Daimler will pay 16 million euros ($21.2 million) for the remaining 40 percent in its Indian heavy truck joint venture after dwindling finances forced local partner Hero Group to focus on its core business of motorcycles.
Referring to the significance of India as “a key to a completely new generation of products,” Daimler Trucks said on Wednesday it would invest more than 700 million euros over four years to enter and eventually use the subcontinent as a bridgehead to other emerging markets.
The two partners had originally planned to divide the investment in proportion to the size of their stakes.
“I really regret the Hero Group’s decision, but Daimler Trucks will nonetheless enter the truck volume market in India,” said Daimler Trucks chief Andreas Renschler in a statement on Wednesday.
“Nothing has changed regarding our plans to manufacture trucks in Chennai. I’m counting on continued good relations with the Hero Group, whose expertise regarding the Indian market is very important for us.”
Daimler, the world’s largest commercial vehicle maker, had hoped its JV with Hero would allow it to compete better against rivals like Volvo, which has a deal with India’s Eicher Motors, as well as Tata Motors Ltd, Ashok Leyland and Mahindra & Mahindra.
Daimler agreed in December 2007 to locally produce light, medium and heavy-duty commercial vehicles with the Hero Group, which controls 26 percent of India’s leading motorcycle maker Hero Honda.
The German group had forecast market potential of 500,000 units by 2018, translating to annual growth rates of 7 percent on average versus 2006 — almost twice as much as the global truck market. Demand for heavy duty vehicles weighing over 16 tonnes would rise by an even faster 10 percent per year.
Daimler plans to use to low cost base to export a type of premium commercial vehicles tailored for emerging markets.