BharatBenz is a true success story wrought in a short span based on the fundamentals unique to Germany and India. It was a perfect mixture of processes, quality, and standardisation from Germany with the Indian flavour of creativity, speed and cost-consciousness. In 2006 Marc Listosella was assigned to explore the Indian market potential for Daimler Trucks. In 2008 he became the Managing Director and CEO of Daimler India Commercial Vehicles. “Till January 2018 we have sold 62,000 trucks which are on Indian roads. Nobody but some Indian players has achieved this. The brand is very settled here.We have reached over 90 percent localisation with 345 suppliers; of these only 20 were known to Daimler before we came into the game”, Marc Llistosella, who is now the President and CEO of Mitsubishi Fuso Truck and Bus Corporation and Head of Daimler Trucks Asia, told T Murrali of AutoParts Asia, in an exclusive interview which unfolds the rare success story of Daimler in recent years. The excerpts:
Q:How was your journey for Daimler in India?
A: It has been a long journey and India was always a second home to us. My family and I will really miss all the sunlight, the dawn and sunrise we got here as well as the people, sights and sounds, the diversity of India. In spite of the problems the people are largely happy; that is the spirit of India. We always felt welcome here.
On November 4, 2005 I was sitting in Germany on a grey, dizzy, rainy afternoon where you could not see the sun. There were two of us discussing where we should go, how we should expand; that is how India came into view and the whole thing started. Till January 2018 we have sold 62,000 trucks which are on Indian roads. Nobody has achieved this other than some players in India. For the first seven years here, I never drove a status symbol like the Mercedes Benz, because for me the priority was to ensure we became profitable in this country. My first car here was the Toyota Innova; I still have it. It is a good example of being cost conscious.
When we first came here I knew we had to change our paradigms completely. We had to adapt to the Indian way, not vice versa. Of course, in processes our employees had to adapt to German ways.But in terms of cost awareness, creativity, and use of capital resources, both financial and human, we were Indianising ourselves. The company today is a perfect mixture of processes, quality, and standardisation from Germany and a strong Indian flavour of creativity, speed and cost-consciousness. This is one of the most exciting start-ups that Daimler has done over the last 50 years because we had new brands, new markets, new teams, new suppliers, new dealers – everything built from scratch.
Q: For the first time Daimler had localised the 5Cs, the cylinder head and block etc; haven’t they done it before?
A:Yes, our strategy was very clear. As a child I was always given the freedom by my parents to create things, which stood me in good stead when I came to India. It was a lucky time for us. We started with a partner who then left us; we were in crisis, short of cash, with everything reduced to the minimum. But we soon overcame all those:the Mumbai terror attack of 2008, after which nobody wanted to come to India, the Leeman Brothers’ fall and crash crunch. We jumped from one crisis to another, overcoming all.
The first thing that we built was the test track, in March 2010, which is the nucleus of our products, because we said the products come first, not the status symbols. Our core team was very small, just 100 people whom we kept for one-and-a-half-years. We fought massively to get the Benz brand here; the powers that be felt we would lose our reputation if we made it in India. We wanted a classical logo, future-oriented and trustworthy, but different from the usual type.BharatBenz emerged. The brand is now very settled here, and dealers are making money; that leaves me very satisfied. All our efforts over the last six to eight years are coming to fruition.
Q: You started your career in sales in 1994 in different markets. But in India you had to set up a plant and establish a brand.How did you manage?
A: I have two master’s degrees in economics, marketing & banking; that is my academic background. It was just coincidence that I ended up in sales. It was a good experience. Initially, I was in sales for three years. After that I was doing contract hiring – hiring and leasing trucks. Then I landed up in strategy for four to five years where I was able to see the economies of scale, the global matrix, management cycle and became aware of fixed cost digression and different facets of plant engineering.
I spent time in China, Korea and Japan and then was given the challenge to set up facilities here which, I am proud to say, was very successful. We have reached over 90 percent localisation with 345 suppliers; of these only 20 were known to Daimler before we came into the game.
Q:Was such high localisation a first for Daimler?
A: Yes, there is no precedence to it.
Q:Was this a Daimler directive or the plan of your team?
A: It was the plan of our team. We believed that if we import anything we will not be cost competitive; we have to create the supplier base here ourselves. Then we were told to get a partner. We had umpteen discussions and went through the entire automotive sector.Finally, we did it the hard way; everything by ourselves. We established all the processes, procedures, guidelines and compliance based entirely on our belief, not someone else’s.
Q: What were the disruptions you experienced in India during your tenure?
A: By disruptions I would say the basic knowledge of the people when it comes to non-academics. Academically Indians are good but when you ask an engineer to work on an engine you realise he has never touched one. There is a complete separation between the hands or craftsmanship and the brain. This is something that is completely different with engineers in America or Europe who want to do things with their own hands. We trained our engineers to be different; if you can’t touch the product we don’t need you.
Another disruption was the many statutory approvals we needed. Nobody ever gave us a list of the total approvals required; it always came in bits and pieces.We have now documented the whole process; we know exactly what we need and from whom you can get it. Everybody was complaining about this, but we have been able to put it together; we never made any shortcuts, never compromised our integrity. We have always been a good example of clean management with an ethical way of doing business.
Handling dealers was much easier though we were told otherwise. We got hundreds of applications when we advertised for dealers. In Germany people are generally negative as they are much older (average age is 46 plus) but in India folks are younger (about 28) and willing to take risks. The risk-taker here is totally different from the one in Germany. We were told we could never build up a proper dealer network but today we have 134 points-of-sales-and-service with our dealers becoming more profitable.
Till 2012 the market was stagnant with no improvement but with us a lot of things came into it.Of course, we crushed the profitability of all our competitors.For them the only way to stop us was to discount everything, and they still do it. Discounting is the wrong way because you really destroy your brand, and your profitability dips.We are on the way up; we have sold in India so far this year over 17,000 trucks (our order intake is 18,000 plus), compared to last year’s 13,000.
Q:Did demonetisation impact the 2016 sales?
A: It had certain impact; it was a stagnant year. Every expert predicted that BS-IV would come in 2013-14 but nothing came then; GST came in 2017. All these regulations, now in our favour, made life easier for us and difficult for our Indian competitors. Soon BS-VI will come; we know how to do it, but it will be a killer for our competition. Our advantage is that we can fall back on our parent company which has been doing Euro-VI for some time now.
The other thing is we kept our employee numbers stable at 3,000 between 2013 and 2017. Now we have made a massive increase due to the second shift. We are today exceeding 2,000 per month in HD (25T and above) production, without exports, which is very good. We have exported nearly 10,000 vehicles from India, mainly HD. We are the only one in the world producing the four brand portfolios of Daimler trucks in one plant out of India. America is not producing anything; they have only Freightliner and Western Star, not Fuso. DICV is producing Fuso, Bharat Benz, Mercedes Benz and Freightliner.
Q: Were all these pre-planned or did they come in due course?
A: The brand Mercedes was never planned; it was a dream we achieved a year-and-a-half ago. Freightliner was not even dreamt of but when the opportunity came we grabbed it. We did have a business plan that included our supplier network which we followed meticulously. The localisation that we set was over 85 percent now it is 90 plus. We wanted a dealer network that exceeded 120 points of sales; we are now at 134. We had a delay of 12-18 months because the market had completely crashed; the numbers we have now could have been reached earlier,in the perfect world. Even in this we had a positive cash flow last year in 2017. EBIT-wise we are still negative but that was planned; 2018 will be the calendar year where EBIT will break-even.
Q: Moving on from India to Daimler Trucks Asia, what was your experience?
A: The strategic idea was born in 2012 when we decided to combine the two power houses – the growing younger one and the established older one – to bring the two markets together, Japan and India as a core, unite the strengths and make the two brands one as Daimler Trucks Asia. In 2014, I had unfortunately to leave India and we lost nearly one year because of that. The plus point was that I got the experience of handling the sales department of Fuso for nine months.
In April 2015 I had to take over full responsibility; what I learnt here was a Green field and then I had to do a hard, brutal Brown field because we had an exchange of nearly 3,000 people in Fuso – out 3000 and in 1,500. We had to internationalise the whole company; they hardly spoke English but now English is a common language. We changed the whole management team, the quality costs – we put quality as the nucleus of the company and halved the product costs – and reduced warranty recalls by nearly 50 percent (from nearly USD 300 million to USD 150 million). We changed the product portfolio and introduced the Supergrade which is a perfect HD truck now. We also brought in medium duty and up-scaled a lot of global applications of these trucks, bringing BharatBenz and Fuso closer.For Fuso we are utilising the supplier base from India more and more. Many Indians followed me to Fuso; that’s good as it brings the two companies closer. Now, after three years with the company, I would say the Brown field is concluded, though not completely, with our profitability in double digits in Fuso for 2017.
We had an increase of order intake by 26 percent in Daimler Trucks Asia as a group including from India.India is smaller in volume; we have done about 24,000 units including exports, which is an increase from the 17,000 last year. In Fuso alone DTA grew from 141,000 to 171,000 trucks and buses covering all the brands, which is huge. We are very optimistic that growth will exceed this year so within Daimler trucks globally, DTA with Fuso and BharatBenz will not be the smallest in terms of volume.
Q: Will DTA surpass some other Daimler brands?
A: Mercedes Benz is selling fewer trucks than we, but they have higher value. We have changed from Brown field to Green field; an example is our Kawasaki plant which now is clean, structured and modern.
Q: How many plants do you have in Japan?
A: We have one lead plant in Kawasaki, Toyama bus plant, transmission plant, CKD plant, about four plants for body-building, and at least 12 to 14 CKD plants in the world. The plant in India is the second biggest for DTA; the first one is Kawasaki and the third is in Jakarta, Indonesia.
Q: How do you compare the Green and Brown field initiatives since it is easier to start from a clean slate than to re-build or refurbish?
A: With the experience of the Green field I was prepared for the Brown field as I had to do everything from A to Z – accounting, facility management, production, logistics, customer service, parts business, sales, financial services, funding, treasury, HR, tax, etc – the entire array.In order to build everything, you must know at least a little bit about all parts of the business – supply chain, procurement, quality management, computer-aided engineering, vehicle applications – a whole bunch of functionalities, of which nearly 60 to 70 are core ones. With all this knowledge when you go to a new company you know what has to be done, how to begin. At the end of the day, forming a cohesive team by integrating different work cultures will be your biggest achievement.
Q: People here respect those coming from outside, so they are easily mouldable. However, in Japan they are culturally moulded in a certain fashion. Changing them to suit your requirements would have been difficult. How did you manage?
A: Yes, that’s true. The funny thing is that people in Europe consider India more of an achievement than Japan, but I say that,from the resistance and reluctance to change, Japan is a much higher achievement than India. Now we have created an environment where the Japanese and Indians respect each other, where we have taken the best from both cultures to add to the German way of working.
Q: What are the significant learnings from India for Daimler HQ?
A: India is a use-case from which we can take lessons out; it contributes to the best practices we have evolved. Here, at the periphery, you have to do things; at HQ you only talk about it. With the parts / supplier availability we have shown Daimler units across the world that you can source quality from India. In 2017, 75 percent of the parts exported from India were to Japan.
Q: Is there any unfinished agenda for you at DICV and DTA?
A: Yes, I wanted 20 percent market share; that is unfinished, but I think it is achievable. Also unfinished is to reach double digits for DTA in a normal year. Electrification of the CV business remains to be done. The electrical grid here is not stable enough. If the government steps in to improve it vehicle electrification could be done in five to six years. Power chargers fed by solar energy would be a positive step for all the major cities.
Q: Do you see a scenario where even the HD trucks would be electrified?
A: My opinion is, yes. I think it would be faster than we expect as we are at the tipping point of technology; once we cross that point the spread would be much faster. The current lithium battery is not sufficient. We need development in battery technology but the incentivisation and focus has to be there, it has to be channelised. We are at the beginning of a new curve; a new technology is rising.
Q: But there is a catch. You don’t have raw material for batteries and rare-earth material for motors?
A: Solutions will be found; history bears witness to that. Perspectives have to change. We cannot afford to get stuck in old paradigms. We have to change our outlook. I am sure this technology will be applied in EVs over time. Even the street or road will contribute to inductive charging. Nano technology would help to get energy from the Sun; the paint on the road surface could act as a solar panel.
Q: Lastly, your views on the global CV industry?
A: First, autonomous driving will come massively in the next three to five years with sensor technology spreading out far and wide. It will be seen in taxi services, more and more in cities. It will be a major disruption. A truck without a driver can keep moving for 24 hours without a break. We will see further consolidation; in India there will be dramatic changes with the existing players. With more investments required for electrification, companies may change their portfolio completely.
We will see concentration of the major players, and a massive attack from the Chinese that would come in the next five years; with electrification they will try to change the balance of power. Last year China made one million medium and heavy-duty trucks while India did about two hundred thousand; it was five times more. With this base they have a scale that nobody else in the world has, not even the Americans. Intra and inner urban transport in China will be totally electrified; every second bus in their cities is already electric. That will come to the rest of the world.
However, there is one material that is the bottleneck; it’s not lithium or graphite but cobalt. Cobalt will be the limiting factor as it will be in use for a maximum of five years.About 60 percent of the world’s cobalt comes from the Congo; that is where China has made huge investments.We will have to find replacements soon.
Q:What will happen to mass employment once autonomous cars, trucks and buses come? Will not millions of driver jobs vanish?
A: Earlier, before the motor vehicle was invented, the horse or the camel was the mode of transport, with millions of people looking after them. It’s a similar analogy with the drivers. As technology improves, new methods evolve, and consequently new skills are required. That’s what will happen in the auto industry. Disruptions will take place, crypto-currency may come in, different functionalities will happen. All these would affect labour; they will have to change as and when required. This will not only affect drivers but also the mechanics, dealers, lawyers, journalists and others, across the entire gamut of all industries. Cloud computing will also play a major role in future. The world will dramatically change between 2015 and 2035 especially with Artificial Intelligence (AI) taking firm root and, according to Moore’s law, technology doubling every 18 months.