India’s two wheeler manufacturer Hero Group and Daimler AG, the world’s largest truck maker, on Monday signed an Rs 4,400 crore Joint Venture contract to build commericial vehicles in India.
Approval for the new company was issued by the Indian government in March 2008, and the two partners now plan to proceed rapidly with the implementation of the joint venture.
The Daimler Hero Motor Corporation will initially produce light, medium, and heavy-duty commercial vehicles for the Indian volume market under a new brand name. The search for a suitable production location is currently under way. Negotiations are being conducted with three Indian states. The talks are expected to conclude shortly.
Daimler Hero Motor Corporation Ltd., the joint venture company will start manufacturing commercial vehicles in 2010. The new company is aiming to achieve a localisation rate of up to 80% in order to optimally utilize cost advantages. Production of commercial vehicles for export to other emerging markets will be launched at a later date.
The Hero group will hold 40 per cent equity in the joint venture, while Daimler will have the remaining 60 per cent stake. The German company Daimler would invest Rs.1,386 crore in equity, while Hero group would be putting in Rs. 900 crore to take 40 per cent stake. Overall investment by both the companies through equity and debt is estimated to be Rs. 4400 crore
Marc Llistosella, who directed the joint venture project from the Daimler side, will become CEO of the Daimler Hero Motor Corporation. Amit Chaturvedi, currently President, Strategy and Business Development, at Hero Corporate Service Ltd. and project leader from the Hero Group, will serve as Co-CEO. Mr. Sunil Kant Munjal will be the chairman of the new company’s Board of Directors. The company will be managed jointly by the two partners.
“Today is a further important milestone for Daimler Trucks and our Asia strategy,” said Andreas Renschler, member of the Daimler AG Board of Management and head of Daimler Trucks. “In the Hero Group we have found an ideal partner, as the two companies perfectly complement one another in terms of the experience and expertise they contribute to the joint venture.
The fact that the negotiations and the approval process ran so smoothly makes me very confident that the establishment of the new company will proceed just as rapidly and successfully.”
Hero has a proven track record of managing long-term relationships with business partners. The Daimler Hero Motor Corporation has been conceived as a long term business by both sides, where we’ll be able to contribute our complementary competences and to learn from each other”, Mr. Sunil Kant Munjal, Chairman of Hero Corporate Service, said. “This joint venture has been planned against a backdrop where large parts of India are increasingly getting connected through trade and commerce, so the growth upside in the long term is strong.’’
