercedes-Benz Research & Development India headquartered in Bangalore, and Daimler Financial Services India headquartered in Chennai.

DICV had to overcome many challenges before opening a manufacturing plant and starting truck production in 2012. True to our vision to revolutionise the Indian commercial vehicle industry, we have achieved an unprecedented manufacturing scale. Earlier this year, we reached a major milestone with the 50,000th vehicle rolling off the line at our truck manufacturing plant.

TDB: Has Indian government been able to create a congenial environment for foreign automobile manufacturers?

EN: As far as Daimler India Commercial Vehicles (we have our home base in Tamil Nadu) is concerned, it will not be an exaggeration to say that the government support has been very encouraging – otherwise we would not have been able to complete the construction of our manufacturing plant in just two years, which is an excellent time for a greenfield
project.

TDB: What kind of competition do you face from other manufacturers? And how do you plan to maintain your competitive edge going forward?

EN: We knew that domestic competition would be stiff when we decided to enter the Indian market. There has been tough competition ever since we entered the market with our BharatBenz range in 2012. And, it will certainly not go away. So, our focus continues to be on providing better products and we are convinced that this is the foundation for the sustainable growth of our business, both in the mid and the long-term.

When it comes to export markets for the FUSO brand, the competition is much tougher than what we face in India. However, with proven and robust products we produce, FUSO obviously meets the requirements of customers in several overseas markets as well. Though we started exporting only in 2013, we have already produced far more than 5,000 vehicles for growth markets in Africa, Middle East, Latin America
and Asia.

TDB: How do you see the passage of the Goods and Services Tax (GST) bill?

EN: The introduction of GST will be a major event and this tax is expected to propel the industry's growth in 2017. However, this shall be possible only when there is a better clarity on many of the
details that are still under discussion.

The seamless and smooth implementation of GST will also depend on its synergies with other important allied policies like the proposed scrappage scheme. If all of this is in place, GST can indeed have a very positive impact on
the industry.

TDB: Do you envisage any hurdle when it comes to the implementation of GST regime? What would you like the government to do to ease the process?

EN: The government can provide better clarity on the forthcoming GST. Developments in the second half of 2016 have shown that the customers of commercial vehicles are a sensitive lot and that a lack of clarity impacts their planning horizon. They must feel confident enough to invest in new vehicles. There is a wide consensus in the industry that GST can stimulate growth when executed in the right way. Therefore, providing clarity on it would actually translate to an incentive of sorts for the entire industry.

TDB: What are your views on 'Make in India' programme? What is your current level of localisation and how do you plan to augment it further?

EN: 'Make in India' is an important initiative, and we are probably one of the most successful poster examples. We have not only exported an increasing number of vehicles to other markets, but also sourced and shipped millions of components from our Indian components suppliers to various Daimler entities around the world – in Japan, Europe, and North America.

When it comes to sourcing components for our manufacturing operations in Oragadam near Chennai, we largely source from Indian suppliers – we started with a localisation ratio of 85% and have increased it to about 90%, while at the same time adhering to Daimler’s stringent global standards. This clearly shows that we provide very interesting opportunities to Indian companies on a global scale when they are willing and committed to compete internationally.

TDB: Are you satisfied with the current level of exports from DICV? Have you set an export target for this year or for the next few years?

EN: In vehicle exports, we will reach the mark of 30 markets by the end of this year. Going forward, we plan to export 10,000 units (annually) from India. Further, we have plans to add new markets in 2017. We aim to sustainably grow our business in growth markets of Africa, Middle East, Latin America, and Asia.

TDB: How many truck models does the company export at present? Are you planning to expand your product portfolio to tap new markets?

EN: At present, we are exporting 15 truck models. In 2017, we will add a third product family to our product portfolio, beyond the existing medium and heavy-duty lines – a new sub-9 tonne export product for markets in Middle East.

TDB: What are Daimler’s future plans for the Indian market?

EN: We will continue to focus on sustainable growth. And, we will achieve it by providing better products with better total cost of ownership to customers – both in India and abroad.