The Hindu Business Line : Daimler-Hero venture to invest Rs 4,400 cr

Weighty pact: (From left) Mr Brijmohan Lall Munjal, Chairman, Hero Honda Motors Ltd; Mr Andreas Renschler, head of Daimler Truck Division; and Mr Sunil Kant Munjal, Chairman, Hero Corporate Services Ltd, after signing a joint venture agreement for the manufacture of commercial vehicles in the Capital on Monday. —

Our Bureau

New Delhi, April 21 Daimler-Hero Motor Corporation Ltd would be the new joint venture company that would mark the alliance between the over $4-billion Hero Group and the world’s largest truck maker, Daimler AG. At a joint press conference here, the company announced an investment of Rs 4,400 crore over the next five years, of which Rs 1,386 crore would be in the form of foreign direct investment.

The Hero Group would be led by Mr Sunil Kant Munjal as the Chairman of the new company and would have 40 per cent stake in the joint venture. Daimler would continue to hold the majority stake. Mr Amit Chaturvedi, who had been associated with Hero Honda Motors Ltd as Vice-President (Operations), would be the Co-CEO of the new company.

Production capacity

Though the company is yet to finalise its manufacturing location, it has decided that the initial production capacity would be 70,000 units. The plant would begin with production of light and medium duty vehicles and later move on to manufacturing heavy duty vehicles. Going forward, Daimler also plans to make India a strategic hub for exports and for sourcing of components.

“Daimler contributes through its product development expertise, selling the vehicle and providing access of its global portfolio to the Hero Group. The Hero Group has service network, tremendous know-how of the local market and manufacturing capabilities,” said Mr Andreas Renschler, Member of the Daimler AG Board of Management and head of Daimler Trucks while explaining the rationale for choosing the Hero Group.

On the location of the plant, Mr Sunil Kant Munjal, Chairman, Daimler-Hero Motor Corporation, said: “We are in the advanced stage of discussions with three State governments. From 13 locations, we have now decided 3 — the most obvious ones are Chennai, Pune or a location in Haryana. We would like to build our plant at a place which has the infrastructure and supply chain,” he said.

As far as product development and branding is concerned, the top company officials remained reticent. Mr Andreas stated that the company would jointly produce new products suitable for the Indian market as well as localise some of the products from their existing product portfolio. The joint venture company would employ 2,000 people with its research and development arm located in the premises of its manufacturing location, he said.

Price hike

On Monday, Hero Honda admitted that it had increased prices of certain models in the range of Rs 500-1,000 since last week. “There has been sharp increase in the price of raw material. This is affecting not only Hero Honda but all manufacturers. When the excise duty cut was announced we passed on the complete benefit to the consumers. But now we are unable to absorb the costs,” said Mr Pawan Munjal, Managing Director, Hero Honda at the sidelines of the press conference.

Market players

The commercial vehicle industry is dominated by Tata Motors, Ashok Leyland and Eicher Motors Ltd, with the latter two having global joint venture partners like Nissan and Volvo. The company officials declined on their positioning in the market vis-a-vis the existing players who have an entrenched presence in the segment.

They, however, said that the industry was being driven by economy, the hub and the spoke model which was fuelling the growth of certain segments in the commercial vehicle segment and also specialised applications in the mining sector, amongst others.