Daimler Opens Massive Factory in India, World’s Fastest Growing Truck Market

CHENNAI, India — Daimler AG officially opened its massive plant here on April 18, as the world’s largest commercial vehicle maker tries to push its way into what has become the fastest-growing truck and bus market in the world.

Daimler, based in Germany, chose to go it alone here and have local engineers redesign two of its existing models for vehicles designed primarily to serve the domestic market for a brand new nameplate, BharatBenz.

In China, the other major emerging market in Asia, Daimler has a joint venture with Foton, a large Chinese truck maker.

Daimler said it has invested some $850 million in India to build the 400-acre plant and related improvements. At present, Daimler sells only a small number of its high-end Actros heavy-duty trucks in India, and almost all are for the mining and construction industries.

Chennai is located in the southeastern portion of the country, about 1,300 miles from the capital city of New Delhi.

Officials said they would begin offering trucks to customers this fall, with 17 models spread over five weight classes.

The two medium-duty lines are based on the Canter, which Daimler’s Fuso subsidiary sells in Japan and other countries, and three heavy-duty lines that use the Axor, a model Daimler sells in Turkey.

During an elaborate ceremony before the company’s top managers, local political leaders and the factory’s 1,500 workers, Andreas Renschler, who heads Daimler Trucks worldwide, called the new company’s vehicles “an ideal combination of German DNA and Indian engineering.”

BharatBenz’s engineers, he said, took the best of the two existing models and created vehicles that are uniquely suited to India’s difficult roadway environment, where many of the nation’s roads are not up to Western standards.

Renschler also said the vehicles will be price competitive in India’s cost-conscious market.

India is currently the third-largest commercial vehicle market in the world, Daimler officials said, with annual sales of around 340,000, and is likely to surpass North America for the No. 2 slot by the end of the decade. Commercial vehicle sales here rose 28.6% from 2010 to 2011, Daimler said.

The truck market in India is dominated by a domestic company, Tata Motors, which is also a major pro-vider of buses and cars. Two other domestic producers provide the bulk of the other trucks, all of which are primitive by Western standards.

Dieter Zetsche, chairman of Daimler’s board, said his company chose to make the massive investment in India because of the changing face of the world’s economy, as emerging countries like it and China — the world’s No. 1 commercial vehicle market — have become major producers. India has had average gross domestic product growth of 8% a year since 2005, he added.

“In the long run,” Zetsche said, “you could say: ‘If you can’t make it here, you won’t make it at all.’ Because a strong position in the global truck market requires a strong position in India.”

India has been on a truck-buying and road-building binge, as its economy grows rapidly and it becomes a major exporting power.

The government has pledged to award construction contracts to build another 5,500 miles of highway in the next year, according to Bloomberg News.

Marc Llistosella, who heads Daimler’s operations in India, told those gathered for the dedication that the company would begin by producing 2,000 trucks in its first year and 12,000 in the second. Daimler hopes to be able to sell 24,000 trucks by the third year, as the plant moves towards its 36,000-vehicle-a-year capacity.

India has several similarities to China in the truck market in that most of its domestic vehicles are cheap — but last only three to four years. There is virtually no used-truck market because the trucks have only scrap value after their short life spans.

These things make it more difficult for a quality producer such as Daimler to compete here successfully. That led Daimler to create its own Indian company, with nearly all of its parts produced locally on designs that are created by local engineers.

Selvi Jayalithaa, the chief minister of the Indian state that includes Chennai, said that it is her goal to make Chennai “the Detroit of Asia.” The sprawling city of about 5 million already is home to several automakers, including Ford and BMW.

Daimler has some history in India. Beginning in 1954, its new competitor — Tata Motors — produced trucks under a licensing arrangement with the German manufacturer; the vehicles were branded as TataBenz. Daimler officials displayed a 1954 model for an international press contingent at the plant’s test track before the dedication ceremony.