By T Murrali:
Daimler India Commercial Vehicles Pvt Ltd (DICV), the wholly-owned subsidiary of the German company Daimler AG, is providing variety of solutions globally through its parent company. Earlier the company manufactured trucks only for India, and then started exporting CKDs followed by components. Now it is systems and transmissions that would be followed by engines in future.
DICV manufactures commercial vehicles under three brands, Bharat-Benz, Mercedes-Benz and FUSO. It has recently added Freightliner to its portfolio. It has been sending CKD kits to its partner plants in Kenya, South Africa and Indonesia.
Now DICV exports systems and modules from India to its headquarters in Germany. It exports also transmissions assembled at its plant at Oragadam, near Chennai, to the headquarters. Erich Nesselhauf, MD & CEO of DICV is elated to share with this correspondent that the transmissions assembled at the company have been mated to the engines manufactured in Germany and hauling trucks there. “We also have a hub here for the medium-duty transmission products and for the first time have begun their export to the Daimler global network. We may assemble engines also for the export markets,” he said.
DICV’s game plan is utilise capacity to the maximum. The company has exported about 15 million parts so far. DICV produced one thousand CKDs in 2017; this year it has already done more than thousand, crossing last year’s target in six months.
The products are mainly vehicles for construction equipment and all kinds of trucks. Exports are to Indonesia, South Africa, Kenya, Vietnam and many other countries; every country has a different kind of kit.
When it comes to exports of systems and modules, currently the focus is on engines and transmissions. “Transmissions, including AMT, are put together here and go as a completely assembled piece. It goes to Germany now and in two to three years these units will go to different countries; the first shipment has already reached the destination. All medium-duty transmissions in future will be produced only in India which will become a hub for that. They will start sending Euro-6 engines from 2020 by which time they would have developed a common engine for use in India and other countries,” Nesselhauf said.
All these call for expansion of both DICV and its suppliers. Nesselhauf explained, “We see a shift in the product segments with more use of high tonnage and multi-axle trucks. From 16 tonne we have gone higher to 20, 25, 31, 37 tonne and so on. So we see a clear shift to higher tonnage and more horsepower. Now we focus on certain components for higher tonnage, not much on entities where there is less order intake. It might come back depending on how the government reacts to all the pollution in the cities. With BS-IV coming in and with BS-VI to follow, as also the huge increase in population with consequent increase in transportation, there will be much demand for trucks, which will give us a chance to clear our entire product backlog.”
“We see this happening with more modern and professional fleets coming in. Customers are looking for very reliable trucks as the fleet has to run 24×7. Safety, environment-friendliness, detecting driver-drowsiness are all important issues that fleet companies look at as the accident rates in India are one of the highest in the world. Customers are now willing to pay more for driver comfort like air-conditioning, which they were reluctant to do earlier. GST has also cleared the hold-ups and delays at check-points during the journey. All this has made it more comfortable for the driver; he can now drive around 800 km a day compared to 300-400 km earlier; it comes to 20,000 km per month and more than two lakh km a year,” he said.
When asked about the holistic growth pattern that India is experiencing in the automotive industry and how the company is able to foresee and leverage opportunities to grow further, Nesselhauf said, “Compared to last year we have experienced significant growth; our monthly output is more than double. Also, our global demand is much higher than the domestic market. The vehicles we have developed for India have also been sold in countries like New Zealand where standards are higher. We have a huge order book and we have changed from ‘build-to-stock’ to ‘build-to-order.’ It’s quite different from the past where we built up a vast stockyard, allocated vehicles to different dealers, and hoped for the best.”
“Last year we produced built-to-order as the order intake was high month after month. We have ramped up our production according to availability of parts from our suppliers. We are sorting out issues with some companies, but our monthly production has doubled from last year. The order book position is good and comfortable from domestic market as well as on the global level,” he said.
On a query whether any new markets were added recently, Nesselhauf said the company caters to more than 40 export markets as of now. Recently it has added one more FUSO truck model (between 6.5 and 8.4 tonne), which is meant for exports; this model has been in series production since couple of months and is being exported to the Middle East. In future the company hopes to tap Latin American market as well.
When asked about the Freightliner production, he said, “In four months we have fulfilled our forecast. One year’s outlook has been produced in four months for the Mexican market. Now we have to produce a little bit more of the 12T and 25T, as the acceptance is good.” Currently DICV makes these two models of Freightliner. The Oragadam facility complements the Frieghtliner’s Mexican plant in manufacturing the models that are not locally produced in North America.
Asked about the kind of goodwill DICV has earned after introducing the Freightliner and the positive vibrations the plant has been getting, he said, “It doesn’t have anything to do with Freightliner. We produce Bharat-Benz, Mercedes-Benz and FUSO. All these come from the same plant with the same quality, with different kinds of upgradation to ensure customer satisfaction; the combinations we produce are of the same high quality. We have an international test track here in India adapted to local conditions. Everything is engineered here.” The company makes twenty plus models in one production line with nearly 400 variants encompassing different kinds of horsepower, wheel-base, transmission, seating configuration, etc as the company has to cater to different market regulations.
It is a seamless operation but how do they sequence or liaise with suppliers on the movement of parts, matching the production requirements? To this Nesselhauf said, “Clear forecasts based on one month / three months / six-month intervals and based on needs as well. We have online suppliers as well as JIT (just-in-time) ones. All bulky parts including frames and cabins come from the belt in and around Chennai. All big parts come from a maximum of 40 to 50 km radius, with axles just 20 km away. We also have dedicated lines with some of our suppliers (about 350), who have the capacity to ramp up when required. Indian engineers can do a lot if given the right opportunities. There are nearly 15 million components of our models, some of which we export.”
On the capacity building exercise at DICV and the need for an additional line for the export orders, he said, “This plant has been planned for 72,000 units annually. We can extend and balance the line better to improve efficiency. We can add on a paint shop if required. We don’t need to have a second plant. This runs on two shifts and we can add one more if necessary. We can also extend the line depending on the type of trucks to be produced; smaller ones have shorter TAKT times.”
As an OEM, the company has all this flexibility but Tier-1s have limited tractableness; it’s worse with Tier-2 and Tire -3 companies. In this scenario how does DICV oversee the Tier-1s and the value chain? To this he said, “We reach out to all the suppliers from Tier-1-to-3. We discuss with them well in advance all capacity increases and take necessary steps to achieve them, like investing in new tools and parts. All our suppliers have a good outlook about our future, how we want to go. The question is whether everybody believes you because in India nobody knows what changes are likely to come. For example, with BS-VI would capacities come down? It’s the biggest opportunity for top-grade technology. If the government is smart and implements the scrap policy on old vehicles from April 1, 2020 it would maintain the increases we have thought of. India, anyway, has no other choice; out of 15 most polluted cities in the world, 14 are in India. I think the government will have to do something, especially bring emissions under control to stay relevant on the global scale. Euro-6 and BS-VI are the best for the latest technology; the faster we do it, the better will it be for us.”
But there could be issues faced by OEMs in packaging these things especially in the exhaust when the wheel-base is shorter. For example, in mining and construction, tipper trucks have to manoeuvre with a lot of systems in-between the hot-end and the cold-end of the exhaust pipe. What challenges will they have to face, particularly in Indian conditions? To this Nesselhauf emphasised, “One thing is clear. The BS-VI truck requires a completely different type of packaging. You have to shift and re-arrange many components in a restricted space. Is it possible? Yes. I say this with confidence as we have built-up the right configuration and tested it for real conditions in India; it’s a big opportunity to update the truck to operate in these surroundings. India should not look behind but move forward.”
All these translate into more opportunities in the aftermarket. The penetration level is key to success for any vehicle manufacturer. The mean time between call and repair should be minimal as the customers would always like to keep the vehicle moving. “The mean time would be within four hours; that is our benchmark. We have set up more dealers; we have about 150 in India. Generally, we would like to get the vehicle back on the road in 24 hours. We try to minimise the waiting time for customers. Of course, there are exceptions to the rule like serious accidents. For construction companies we have service people and workshops at the site to ensure the truck is continuously working. We want to be closer to the customer. For someone with 20 trucks, it makes sense that we go to him rather than he comes to us.”
On the plans for increasing the touch-points from the present 150, Nesselhauf said, “We have recently handed over one more but I don’t think we need any more as the current dealers are all geared to sell our products profitably. They need to be modern. Our trucks now don’t go to any old-time mechanic because customers need to have the best parts and service to get the vehicle quickly back on the road. The life expectancy of our trucks increase day-by-day; all our five-year old trucks have run the maximum kilometres and are still in use. We have to build in a much higher life period.”
That is an ongoing challenge for all OEMs. He concluded, “Every year we improve the quality. Now we have gone to the next level and upgraded it to last longer, so that the customer really feels it. For us, it’s important to give customers the best product possible. There is no need to overhaul our engines or the vehicle even after four lakh to five lakh km or three years. The truck must be on the road 24×7 to earn for the customer. Cost of ownership must be low and uptime always high; this is what we have achieved in our quality journey.”