April 18 (Bloomberg) -- Daimler AG will start building trucks at a new factory in southern India beginning in the third quarter as the German company looks to challenge Tata Motors Ltd. in the fast-growing market.
The manufacturer of Mercedes-Benz vehicles will introduce 17 models ranging from six tons to 49 tons by 2014, according to Daimler statements released in Chennai today. The factory will initially have a capacity to make 36,000 trucks a year and raise it to 72,000 units, the company said.
Daimler, which is spending 44 billion rupees ($853 million) in the country, plans to have 70 dealer locations by the end of this year to win customers as India builds more roads and boosts trade. The Stuttgart-based company will join Navistar International Corp. and Volvo AB to try and dent the dominance of Tata Motors.
“If Daimler can match Tata on price and beat them on reliability, then they will do very well in India,” said Deepesh Rathore, the New Delhi-based managing director of IHS Automotive in India. “Trucking in India is changing slowly to the hub-and-spoke model and as that happens, customers will increasingly look at safer and more comfortable trucks.”
Tata Motors, which makes trucks ranging from 0.5 tons to 49 tons, had a 58 percent share of India’s 809,532-unit truck and bus market in the year ended March 31, according to data from the Society of Indian Automobile Manufacturers.
Sales of Tata Motors’s heavy and medium trucks grew 8.7 percent in the year ended March 31, compared with the industrywide increase of 8.8 percent, the trade group’s data show. The company has five truck factories and sells through 1,173 outlets.
Daimler will expand the number of dealers to more than 100 by 2014, it said in the statement. The trucks to be sold in the country will have 85 percent local content, it said.
“We are optimally positioning ourselves for one of the world’s strongest and fastest growing truck market,” Chief Executive Officer Dieter Zetsche said in the statement.
Truckmakers are counting on India to award construction of 8,800 kilometers (5,468 miles) of highways in the next 12 months to boost vehicle demand. Asia’s third-biggest economy could increase spending on roads, which carry about 65 percent of the nation’s cargo, to $145 billion in the five years to 2017 from about $69.8 billion in the previous period, according to a PricewaterhouseCoopers study.
The newer roads come as the country seeks to boost exports to $500 billion by 2014 from more than $300 billion in the year ended March 31, which could further bolster cargo traffic.
Sales of medium and heavy trucks are projected to almost double to 500,000 vehicles by 2020 from 270,000 last year, according to IHS.
Daimler, which is also the world’s third-largest maker of luxury cars, aims to increase truck sales in markets such as China, India and Russia to drive growth. The company said in February it’s targeting sales of 700,000 trucks by 2020 from 426,000 last year.
Daimler, which also makes Freightliner trucks in the U.S. and Fuso models in Asia, is rolling out commercial vehicles tailored for the demands of emerging markets. Daimler received final approval from China’s government in December to make trucks in the country under the Auman brand. Its trucks in India will be sold under the new BharatBenz badge.
The truck business contributed 25 percent of Daimler’s revenue in 2011, according to data compiled by Bloomberg.
The German truckmaker originally formed a venture with New Delhi-based Hero Group to run the Chennai facility. It took control of the operations in 2009 after Hero pulled out.
Daimler’s history with Tata goes back decades. In 1954, the German automaker signed an agreement with Tata to assemble medium-duty Mercedes-Benz trucks for sale in India. In March 2010, Daimler sold a 5.3 percent stake in Tata Motors, which controls the Daimler brand.
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