Hino, VW to jointly explore global trucking landscape

It was precisely a week ago when Volkswagen Truck & Bus and Hino Motors of Japan announced that they were coming together in a ‘mutually beneficial strategic long-term partnership’.

This would include cooperation in logistics and traffic solution research, conventional powertrains, hybrid and electric powertrains, as well as connectivity and autonomous driving systems.

The press conference in Tokyo had the global chiefs of the two companies throw some investing insights on the prospects of this interesting alliance.

Yoshio Shimo, President & CEO of Hino Motors, said the automobile industry was facing a “massive, once-in-a-century transformation” where the rapid expansion of e-commerce and other businesses had created a shortage, as well as ageing, of drivers.

“Additionally, in rural areas, train and bus lines are being phased out and an increasing number of people is struggling with basic transportation needs. We cannot meet our customers’ demands by just providing the same value as we did in the past,” added Shimo.

This is where Hino Motors and VW Truck & Bus share “this sense of urgency” and were committed to taking a lead in providing solutions for customer needs. Andreas Renschler, CEO of VW Truck & Bus, agreed with this view saying that the changes in the transportation industry come along with a need for further investments and technology capabilities.

“We are convinced that by joining our forces to tackle these challenges, we will be able to turn challenges into chances and create additional value for our customers as well as for our owners,” he said.

Synergies in Asia

From Renschler’s point of view, the coming together of Hino Motors and VW Truck & Bus represented a cooperation between two strong partners in the global transportation industry who share a passion for transport solutions that look to the future.

Hino Motors has a strong presence in Asia which VW Truck & Bus will hope to leverage in this partnership. This business model has worked successfully with the Daimler-Mitsubishi Fuso Truck and Bus alliance as also between Volvo AG and UD Trucks.

In both these cases, however, there is a distinct ownership template in place. Daimler has a near 90 per cent stake in Mitsubishi Fuso while Volvo bought out UD Trucks (formerly Nissan Diesel) in 2007.

Hino Motors, on the other hand, is a subsidiary of Toyota Motor Corporation and the teaming up with VW is clearly a non-equity alliance. Yet, that does not take away the fact that tremendous synergies can be contemplated, especially in Asia, where Hino has a formidable footprint. VW Truck & Bus, on the other hand, has an advantage in Europe and Brazil while looking at growth in North America through its recent 17 per cent stake acquisition in Navistar. Its two big brands are MAN and Scania where the parent company is pulling out all the stops for synergies at the back-end.

This point was driven home at a press meet in Munich earlier this week where the VW management spoke of the role of lead engineering in the expansion of brand cooperation and leveraging synergies. To elaborate, one brand is given project responsibility for the joint development of a component platform and this way, technologies are used across brands and new ones developed to market maturity more quickly.

Further synergies can be had by introducing a modular system for commercial vehicle powertrains. Here, the design of individual components will enable their universal application as modules in buses and trucks.

On the face of it, the sky is the limit for Hino Motors and VW Truck & Bus. Clearly, India could be an integral part of this alliance though it is way too early at this point in time to predict what could happen.

The reality is that from the VW side, MAN and Scania are present in the country but hardly pose a threat to established players like Tata Motors and Ashok Leyland. Further, it is still not clear how MAN and Scania plan to collaborate here in terms of back-end synergies. Multinationals like Daimler have been hugely aggressive too and its Chennai plant has become a global manufacturing hub for brands like Mitsubishi Fuso, Freightliner, Mercedes-Benz and, of course, BharatBenz.

Likewise, Volvo and Eicher have teamed up to create a powerhouse at Pithampur, Madhya Pradesh, which makes trucks and engines for other markets. To that extent, the Hino-VW partnership will have its work cut out in building an India presence though the potential of this market is immense.

The other reality to be reckoned with is Chinese presence in the form of Geely which has recently acquired stakes in both Volvo and Daimler. This only means that the mobility landscape will see some interesting dynamics playing out in the coming years.

Financing avenues

Coming back to VW, it was in 2015 when the group decided to bundle its truck and bus brands — MAN, Scania and Volkswagen Caminhões e Ônibus — under the umbrella of an independent legal entity: VW Truck & Bus GmbH. The company is now on its way to capital market readiness and potential stock market listing which will open up new financing opportunities for future investments.

“We are just really getting things going. Thanks to our strategic partnerships, we are now present in relevant key markets. We have ambitious plans for 2018 and are working with great motivation and manpower on its successful implementation,” declared Matthias Gründler, CFO of VW Truck & Bus, at the Munich meet.

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