Daimler India Commercial Vehicles (DICV) is riding high after its truck business achieved break-even in India. The company has achieved the milestone in just over six years of operations after the launch of BharatBenz – a feat considered commendable at a time, when foreign competitors have found the Indian market a tough nut to crack. Daimler Buses India – a subsidiary of DICV – has also fared well with its buses clocking sales of 2,000 units in a year for the first time, posting a growth of over 70 % in its domestic business over the previous year.
Auto Tech Review met up with Satyakam Arya, Managing Director & CEO, DICV (Above), and Thomas Fricke, Managing Director, Daimler Buses India (Below), to understand how the company is gearing up to embrace the new BS VI emission norms among others.
STRIKING THE RIGHT BALANCE
The Indian bus market currently hovers around 40,000 units (up from 38,000 units a year ago) and continues to be the world’s second largest bus market. Daimler Buses is currently offering 36 products in India and has managed to achieve 95 % localisation of its portfolio complying with BS IV norms. Daimler Buses India plans to adopt a similar strategy to comply with BS VI norms and is focussing on the phase-wise upgradation of its entire portfolio, including BharatBenz 9-tonne buses in the school, staff and tourist bus sub-segments, Mercedes-Benz 15-metre multi-axle luxury coaches and bus chassis for the 9, 16 and 24-tonne segments. Fricke said the leapfrogging to new emission norms will necessitate a price hike of 5-20 %, besides increased fixed and variable cost of the vehicle. The introduction of additional components in exhaust train will comply with stricter emission norms, he noted.
The auto industry will face the trilemma of balancing between factors like particulates, CO2 and cost escalation due to technology upgrades. Any effort to reduce nitric oxides will lead to particulates and fuel consumption going up and any attempt to reduce particles will result in nitric oxide emission going up, although it brings in a positive effect on fuel consumption, Fricke explained. So the need of the hour is for OEMs to find the sweet spot, in terms of compromise. Fricke said BS VI is an opportunity to shift India’s bus market towards global standards.
Sales numbers across the Indian automotive industry are dwindling and general elections have exerted increased pressure on OEMs. Fricke said pre-buying of vehicles during the transition to high emission norms will boost vehicle demand. However, he was quick to point out that if the pre-buying kicks in late it will be tough for the industry to pump in supply. Any additional investments to meet pre-buying-powered demand have to be balanced with low demand that will also follow over the next two years after the implementation of BS VI norms in April 2020. DICV is not looking to focus on the 16-tonne dominant State Transport Undertaking (STU) bus market since the segment continues to grapple with tight margins. The company is keen to target the open market as it is flexible for its portfolio specifications and meets the cost involved. Fricke said such tenders generally have criteria like steel suspension, simple features and low horsepower chassis, whereas DICV has air suspension with retarder in the 16-tonne chassis, which is not required in a STU business.
RIDING A GROWTH WAVE
DICV sold around 22,500 trucks in the domestic market and exported over 7,000 trucks, registering a growth of 35 % and 28 % respectively in FY 2017-18. The Oragadam plant has also emerged as the global sourcing hub for medium-duty transmissions for trucks that meet the European market commitments for Daimler AG Group. Further, DICV also production of 100,000 units in 2018 at its Oragadam plant, near Chennai.
Arya said while the industry is fast-forwarding towards safety regulations along with new emission norms, DICV is keen to capitalise on its eight-year experience of dealing with Euro 6 norms to build capacities, while complying with BS VI norms. The aim to is adapt the technology to Indian driving conditions based on market insights to create market suitable products and bring in advanced technologies as and when the market is ready at competitive prices, Arya noted.
The industry is facing headwinds with the introduction of new axle load norms and liquidity crunch, even as sales are expected to remain subdued in the segment. As far as DICV’s future focus areas are concerned, it intends to accelerate product development and double its network expansion for BharatBenz over the next two years, from currently 180 touchpoints to 350 touchpoints, with one located within every 100 km. Additionally, DICV is also focussing on digitising its customer interface that will be supported by ERP-based digitisation as well as mobile telephony, to become more customer-centric and offer more customer value.
DICV is also extending support to Tier I suppliers to develop products that comply with stricter emission norms. Arya claims the move will provide the company with an opportunity to expand its portfolio to more than 50 products. Legislation, body building timeline along with availability of BS VI-compliant components for commercial vehicles will play a crucial role during the transition from BS IV to BS VI norms, said Arya.
TEXT: Anirudh Raheja