Munjals pull out of truck JV with Daimler

Although reports from Frankfurt said that dwindling finances forced the Hero Group to focus on its core business of motorcycles and pull out of the JV, Hero Corporate Services chairman Sunil Kant Munjal blamed the drop in commercial vehicle sales. Truck and bus sales in India fell by 22% to 3.84 lakh units in FY 2009 due to the slowing economy. The sales of heavy trucks dropped by 37% to 1.48 lakh.

"We will not like to invest in such an uncertain economic situation and have decided to venture out," he was quoted as saying. In March, Hero Group had pulled out of a joint venture with Ergo of Munich Re Group to launch insurance services in India. "I really regret the Hero Group's decision. Daimler Trucks will nonetheless enter the truck volume market in India," Daimler Trucks chief Andreas Renschler said in a statement.

"Nothing has changed regarding our plans to manufacture trucks in Chennai. I'm counting on continued good relations with the Hero Group, whose expertise on the Indian market is very important for us," he said.

Hero Group, which owns 26% in Hero Honda, the world's largest two-wheeler maker by volumes, has the widest distribution network in India and this could have come in handy for Daimler. Hero's distribution could have catapulted Daimler ahead of rivals such as Volvo and Navistar.

DHMC intended to opt for local production of light, medium and heavy-duty commercial vehicles for the Indian market, followed by production for the export markets. The light and medium commercial vehicles were to be launched by 2010, while the heavy commercial vehicles were to roll out by 2012.

The plant was meant to be commissioned in a 1,000 acre-plot at Chennai at an initial capacity of 70,000 trucks per year and provide direct employment to around 2,000 people. The new vehicles were to be variants of Daimler Trucks' portfolio and tailored to the Indian market. Daimler has five truck brands. Last year, utility vehicle major Mahindra and Mahindra (M&M) had pulled out of a tripartite JV with the Renault-Nissan alliance, citing lack of activity in the passenger car market. Meanwhile, Daimler's specialty trucks such as the Actros, targeted at specific applications like mining, will continue as a separate venture under Daimler India and be assembled at the company's Chakan plant in Maharashtra.

BUMPY RIDE

• Reports from Frankfurt said dwindling finances forced the Hero Group to focus on its core business of motorcycles and pull out of the JV
• Hero Corporate Services chairman blamed the drop in commercial vehicle sales for pulling out of JV
• The plant was meant to provide direct employment to around 2,000 people