Daimler ready for next big growth phase in trucks, buses

Erich Nesselhauf grins when I prod him to go down memory lane in his India journey.

“From snakes and scorpions in a greenfield project to a production hub has been an interesting 10-year journey,” responds the CEO and Managing Director of Daimler India Commercial Vehicles.

He isn’t exaggerating. The sprawling facility at Oragadam near Chennai was actually infested with reptiles when the German auto-maker took its first baby steps in this part of the world. Everything had to be built from scratch, which included setting up the plant and supporting infrastructure, a robust supply system and planning for the right products.

As if this was not enough, Daimler had to deal with the realities of the global slowdown in 2008, which meant an adjustment of its business plans. The Lehman crisis had paralysed the world and most companies were shelving big ticket investments. Daimler hung in there and weathered the storm while preparing to take on established players like Tata Motors and Ashok Leyland.

The BharatBenz story

“Yes, we have come a long way since then,” says a visibly satisfied Nesselhauf, who believes that the BharatBenz brand, now a familiar name in the truck segment, had truly transformed the Indian commercial vehicle industry “in a way nobody would have expected”. He also makes no bones about the fact that Daimler put competition under “tremendous pressure”.

As Nesselhauf reiterates, BharatBenz was the reason for rivals to “pull up their socks”, especially in areas like truck modernisation and aspects like safety. “We have shaken up the industry with new technologies and safety features,” he says.

Apart from this, the company went the extra mile in taking its suppliers, comprising blue-collared workers and not managers, overseas for training. “They now understand our processes and systems, which has helped them become part of our global programmes,” says Nesselhauf.

The effort has clearly paid off considering that 50 million components are now shipped out of India to various Daimler operations across the world. “We also export to 40 different countries, which shows that if we had not invested in systems, parts, processes and quality, this would not have been possible,” he adds.

This investment has also yielded rich dividends for the vehicle’s well-being. While the normal life of a truck in India is 5 lakh km on an average, after which overhauling of the engine is inevitable, some of the BharatBenz models are still going strong after a million kilometres. “We were determined to have products that outperformed those from competitors not only in fuel efficiency but also in ability,” says Nesselhauf.

Localisation

Daimler has achieved localisation levels of over 90 per cent for its bus and truck range. This has helped strike the right balance between “Indian costs and German quality” in order to become a significant player in the subcontinent. The fact that millions of key parts are exported is sufficient proof of the quality levels attained in this effort. Additionally, fully-built vehicles are also shipped out, which includes a wide range of brands like the Mitsubishi Fuso, BharatBenz, Mercedes-Benz and Freightliner.

“We are not driven by market share but believe in profitable growth, which is much more important,” reiterates Nesselhauf. The good news is that Daimler India Commercial Vehicles turns profitable this year and is looking to the future with confidence.

Future challenges

There is, of course, a lot of hard work ahead with Bharat Stage VI emission norms due to become a reality barely two years from now. “BS VI is the most difficult emission norm we need to fulfil. It is challenging since there will be a lot of modifications to be done. BS IV was a piece of cake in contrast,” says Nesselhauf.

This is because there will be mapping changes and a different after-treatment system involved in the transition. All is not easy to achieve but the company believes it is “much better prepared than anyone else” in the technology, which will involve big investments.

And while Nesselhauf has no quibbles about the clean air drive, he says what needs to be urgently addressed is to have a scrapping policy in place for old trucks that still pollute roads. Merely having BS VI-compliant vehicles is akin to putting the cart before the horse and will not help in the overall clean-up effort.

Meanwhile, demand for medium and heavy commercial vehicles has been on the rise in recent months thanks to the furious pace of road construction as well as other infrastructure activities. Neeselhauf expects the next two years to see this level of robust growth continuing before the BS VI regime formally sets in.

Critical growth period

What this will mean in demand still remains the great unknown since the new trucks will be more expensive thanks to investments. Daimler, however, believes that this period will be critical to its growth since it is more than confident of meeting the BS VI challenge.

“The period from 2020 onwards will benefit Daimler for sure and people will appreciate technology especially if it is from someone who understands it and has the experience,” says Nesselhauf. This confidence also stems from his belief that customers appreciate the BharatBenz brand for its high quality of German engineering produced in India. “We will continue to grow and the strong base has been readied over the last 10 years. Today, market sentiment is very positive and we have a bright future especially with our BS VI technology,” says the Daimler India chief. Going forward, the company sees bigger prospects with more transport/connectivity solutions coming in and becoming an integral part of the landscape.

In this bright backdrop, Nesselhaulf is still irked by the fact that the attitude here within the automative ecosystem continues to be defensive. He narrates an incident when an ancillary supplier asked at a meeting where the country could get technologies for electrification in cars.

“To me, this was an awful question since nobody has more engineers than India and you still expect someone to bring future technology. This is truly a shame,” he says. According to him, the time has come to change this attitude and India should bring technology to the world and lead the way.

“In my view, this is a mindset issue and India should work on advanced technologies, which could be supplied to the world,” insists Nesselhauf. He believes a start could perhaps be made with environment protection where India could become the cleanest place in the world.

“Obviously mass change cannot happen overnight but there are some really clean cities in place already,” declares the Daimler India boss.

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