Daimler's 60% stake in bus & truck JV with Hero

NEW DELHI: German auto major Daimler will hold 60% stake in its commercial vehicle joint venture in India with the Hero group holding the remaining 40%. The total investment in the project will be around Rs 3,500 crore, although the final numbers are still being worked out. Daimler’s investment in the venture will be around Rs 1,650 crore. This pegs the equity component of the Rs 3,500-crore project at around Rs 2,750 crore.

While Daimler and Hero had announced plans for a JV earlier this month, but they did not give out the details then. These figures were communicated by the German company to the government last week. The proposed Rs 3,500-crore investment makes this JV the biggest of the four commercial vehicle partnerships announced this year, namely Tata-Iveco, Nissan-Ashok Leyland and Volvo Eicher.

The Nissan-ALL combine has announced investments worth around $500 million (Rs 2,000 crore) while the Volvo-Eicher JV is valued at around $768 million (Rs 3,100 crore). M&M’s JV with Navistar subsidiary ITEC had recently announced investments worth around Rs 2,500 crore.

The JV will focus on both domestic sales and export of trucks and buses and also work out global sourcing of components from India. It will cover designing, manufacturing, distribution, selling, sourcing, aftersales, engineering services and R&D of commercial vehicles above the 2-tonne gross vehicle weight (GVW) for the domestic and overseas markets.

It also covers “related products and components” and would be used to “source components from India for Daimler AG global requirements”. Apart from assembling products from Daimler’s global portfolio, the JV company will also “undertake R&D activities in relation to new products and variants”, says the proposal. Daimler AG would provide technology and knowhow to the JV company through a tech licence agreement.

Daimler has also got no objection letters from former partners, Tata Motors and Force Motors. According to the proposal submitted to the government, Daimler AG has already “informed Tata Motors of its proposed plans going forward in India and has obtained a no objection dated May 25, 2007”. The German company also informed Force Motors and obtained a no objection dated July 18, 2007.

Daimler continues to hold around 6.7% stake in Tata Motors and a licence agreement with Force Motors to make a certain range of diesel engines and parts. The focus on R&D and new products could be an indication that the JV will spawn a range of locally-developed models that Daimler may then source for other emerging markets as well. Given the boom in the Tata Ace segment, light trucks could be one of those options.

Though the JV, interestingly, leaves the sub-1 tonne segment alone focusing on 2-tonne and above GVW instead. Hero group’s arch rival Bajaj Auto is also developing its own light truck in the Ace segment, to be showcased at the Auto Expo.

India’s Rs 30,000-crore commercial vehicle market has been going through a lean phase with real growth coming mostly from the light commercial vehicle segment. Both medium and heavy goods carrier segments have been either flat or negative in the April-November period. The action in the light CV range is mostly on account of the performance of the Tata Motors Ace.