Hero Group has decided to pull out of its joint venture with Daimler Trucks of Germany for manufacturing commercial vehicles.
Hero Group has decided to pull out of its joint venture with Daimler Trucks of Germany for manufacturing commercial vehicles, ostensibly due to its inability to commit large investments to an entirely new category of vehicles in the current economic environment.
“It was thought best to maintain a conservative outlook in the current situation and that is why we decided to end this JV,” Sunil Kant Munjal, chairman, Hero Corporate Services, told DNA from Germany.
The JV was formed last year with an investment blueprint of about Rs 4,500 crore (€700 million) over five years. It was to begin manufacturing 70,000 light and medium commercial vehicles per year from a greenfield facility in Chennai.
Daimler has agreed to buy out the Indian partner’s 40% stake in the JV, Daimler Hero Commercial Vehicles, for €16 million ($21.2 million). The company said it would go it alone in the Indian market and was committed to bringing in the entire envisaged investment.
“I really regret the Hero Group’s decision, but Daimler Trucks will nonetheless enter the truck volume market in India,” said Andreas Renschler, Daimler executive board member responsible for sales.
Daimler would rename the company after acquiring Hero’s shares and would initially produce light, medium, and heavy CVs for the Indian volume market.
Production of trucks for export to other emerging markets would be launched on a later date.
Some experts feel Hero’s pullout wasn’t entirely over investments. Difficulty in dealing with what is known in the auto industry as the “German” attitude could also be a reason.
An industry veteran claimed differences had cropped up between the two partners and the local partner had started resisting the Germans’ control and analysis of the Indian market.
Others say volume expectations from the high profile venture were disproportionate with investments required of the Indian partner.
An expert said Daimler may look for another Indian partner and could even consider contract manufacturing possibilities.
Before zeroing in on the Hero Group, the German giant had done extensive trial runs at the erstwhile Daewoo India’s Surajpur facility in Uttar Pradesh, now owned by B V R Subbu-promoted Argentum Motors.
Daimler Trucks is the world’s largest producer of commercial vehicles by sales and comprises the Mercedes-Benz, Freightliner, Mitsubishi Fuso and Western Star brands, as well as Thomas Built Buses. The division sold 472,100 vehicles in 2008 and posted revenue of euro 28.6 billion.
Hero Group is the largest two-wheeler manufacturer in the country.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}