Daimler AG crosses a billion dollar mark spend in India

Daimler AG on Thursday inaugurated its second vehicle assembly plant in Maharashtra, doubling its annual capacity in India to 20,000 units and taking its investment in the country past the billion-dollar mark. About a fortnight ago, the company had established its bus division in southern India.

The capacity addition makes India the largest aggregator of three-pointed-star cars in the world for the Stuttgart-headquartered automaker. It also underscores Daimler’s intent to give the company an image makeover and tap hot new money that is driving demand for high-end vehicles in the country.

Inaugurating the second plant at Chakan, near Pune, Eberhard Kern, managing director of Mercedes Benz India, told ET that the country is the most focussed market for the headquarters and the investment in the new plant underlines Daimler’s commitment.

“We grew by 40% in the first quarter; the growth in the second quarter has been even steeper, so we are heading towards a very strong double-digit growth in 2015,” Kern said. “With the start of a new plant, we are future ready. We think this market will touch 1 lakh cars per annum by 2020 and we will have a sizeable share in that.”

Kern said the company will locally produce its GLA compact SUV, a move that will make India Daimler’s only base to make three car lines–compact cars, salons and SUVs–in one plant. And local production benefit will be passed on to customers in form or Rs 1.5-2.5 lakh price reduction on the GLA.
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In India, Daimler operates Mercedes Benz India, which handles its car business, and Daimler India Commercial Vehicles (DICV), which makes trucks and buses. Bharat Benz is a brand of DICV.
Daimler’s India story goes back to the 1950s when it first tied up with the Tata Group to make trucks. Today, Daimler is the only European vehicle maker in India that has every facet of its business — finance, R&D subsidiary for cars and trucks, and manufacturing base–for all its vehicle lines.

Mercedes Benz India which entered India in 1994, operated out of a small facility of Tata Motors at Chikale on the outskirts of Pune, before it decided to set up its own plant in India.

Starting 2009, with an investment of Rs 250 crore, the company has quadrupled its investment to Rs 1000 crore and a part of that went into the second plant, which was inaugurated on Thursday by the chief minister of Maharashtra.

Daimler had also committed investment into a full-fledged commercial vehicle manufacturing plant with the test track in Chennai in 2008 along with Hero Group, but the truck maker decided to call off the JV in 2009 and committed Rs 4400 crore on its own. And just fortnight ago it committed an additional Rs 425 crore in a bus manufacturing facility.

In two decades since the automaker set up its first base in India, last five years has seen a swift rise in both businesses. Bharat Benz has climbed to No 3 position in the medium and heavy truck space and the DICV operation has already started exporting trucks. Mercedes Benz India, on the other hand, which was relegated to No 3 position, has now become No 1 in the first five months of this year, according to industry executives.

The automaker’s increased focus on India has brought several key board members to the country in the last five-six months. Among them were Dieter Zetsche, chairman of board of management, Wolfgang Bernhard, head of global trucks and buses, and Till Conrad, head of region overseas for Mercedes Benz Cars.

Although Mercedes Benz was the first luxury carmaker to enter India (1994), it lost ground to its German rivals BMW and Audi, which came in later. The company had to make a dramatic shift from being perceived as a chauffeur-driven car meant for elderly business people to a brand that appeals to the youth and even the women.

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Led by new generation compact cars, the SUVs and the new design language, Mercedes Benz regained the No 2 positionfrom BMW a couple of years ago, and, according to industry insiders, it is already gunning for the No 1 position in 2015, led by new products and increased localisation.

Marc Llistosella, the head of Daimler Trucks Asia and the key architect of DICV, said India is significant and very well exposed in the ‘Daimler World’.

The company (DICV) has already sold over 22,000 units in the last three years. All its trucks sold in India are developed by an Indian workforce with over 85% localisation.

In the local truck market, the Bharat Benz brand has grown to hold about 8-10% market share. In the southern markets of Kerala, Karnataka and Tamil Nadu, it holds 20-40%. Since the launch of Benz trucks in the country in 2012, Tata Motors’ market share in the segment has fallen by over 10% to 50%.

According to Llistosella, with a pan India roll out by 2017, Bharat Benz hopes to garner at least 20% of the overall market for 9-tonne to 49-tonne vehicles. He hopes to export at least 25% of the production.

Sour