The slowdown in truck sales in the country has claimed the nascent joint venture between Europe’s Daimler and local two-wheeler giant, Hero.
The Hero Group on Wednesday withdrew from the joint venture company, Daimler Hero Commercial Vehicles Ltd, citing the tough economic conditions and slackening demand in India.
Daimler said Hero would focus on its core business and return its 40 per cent stake in the J-V to its Daimler Trucks unit. It did not disclose any financial details. The venture would be renamed once Daimler buys out Hero’s stake in the company.
Confirming the break up, Hero Corporate Services chairman Sunil Kant Munjal said the group would like to maintain a conservative profile. "We are disengaging ourselves from the joint venture, which would now be run by Daimler. In such economic conditions it is not prudent for us to invest so heavily,” he said.
The J-V had intended to set up a new plant in Chennai with an investment of Rs 4,400 crore. Daimler was supposed to invest Rs 1,368 crore and Hero was to put in Rs 900 crore.
“I really regret the Hero Group's decision, but Daimler Trucks will nonetheless enter the volume truck market in India,” Daimler board member Andreas Renschler said. He pointed to the domestic Indian market’s continuing “strategic significance” for the group’s growth in Asia. Daimler Trucks will invest more than $932 million in India over the next four years, Daimler said.
The joint venture was initially expected to focus on light and medium commercial vehicles, developed in line with the needs of Indian consumers. A range of vehicles was supposed to be launched by 2010.
It had also planned to enter the heavy commercial vehicle segment by 2012.
The Indian commercial vehicle market is valued at Rs 43,765 crore. At present, it is dominated by homegrown Tata Motors, which has a commanding 65 per cent market share. Other leading players are Ashok Leyland and Eicher Motors.
The segment has been reeling under the impact of the recession with domestic sales declining by almost 22 per cent in 2008-09. Exports have also slid by 27 per cent during the fiscal.