Daimler, the world's largest truck maker, is betting on its high-quality and technologically superior BharatBenz commercial vehicles in India as it looks to win a piece of the world's fastest-growing truck and bus market.
The initial purchase price (of such trucks) may be a single-digit percent higher than others, but BharatBenz products have a total ownership cost that is value for money, said Andreas Renschler, Daimler's trucks head.
Daimler's trucks will be 10 percent more fuel efficient than their Indian rivals, the company said as it officially opened a 44 billion rupee ($853 million) plant on a 400-acre plot an hour's drive from India's southern city of Chennai, in an area dubbed India's Detroit for its concentration of automakers.
India's roads transport around 65 percent of the country's freight, but are typically plied by old and inefficient trucks, precariously piled with cargo strapped down by rope and covered with tarpaulins flapping in the wind.
Stuttgart, Germany-based Daimler, which also makes its luxury Mercedes-Benz cars in India, is banking on transport companies stumping up for its advanced technology, but could face a pricing challenge in a developing market.
Our focus is the modern domestic segment which has much higher standards than the majority of trucks on Indian roads today ... Work-life and durability will be much larger than comparable trucks, Renschler said.
Daimler Chairman Dieter Zetsche said it is possible the company could join with Renault-Nissan
Of course, it could be possible to do something together in India, said Zetsche. There's nothing in the planning right now but I would not exclude that.
Commercial vehicle sales in India have more than doubled over the past six years to around 800,000 per year, outstripping car sales growth, as construction booms and infrastructure development increases in Asia's third-largest economy.
Newcomers have found it tough to crack a market dominated by local manufacturers Tata Motors
Daimler's foray comes after global rivals such as Navistar International Corp
Foreign truck makers, operating alone or in joint ventures, account for around 15 percent of sales in India.
At Daimler's plant a handful of workers milled around a 435-metre long assembly line, India's largest, as dozens of robots and truck parts lay still. The plant, Daimler's third-largest outside Germany, will begin production this fall.
With a maximum capacity of 72,000 trucks per year, the plant is likely to produce only 5,000 vehicles in 2012.
Daimler will begin exports from the plant next year and will ramp up local content to account for 90 percent of parts by 2015, said Marc Lilstosella, chief executive officer of Daimler India Commercial Vehicles, its fully owned subsidiary. It also plans to source parts in India for its factories elsewhere.
Daimler, which will have more than 100 commercial vehicle outlets in the country by 2014, plans to export parts from the Indian plant to other markets in Asia as well as the Middle East.
($1 = 51.5650 Indian rupees)
(Editing by Tony Munroe and David Holmes)