FIBRES Research

Daimler presents BharatBenz for India

The new entrant in the Indian CV market

FIBRES Research (CVBU)

December 2011

Foreword
The story called BharatBenz

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India has been standing tall among the global ruins ever since the world was hit by the financial tsunami in 2008. Post the 2008 crisis, Indian truck market galloped with high rates of growth partly due to low base but largely due to genuine demand for commercial vehicles (CVs) propelled by robust economic growth. Given the abysmal growth rates as recorded by the global CV markets, the worlds largest CV maker (above 6 tonne category), Daimler AG decided to land on the shores of the Indian market to forge a partnership with Indias Hero Group in 2008. However, due to the economic uncertainty arising due to 2008 crisis, Hero Group withdrew from the joint venture in 2009 and Daimler decided to go solo in the Indian market, though it was not initially willing to part ways! It also realized that that just by assembling the completely knocked down (CKD) kits of trucks will not help it to get a strong foot hold in the fast emerging worlds one of the largest CV markets. Post the split and this realization, Daimler went into a huddle to have a re-think over its India strategy. Given the attractiveness of the Indian market, it decided not to quit India and take the split as a blessing in disguise. With this positive attitude, Daimler devised a fresh strategy and thereby decided to give birth to an altogether new brand specifically for India, something it has never done before. On February 17, 2011, Daimler revealed its new brand and logo, BharatBenz, to the amazement of everyone. Under BharatBenz, Daimler strategized to build India business from scratch a very bold step of which it had no experience to fall back on or a blueprint to refer to! With a determined mind, Daimler went about revealing nuggets of its strategy India pricing, stripped-down versions of global truck platforms, end-to-end India manufacturing, high levels of localization, developing Services as a strong business etc. which made many CV makers to sit up and take notice. And coupled with its strong Benz brand recall in India, it looked like a serious competitor emerging on the horizon. This made it imperative to have a deep dive into Daimlers India Strategy under the garb of BharatBenz and be prepared to welcome the new entrant with a proactive mind. In the light of this, we welcome you all to read about the story called BharatBenz

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Contents of the report

Sr.No.
1 2 3 4 5 6 7 8 9 10 11 12

Topics
The Paradigm Shift Strategic intent of Daimler India CV birth of a new brand Leading the paradigm shift Inception, Vision, Values & the Brand BharatBenz Leadership Team and the Advisory Council BharatBenz Manufacturing and Sourcing Strategy BharatBenz Product and Aggregates Strategy Pricing Strategy of BharatBenz trucks Network planning Strategy BharatBenz After sales model & IT strategy Implications Emergence of the new middle market SOWT analysis of BharatBenz Conclusion What Tata Motors should do?

Page nos.
4-9 10-11 12-13 14-17 18-21 22-27 28 29 30-35 36-37 38 39

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The Paradigm shift!!

India is changing As India grows to be a an economic super power, it will witness a paradigm shift in the consumer behavior which will in turn lead to a shift in product offerings Daimler intends to ride on this paradigm shift

Over the years, our experiences have evolved for the better, enabled by innovation all through
Innovation has driven change and will now lead to the paradigm shift

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Music on the move

Converse on the move

+ = + +

The ALL in One

Click in a giffy

Gateway to a virtual world

Consumer is the first beneficiary,

Organizations who innovate for this consumer create immortal brands

Communicate on the move

Customers & Users drive this shift ; Organizations which are able to foresee this enjoy long term differentiation

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Product
Quality Technology Accessibility Serviceability Sustainability

Experience
Reliable Competent Convenience One Stop solution Life cycle involvement

Superior Products, Innovation are a necessary condition, but will not be a sufficient condition for Brand Differentiation. Consumer experience will play a bigger role as product differentiation will cease
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The Auto Industry too has kept pace; and so focus should now shift to Customer & Consumer Experience

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Products have changed

Retail infrastructure has changed

Need to focus on Consumer Experience Product Brand needs to complement the Retail Experience

Convenience of Reach

Any time Service

Skilled Manpower
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Dealerships paradigm is set to change as it faces the OEMs and the customers and both are changing at a fast pace
Change is the only CONSTANT
Limited choice Premium Driven Limited Access to Information Limited financial leverage Inadequate infrastructure

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More demanding Value driven One World No time lag between developed and developing economies Boom in business as financing paradigm changed High pace of infrastructure change Roads, Ports, etc. Global leaders drive competition Latest technologies harness global strengths Concepts like CRM and 24 X 7 Demand Driven Highly regulation driven Emission, safety etc.

Customers

Less Competition Little investment in innovation / change Less Customer Focus Production Driven Little regulation

OEMs

In India, we have examples of paradigm shifts in many spheres IT industry Telephony Health Tourism BOT roads Micro finance Small Cars All of the above show that leap-frog against natural progression itself is a paradigm shift

Success of same products varies across locations. Today it has become imperative for the Network to deliver on..

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INFRASTRUCTURE
Reach & Coverage World Class

MANPOWER
Quality, Skilled and Employability

MANAGEMENT
Professional and Transparent

BEST PRACTICES
Ethics & Compliance

CUSTOMER
Satisfaction & Retention

LOYALTY
Loyalty towards experience

Internalize learning and leverage it across businesses Build brand equity to attract and retain talent Participate in skill development of the country Mirror customer expectations to the OEMs

Inspired by this impending change, Daimler plans to challenge FIBRES Research established conventions and induce shift

The Strategic Intent of Daimler AG for India 4-pronged approach

PRODUCT OFFERINGS

World tested, reliable products made affordable to Indian Mass Market Look at long term partnerships. Lead the desire of partners to grow. Participate with the customer in his entire business lifecycle Processes to enhance workflow reliability and Zero defect operations

NETWORK APPROACH

CUSTOMER ENGAGEMENT

SYSTEMS & PROCESSES

HOW?? Introducing BharatBenz for India

thereby establishing 5th brand in its global truck portfolio
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India gets special importance Birth of a new brand especially for India
Till recently, Daimler Trucks were manufactured and sold under its 4 major brands globally Mercedes-Benz, Freightliner, Western Star and Fuso. Recognizing Indias potential, it created a new brand BharatBenz especially for the Indian market in 2011 Daimlers Global Truck Brand portfolio

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Given the uniqueness of the Indian market, Daimler recently introduced a new brand BharatBenz especially for the Indian market

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Leading the Paradigm shift!!

How Daimler plans to execute its strategic intent?? Here we go

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Introducing Daimler India Commercial Vehicles (DICV) Inception, Vision, Values and the Brand
Daimler AG incorporated Daimler India Commercial Vehicles (DICV) in 2008 in order to build its trucks locally in partnerships with Indian suppliers

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Vision
Delight customers and transform the Indian CV industry

Values
Passion, Respect, Integrity, Discipline and Fairness

Daimler initially entered into a JV with Hero Group in 2008 with 60% stake by Daimler and 40% by Hero Group. However, due to recession in late 2008, Hero Group withdrew from the JV, leaving Daimler to raise its stake to 100%, thereby converting it into a wholly-owned subsidiary. Backed by Daimlers legendary technological standards and an in-depth understanding of the Indian truck market, Daimler India Commercial Vehicles (DICV) intends to build a robust, reliable and performance-oriented trucking solutions for the Indian market. And these trucking solutions will be launched under a newly created brand BharatBenz signifying Benz technology meshed with Bharats market insights. 13

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The BharatBenz Leadership Team

Daimler India Commercial Vehicles (DICV) leadership team comes with a diverse mix of global expertise along with local market insights
Functions related to Product Engineering and Procurement & Logistics are headed by the Germans, whereas the other key local functions like Sales & Marketing, Finance, HR and Manufacturing related areas are headed by the Indians thereby trying to mesh German engineering expertise with Indian market knowledge and experience Daimler has about 400 employees on its rolls which includes both the nationalities Germans and Indians. Additionally, it employs about 500 engineers in its R&D centre which it plans to double by 2013. By the time the plant is ready, the companys total headcount is likely to touch about 3,000.

Marc Llistosella Managing Director & CEO

Erich Nesselhauf Vice President Procurement, PSSM & Logistics

Aydogan Cakmaz Vice President Product Engineering

Vijay Tuli Vice President Production Engineering

VRV Sriprasad Vice President Marketing, Sales & After Sales

Sanjiv Khurana Chief Financial Officer

T. Narayanan Vice President Human Resources, Legal & Compliance

Headed by Germans

Headed by Indians

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Who are these guys?? Background of Daimlers India Leadership Team

Based on the available information, we have drawn up the background of the key senior managers of the Daimlers India Leadership team so as to know their key strengths and expertise VRV Sriprasad (VP Marketing, Sales and After Sales)

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Earlier worked with Eicher in the Marketing Division for about 23 years before joining Daimler in 2008 Has a BE Mechanical degree from Coimbatore Institute of Technology

Sanjiv Khurana (Chief Finance Officer)

Earlier worked with Freightliner, Daimler Trucks as GM Finance & Controlling ( 1 years), Finance head for the Aftermarket and Specialty vehicles business of Freightliner, including Thomas Bus and Freightliner Custom Chassis. Responsible for M&A projects and transactions. Besides this, he has worked at American LaFrance, Delphi etc. with about total 20+ years of workex. Has an MBA, Finance, General Management (The University of Chicago - Booth School of Business), MS (Engineering) from University of Michigan

Vijay Tuli (VP Production Engineering)

Worked earlier at M&M Ltd. as Senior GM (Operations)

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Background of Daimlers India Leadership Team (contd.)

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Erich Nesselhauf (VP Supply Chain (Procurement, Supplier Management & Logistics)
Expertise in all functions of supply chain like Strategic Sourcing, Contract Management, Supplier Assessment and Development, Supply Chain Design and Quality Assurance, Project Management Member of Executive Committee at Daimler India Commercial Vehicles Pvt Ltd Member of various cross functional executive committees at Daimler India giving exposure to manufacturing, production planning and site readiness, labor and work force management and policy making, Product Planning and execution of product related strategies Member of Daimler Trucks Global Purchasing Management Team with responsibility to define and implement global procurement processes and policies, performance management and tracking, emerging market sourcing guidelines and ensuring Code of Conduct at all purchasing offices of Daimler Trucks & Buses Functional specialties - Global Sourcing - Procurement & Supplier Development - Supply Chain Design & Management - Project Management - Supplier Relationship Management - Green Field Projects - Partnership and Alliance Management - Organization Development & Human Resource Planning Graduated with Business Economist degree

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And to support the Leadership team, Daimler has formed a 5-member Advisory Council in India
Daimler India has put together a 5-member Advisory Council in India, which includes the following eminent people. The advisory council will be a sounding board for Daimlers Board Members on issues like truck financing, questions on suppliers, market reach and so on. By setting up this panel, Daimler is following the footsteps of other global MNCs such as Microsoft, Siemens, Bosch and Novartis in India.

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Daimlers Advisory Council for India

Mr. Baba Kalyani Chairman & MD Bharat Forge

Mr. Lakshmi Narayanan Vice Chairman, Cognizant Technology

Ms. Renu Karnad Managing Director HDFC Ltd.

Mr. Arun Ramanathan Former Finance Secretary

Mr. P.S. Raman Advocate-General, Tamil Nadu

A far-sighted step
The panel members represent a diverse expertise in the fields of Financing, Law, IT, Government relationships and Supplier relationships. This panel consisting of the leading luminaries of India Inc. is expected to familiarize the Daimlers Management team with the Indian business climate, its regulatory environment and the relationships. India will also house Daimler's TOS experts for South East Asia. Truck Operating System or TOS is Daimler equivalent of Toyota's Kaizen (or improvement) approach. These TOS experts would work with Indian suppliers in effecting dramatic efficiency improvements.

Establishing TOS Team for India and South East Asia

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Manufacturing and sourcing strategy

Manufacturing Strategy
Location: at Oragadam, near Chennai Area: ~400 acres of land area Capacity: Maximum manufacturing capacity of 70,000 vehicles p.a. Phases: Production at the plant will be defined in a two-phase concept, with first phase to have ~36,000 trucks in 2012 Also has a high quality painting and finishing line Test track Consists of test track spread over ~47 acres which was inaugurated in May 2010. (Refer page 25 for details) Production plan as indicated to the vendors
48,000 50,000 40,000 30,000 20,000 6,000 10,000 2012 2013-14 2015-16

28,000

Sourcing Strategy
Some critical components would be manufactured or assembled in-house and most of the other components will be sourced from Indian suppliers or global suppliers who have established production facilities in India. Nearly 12-14% of the manufacturing / assembly operations will be done in-house and the remaining will be sourced from established vendors.
Supplier base: The supplier base presently stands at around 200 and it is likely to go up to 430. Two key suppliers makers of frame and sheet metal parts will be housed within the factory. Localization plans: 85% from start which includes frames, axles, engines and all other major aggregates. Engines: The engines for the light and medium duty trucks will be contract manufactured and the ones for the heavy duty trucks will be manufactured inhouse at the DICV facility at Chennai.

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Birds eye-view of Daimlers manufacturing facility in Chennai, India

Artists impression

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Daimler planned its third global test track in India with Indian road conditions in mind implies its seriousness for India
Track for South Asia, but built in India Spread across 47 acres, the test track was inaugurated in May 2010. This test track is prepared as a testing hub and provides Daimler to thoroughly test its trucks for South Asia. The other major tracks are located are at Woerth, Germany and Kitsuregawa, Japan 3 tracks to test all types of road conditions Presently has two different tracks with one to be added in future: The three-lane outer track has a total length of 1.55 kilometers which is equipped with a noise pad and a jump section and is specially designed for testing the power train and driving noise The two-lane inner track is 1.16 kilometers long and includes a variety of India-specific poor road features like bump track, pothole testing and articulation sections. This track offers special testing opportunities, including a water trough, a dusty road and poor road surfaces. Facilities for testing gradeability and steering will be added in the near future The intent specially made with Indian conditions in mind
Marc Llistosella, the MD sees the test track as the successful product of German and Indian collaboration. Numerous customer studies and measurements were considered during the construction of the test track to ensure a realistic simulation of the road conditions in India. Our trucks will have to undergo a variety of tests to offer our customers high standards of product performance.

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3-lane outer elevation track

The cobble stone bump track

Articulation & pothole test track

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A picture is worth 1000 words! BharatBenz models being tested on the new test tracks

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Daimler claims that its trucks have already clocked 1 million kms of testing in India. Given below is the picture which shows Daimler's camouflaged trucks (LCVs & HCV) being tested on its new test track. Further, the test track would operate as an independent profit centre, initially for the use of Daimlers product testing, and later will be made available even to component vendors and non-core competitors for testing their products.

BharatBenz LCV Trucks

BharatBenz HCV Truck

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BharatBenz Product strategy Launch to begin in June 12; to introduce 16 trucks by 2014
Daimler plans to introduce 16 trucks in India under the BharatBenz brand until 2014
BharatBenz product platforms

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Product launch Map

25T GVW Haulage truck June 2012 49T GVW Tractor-trailer June 2012 12T GVW Haulage truck June 2012 25T GVW Tipper Sept 2012 31T GVW Haulage truck Sept 2012 31T GVW Tipper GVW: > 25 T 40T GVW Tractor-trailer Dec 2012 16T GVW Haulage truck 16T GVW Tipper 11T GVW Truck 9T GVW Truck 7T GVW Truck 6T GVW Truck

LCVs

GVW: 6-16 T
Localized

MCVs

HCVs

Localized

Deliver global technology at Indian price Tested for reliability LCV & MCV range of products based on FUSO Canter platform HCV range of products based on Mercedes-Benz Axor platform Products to offer lower Total Cost of Ownership to customer in terms of: Higher Service Intervals High Reliability Low turn around time Better Fuel Efficiency

Daimler plans to introduce its first set of trucks in June 12. After which it will launch a new model / variant every 2-3 months till 2014. It plans to come out with its HCV range first followed by the MCV range and then the LCV range

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BharatBenzs LCV truck range based on the Fuso Canter range

For its LCV range (6T to 7.5T), Daimler has the following options from its Fuso Canter range of trucks, which it is likely to bring to India under the BharatBenz brand

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The Canter LCV range

Below are likely specifications of the BharatBenzs LCV truck range in India as derived from Mitsubishi Fuso Canter platform
Fuso Canter truck range GVW (kgs) Engine Make Model Capacity (cc) Max. Power Max. Torque Range Maximum Speed (Km/h) Transmission Make Model No. of gears Type Standard tyres Front Rear Fuel tank capacity Dimensions Overall length (mm) Overall width (mm) Overall height (mm) Front overhang (mm) Rear overhang (mm) Wheelbase (mm) Turning radius (mm) FE 5 - 109 5500 FE 6 - 109 6500 FG 6 - 109 6000 FE 7 - 136 7500

Below is the picture of the camouflaged Fuso Canter LCV truck being tested on the Chennai roads

Mitsubishi Mitsubishi Mitsubishi Mitsubishi 4D34-2AT5 4D34-2AT5 4D34-2AT5 4D34-2AT5 3908 3908 3908 3908 110 HP@2900rpm 110 HP@2900rpm 110 HP@2900rpm 136 HP@2900rpm 275 Nm@1600rpm 275 Nm@1600rpm 275 Nm@1600rpm 370 Nm@1600rpm 4 x 2 range 4 x 2 range 4 x 4 range 4 x 2 range 101 Mitsubishi M025S5 5 speed Synchromesh 7.00R16 7.00R16 100 litres 6105 1995 2195 1145 480 3350 6000 101 Mitsubishi M025S5 5 speed Synchromesh 7.00R16 7.00R16 100 litres 6105 1995 2195 1145 1480 3350 6000 89 Mitsubishi M035S5 5 speed Synchromesh 215/75R17.5 215/75R17.5 100 litres 6105 1995 2435 1130 1475 3460 6800 104 Mitsubishi M035S5 5 speed Synchromesh 215/75R17.5 215/75R17.5 100 litres

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BharatBenzs MCV truck range based on the Fusos MCV platforms

For its MCV range (10T to 16T), Daimler has the following options from its Fuso MCV range of trucks, which it is likely to bring to India under the BharatBenz brand

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The Fuso MCV range

Below are likely specifications of the BharatBenzs MCV truck range in India as derived from Mitsubishi Fuso FK/FM MCV platform
Fuso MCV truck range GVW (kgs) Engine Make Model Capacity (cc) Max. Power Max. Torque Transmission Make Model No. of gears Type Rear Axle Make Model Ratio Standard tyres Front Rear Fuel tank capacity Dimensions Overall length (mm) Overall width (mm) Overall height (mm) Front overhang (mm) Rear overhang (mm) Wheelbase (mm) Turning radius (mm) FK 10 - 240 10400 FK 13 - 240 13500 FM 15 - 270 15100 FM 16 - 270 16000

Mitsubishi Mitsubishi Mitsubishi Mitsubishi 4M50-T5 4M50-T5 4M50-T5 4M50-T5 4899 4899 4899 4899 177 HP@2600rpm 177 HP@2600rpm 177 HP@2600rpm 177 HP@2600rpm 529 Nm@1400rpm 529 Nm@1400rpm 529 Nm@1400rpm 529 Nm@1400rpm Mitsubishi M060S6-0D 6 speed Synchromesh Mitsubishi D050H 4875 235 / 75 R17.5 235 / 75 R17.5 200 litres 8710 2170 2470 1135 2300 5210 8300 Mitsubishi M070S6-0D 6 speed Synchromesh Mitsubishi D052H 5428 265 / 70 R19.5 265 / 70 R19.5 200 litres 8710 2260 2535 1135 2300 5210 9100 Mitsubishi M070S6-0D 6 speed Synchromesh Mitsubishi D10H 4625 11R22.5 11R22.5 200 litres 6690 2470 2690 1245 1700 3680 7100 Mitsubishi M070S6-0D 6 speed Synchromesh Mitsubishi D10H 4625 11R22.5 11R22.5 300 litres 10305 2470 2680 1245 2915 6080 11100

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BharatBenz HCV range based on Mercedes-Benz Axor platform

Mercedes-Benz AXOR Cab options

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Below is the picture of the Mercedes-Benz AXOR 25T HCV truck being tested on its Chennai Test track

BharatBenzs HCV range will be based on the Mercedes-Benz AXOR model. Based on the understanding available from various sources, we have derived the following specifications of the BharatBenzs HCV truck range for India:
BharatBenz HCV range GVW Engine Make Model Capacity (cc) No. of cylinders Max. Power Max. Torque Transmission Make Model No. of gears Type Fuel tank capacity (options) Suspension Wheelbase (mm) Air-conditioning Power windows 2523 25 tonnes 3123 31 tonnes 4028 40 tonnes 4928 49 tonnes

Daimler plans a no-frills product range to conform with Indian prices and as such plans to keep AC, Power windows etc as optional

Mercedes-Benz Mercedes-Benz Mercedes-Benz Mercedes-Benz OM 906 LA OM 906 LA OM 906 LA OM 906 LA 6347 6347 6347 6347 6 in-line 6 in-line 6 in-line 6 in-line 231 HP@2300rpm 231 HP@2300rpm 279 HP@2300rpm 279 HP@2300rpm 810 Nm@1200-1600rpm 810 Nm@1200-1600rpm 1100 Nm@1200-1600rpm 1100 Nm@1200-1600rpm Mercedes-Benz G85-6 6 speed Synchromesh 250-400 litres Parabolic leaf spring 6000 Optional Optional Mercedes-Benz G85-6 6 speed Synchromesh 250-400 litres Parabolic leaf spring 5175 Optional Optional Mercedes-Benz G131-9 9 speed Synchromesh 250-400 litres Parabolic leaf spring 3600 Optional Optional Mercedes-Benz G221-9 9 speed Synchromesh 250-400 litres Parabolic leaf spring 4000 Optional 25 Optional

Daimlers engine line up for India Engine options that are likely to be used in BharatBenz trucks
Daimler is likely to have the following range of engines for its BharatBenz trucks in India: 110HP and 170HP engines for LCV and MCV trucks 230HP and 280HP engines for the HCV range
While Daimler will manufacture its HCV engines in-house, unconfirmed sources mention that it is likely to have a contract manufacturing deal for its LCV and MCV engines with Argentum Motors (led by Mr. BVR Subbu)

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Engines for HCV range

Model: OM 906 LA

Engines for MCV range

Model: 4M50-T5
(also has T3 & T4 low HP models) Electronically controlled water cooled EGR system Common rail direct injection diesel engine 16-valve DOHC intercooler-turbocharged Displacement: 4899 cc Power options: 140 HP @ 2600 rpm (T3) 160 HP @ 2600 rpm (T4) 177 HP @ 2600rpm (T5) Torque options: 412 Nm @ 1400 rpm (T3) 470 Nm @ 1400 rpm (T4) 529 Nm@1400rpm (T5) Max. speed: 101 kmph

For LCV range

Model: 4D34-2AT5
Turbocharged with intercooler 4-stroke, water-cooled, Direct injection diesel engine Displacement: 3908 cc 110 HP@2900rpm 275 Nm@1600rpm Max. speed: 101 kmph

In-line 6-cylinder engine with an exhaust-gas turbocharger and charge air inter-cooling Displacement: 6374 cc 3-valve technology Cooling: water-cooled Engine management: Electronic engine management system integrated in the Telligent drive management system Fuel injection system: Unit-Pump System (UPS) technology with single plunger fuel-injection pumps and centrally arranged 8-hole or 6-hole injection nozzles Injection pressure: up to 1800 bar (Euro 3) Performance data for models xx23 Maximum output: 170 kW (231hp) @ 2300 rpm Maximum torque: 810 Nm @ 1200 rpm-1600 rpm Performance data for models xx28 Maximum output: 205 kW (279hp) @ 2300 rpm Maximum torque: 1100 Nm @ 1200 rpm-1600 rpm Euro 3 Emission Level

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BharatBenzs Gearbox options (for HCV range) plans to bring in 6 speed and 9 speed gearbox range
Daimler plans to bring in its 6 speed and 9 speed gearboxes for its BharatBenz HCV range. Following are the gearboxes which it presently uses in its Mercedes Axor range and are likely to be the Indian options as well

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6 Speed gearbox range

Model: G85 6 The G 85-6 gearbox is an allsynchromesh gearbox with 6 forward gears and one reverse gear. It features a hydraulic gearshift.

Following are the options

9 Speed gearbox range
Models: G131-9 & G221-9 The gearbox G221-9 / G 1319 is a direct-drive gearbox with 8 synchromesh forward gears, one constant-mesh crawler gear and one reverse gear. It consists of a 4-speed basic gearbox with a pneumatic rear-mounted unit (range). It is shifted hydro-pneumatically.

G85 6 (Ratios) 1st gear = 6,70 2nd gear = 3,81 3rd gear = 2,29 4th gear = 1,48 5th gear = 1,00 6th gear = 0,73 Reverse gear = 6,29

G131 9 (Ratios) 1st gear = 9,478 2nd gear = 6,635 3rd gear = 4,821 4th gear = 3,667 5th gear = 2,585 6th gear = 1,810 7th gear = 1,315 8th gear = 1,00 Crawler gear = 14,573 Reverse gear = 13,862 Weight (not including oil): approx. 210 kg

G221 9 (Ratios) 1st gear = 10,187 2nd gear = 7,156 3rd gear = 5,129 4th gear = 3,833 5th gear = 2,657 6th gear = 1,867 7th gear = 1,338 8th gear = 1,00 Crawler gear = 16,15 Reverse gear = 14,907 Weight (not including oil): approx. 290 kg 27

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Pricing Strategy Global trucks at local prices

How they are able to make it cheaper? Global products and local prices!
Daimler plans to price its BharatBenz trucks just about 5-10% expensive than the existing truck models in the market of that of Tata and Ashok Leyland. Some of the pointers to this aggressive pricing strategy could be: Higher localization (85%) from the beginning at local prices Local manufacturing of engines contract & in-house In-house manufacturing of frames, axles, sheet metal parts etc. Local procurement of most of the components with a large vendor base (~50%) located within a 50 km distance of the mother plant in Chennai. Will also act a shield against currency fluctuations Huge tax benefits Full-fledged manufacturing in India helps in reducing taxes 110% customs duty for imported FBU 60% customs duty for imports of SKD kits 12% excise tax for locally manufactured trucks (including engines and other aggregates) No-frill / Stripped down versions of their existing models Mercedes-Benz Axor and Fuso Canter products. Basically, Daimler would provide a no-frill products without features such as AC, power windows etc. Additional revenue stream test track as a Profit Centre, i.e. it will lend out the test track to others even to its component vendors and non-core competitors which will help in augmenting its revenues, although it may not be a major revenue earner

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Network Planning Strategy Accelerated network ramp up planned covering 73 locations of the industry by 2014
BharatBenz is in discussion with 200 dealer groups who have expressed interest till date. However, the company plans to have about 70 dealerships which it feels can cover the entire Indian market. says Mr. Marc Llistosela, managing director and CEO of DICV

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Phase wise ramp up plans

Phase 1 By June 12, 7 locations will be covered Phase 2 Between July 12 to June 13, 63 locations will be covered (DICV: 34 and MMC: 29) Phase 3 By June 14, 73 locations would be covered Above these, it will have Regional Offices in major metros and Area Sales Offices in 10 prominent cities

Distribution network ramp-up plans

80 70 60 50 40 30 20 10 0 June '12 July '12 to June '13 June '14

(no. of locations)
Critical period of network ramp up during which DICV plans to launch most of its models

73

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Salient features of Daimlers Network planning strategy

Network planning based on point of sales and service requirements of customers Network approach worked out towards early dealer viability and a promise of high growth Facilitate world class dealership build up with larger areas of operations Will involve project monitoring tools since delays cause the highest cost Future proof dealerships with: Having Lean Infrastructure with built in expansion scopes Generating Long Term Association with clear 2nd generation visibility

Dealerships have been granted in Western and Southern India. For Central India, they have started allotting dealerships now. As far as North is concerned, some reports say that Daimler has appointed Mr. BVR Subbu as its distributor in the Delhi NCR region

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After sales model Focus on life-cycle approach towards customers

Daimler plans to have service outlets spread over 95 locations and covering 90% of the total market, right at the time of launch

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Daimlers After Sales Service Model

Long term Service Agreements

Insurance On site service

Highway Assist

nt e i l Sa tures fea

Participation in overall lifecycle of product Solutions beyond product to enhance peace of mind Onsite service solutions lessons from mining industry Empowered front end staff: Mechanic access to documentation Leverage technology Manuals / Training / Integrated operations

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FIBRES Research

Daimler Financial Services India Private Ltd.

k Quic facts
Officially launched as a Non-Banking Finance Company (NBFC) in July 2011 captive finance company as a 100% subsidiary of Daimler Financial Services AG Headquartered in Chennai and operating under the brand Mercedes-Benz Financial for cars and BharatBenz Financial for trucks Initial investment of US$ 50 million (~ Rs.250 cr.) Objective to offer financing, leasing and insurance products to dealers and customers of Mercedes-Benz cars (with immediate effect) and for BharatBenz Trucks (from 2012 onwards) Hopes to break-even in 4-5 years and aims to reach a loan book of US$ 500 million (~Rs.2,500 cr.) in India by 2016 Despite the likelihood of truck financing volumes being higher than car loans, the two businesses will comprise equal halves of Daimler Financials India portfolio in the coming years Human Capital Led by Mr. Siddhartha Nair, MD, the team consists of about 50 experienced industry professionals and more to join soon

Global Track Record

Daimler Financial Services operates in 40 countries worldwide. With contract volume of Euro 64 billion for 2.5 million vehicles at the end of 2010, it is one of the world's largest automotive financial services providers for passenger cars and the world's largest provider of financing for trucks, buses and vans. Also provides automotive insurance solutions with a contract portfolio of more than 1.8 mn contracts. About 40% of Mercedes-Benz cars and about 25% of CVs of the Daimler Group is financed or leased by Daimler Financial Services AG The Indian unit intends to replicate this performance in India

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Planned business model of Daimlers Financial Services business in India

Financing Business

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Dealership based model Has put in place an electronic point-of-sales system to Dealership based model Has put in place an electronic point-of-sales system to deliver speedy loan approval decisions and contract processing across all Mercedesdeliver speedy loan approval decisions and contract processing across all MercedesBenz dealerships. Benz dealerships. Finance contract sold under the product name STAR Finance and has various Finance contract sold under the product name STAR Finance and has various structural options like Step-up finance, Step-down finance and Bullet finance structural options like Step-up finance, Step-down finance and Bullet finance STAR Finance is also offered with a Balloon option where EMIs are lower with a large STAR Finance is also offered with a Balloon option where EMIs are lower with a large final payment that transfers ownership of the vehicle to the customer final payment that transfers ownership of the vehicle to the customer Margins Hopes to maintain a net interest margin (NIM) of 3% Margins Hopes to maintain a net interest margin (NIM) of 3%

Daimler Financial Services India Private Ltd.

Leasing Business

Leasing contract sold under the product name STAR Lease Leasing contract sold under the product name STAR Lease Leasing available based on choice of the vehicle, repayment period and anticipated Leasing available based on choice of the vehicle, repayment period and anticipated contract kilometer limit contract kilometer limit Helps the customer in knowing the vehicles future value upfront Helps the customer in knowing the vehicles future value upfront Lease product is bundled with insurance Lease product is bundled with insurance Got approval in July 2011 from the Insurance Regulatory and Development Authority of Got approval in July 2011 from the Insurance Regulatory and Development Authority of India (IRDA) to offer insurance India (IRDA) to offer insurance The company will be a corporate agent for Pune-based Bajaj Allianz with which it has The company will be a corporate agent for Pune-based Bajaj Allianz with which it has an exclusive tie up for insurance products an exclusive tie up for insurance products Will be sold under the name of Mercedes Benz insurance Will be sold under the name of Mercedes Benz insurance As per some reports, Daimler is likely to enter the As per some reports, Daimler is likely to enter the branded credit cards business in 2013 branded credit cards business in 2013

Insurance Business

Credit Card Business Fleet Mgmt Business

Globally it offers fleet management services but sources say that is unlikely to launch Globally it offers fleet management services but sources say that is unlikely to launch the same in India in near future. However, this remains an option in future the same in India in near future. However, this remains an option in future 32

TruckStore Daimlers brand for its Used Trucks business is

being planned to be introduced in India soon
Daimler is planning to introduce its Truckstore brand of Used Trucks business as part of its India strategy. While it may be too early to launch such an operation, the TruckStore business model caters to all brands of trucks which suggests that it can be used to exchange existing truck brands for BharatBenz trucks in the Indian CV market
TruckStore is a brand part of the Daimler Trucks division which began its operations in 2001

FIBRES Research

Quick Facts of Daimlers Used Truck business which is now a Europewide operation

Europes largest dealer for Used Commercial Vehicles with 31 centers in 15 European countries Trades in Used Trucks, Used Vans, Used Tractor units, Trailers, Semitrailers etc. of all types, with all bodies, of any age and of all brands like Volvo, Scania, Iveco, MAN, Renault, Mercedes-Benz, Mitsubishi etc. Consists of about 4,000 vehicles in stock on an average all over Europe. All the vehicles are classified as Gold, Silver and Bronze based on age, condition, mileage and service component of the vehicle (refer boxes below for more details) Comes with range of services like financing, leasing, rental, service contracts, buy-back and the TruckStore warranty Warranty It covers trucks of all brands and models of the categories Gold and Silver up to an age of 6 years. With duration of 12 months, the warranty covers the entire powertrain with respect to workshop costs in case of damage without any excess payable for the customers. Irrespective of the location of the customer, the warranty applies EU-wide without mileage limit. Virtual market The used CVs are also available on the online network of TruckStore where user-friendly menu navigation and an intelligent search function helps the customer to retrieve current vehicle photos, prices and detailed descriptions for used trucks in 15 languages

TruckStore was one of the first used truck dealers to introduce a clearly defined 3level-categorisation of vehicles. According to international standards, the trucks are categorized into Gold, Silver and Bronze as follows: Gold Vehicle maximum 4 years old TruckStore Warranty / Manufacturer warranty Technical inspection in line with TruckStore standards All necessary repairs and services carried out Legally prescribed main inspection new Fully refurbished Tyre tread at least 6mm
Vehicle maximum 6 years old TruckStore Warranty optionally Technical inspection in line with TruckStore standards Roadworthy Refurbished Tyre tread at least 3mm

Silver

Technical inspection Roadworthy Basic cleaning

Bronze

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FIBRES Research

Other services
Daimler has been offering some of the services for its Mercedes-Benz cars in India. Some of these are likely to be adopted for its BharatBenz trucks from 2012 onwards
Star Care Program Star Ease Service Package An Anextended extendedwarranty warrantyprogram programbeyond beyondthe thestandard standardwarranty warranty(2 (2years yearsfor forits itscars) cars)on onaa vehicle vehiclewithout withoutany anyextra extracost costor ormileage mileagelimitation limitation Similar Similarto toAMC AMCcontracts contracts Offered by the authorized Offered by the authorizeddealerships dealershipsusing usingthe thecompanys companysgenuine genuineparts parts Covers all the vehicles basic service requirements as prescribed by the Covers all the vehicles basic service requirements as prescribed by thecompany company Can be availed by paying a defined amount according to the vehicle model, Can be availed by paying a defined amount according to the vehicle model,contract contract period and vehicle mileage period and vehicle mileage The Theservice servicepackage packageis istransferable transferablefrom fromone onecustomer customerto toanother anotherduring duringthe thecontracted contracted period period The Thebenefits benefitscan canbe beavailed availedat atany anyof ofthe thecompanys companysworkshop workshopacross acrossIndia India Helps in improving the retention value of the vehicle Helps in improving the retention value of the vehicle Has Hasbeen beenbundled bundledwith withany anynew newMercedes-Benz Mercedes-Benzcar carpurchase purchasesince since2010 2010 Covered for a 3 year period, for a 24x7 assistance Covered for a 3 year period, for a 24x7 assistance Can Canbe beused usedin inthe thetimes timesof ofbreakdown breakdownor oraccidents accidents Services available like vehicle towing, replacement Services available like vehicle towing, replacementvehicle, vehicle,medical medicalcoordination, coordination,taxi taxi service, mobility benefit like air travel and hotel accommodation etc. service, mobility benefit like air travel and hotel accommodation etc.

MercedesBenz Roadside Assistance

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Further, Daimler plans to leverage Indian IT edge to deliver user friendly front-end for dealership systems & processes
BharatBenz plans to install some of the IT processes for easy workflow and with an aim to have zero defect operations

FIBRES Research

More business control to dealerships Visibility of stocks and lead times Single window interface encompassing modules of DMS, CRM & Workshop Information systems, Ordering etc. Focus on floor skill enhancement Mechanic Training & Empowerment Sales Man Empowerment Facilitative margin and incentives systems

Integrated web application

Touch screen enabled

Animated Training Module

Multilingual Voice Over

Multilingual Service Manuals

3D Optimized Parts Catalogues

Accident Repair Search Module

DMS Integrated Damage Code

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Implications emergence of a new middle market where BharatBenz plans to create its place

FIBRES Research

3 key strategies of BharatBenz to establish itself in the Indian CV space:

Aggressive target pricing so as to compete effectively with entrenched competitors like Tata Motors and Ashok Leyland Focus on Customer Service from the beginning to differentiate with the existing CV majors and establish its brand Placing products in the new middle market which are just about 5-10% costlier but with high-end features and higher HP engines (for faster turnaround time) unlike Tata Prima, Volvo FH etc. which comes in at a very high premium pricing (almost 2-3 times of the basic / conventional CV range)

Emergence of a new middle market where BharatBenz plans to establish itself

M&HCV price range

Rs.15-18 lakhs
New Middle market: 5-10% premium pricing over the existing basic models

Basic CV market

Current Tata & AL models

Rs.18-22 lakhs

New Middle market

BharatBenz models planned

Rs.30-45 lakhs
Source: FIBRES Research

Premium CV market

Tata Prima, Volvo FH, MAN 36

FIBRES Research

Why BharatBenz is a threat?

Some of the key reasons are
Strong recall of the Benz brand name in the minds of the customers especially in the South since Tata trucks previously were called as Benz trucks Competitive pricing strategy aided by high localization etc. Reach-out Marketing strategy Also, we understand that they have been pitching to the freight operators that though BharatBenz trucks will be 10% more expensive than competition, running costs over a 5 year period will be 20% lower. Further, we learn that they have even met the top 100 operators and understood their requirements. Advantage of the global trucking experience backed by global technology Additionally, Daimler has gained experience of the Indian psyche through their MercedesBenz car business for the last 15+ years Changing paradigm Last but not the least, changing 2nd generation Indian mindset with more importance towards after-sales service than just the product brand can erode Tatas brand competitive advantage and make it vulnerable to the emerging global competitors

But what is critical for Daimler is the right execution of this strategy!!

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FIBRES Research

So what does the SWOT of BharatBenz tell us?

SWOT Analysis of BharatBenz
STRENGTHS Benz brand recall among many sections of the Indian market should make BharatBenz easy to establish itself Aggressive pricing may allow it to compete meaningfully with entrenched players Backed by global technology Changing paradigm with customers willing to experiment may support its entry in the Indian market OPPORTUNITIES Upgrading the Indian CV operators by creating the new-middle market through provision of global technology at a marginally premium priced products Participation in one of the worlds largest CV market If successful, Daimler can get a strong foothold in the rapidly growing Indian CV market WEAKNESSES Lack of Indian market experience and knowledge Unproven products given that they are tweaked for the Indian market Lack of strong and established sales and service network India operations have been built from scratch, with no readily available global blueprint for help

THREATS Investment risk as it has taken a leap of faith in a duopolistic Indian CV market where no global player is able to establish itself as yet Execution risk Daimler must ensure that all the elements of its strategy must get well executed. Else, its bold attempt can prove to be a big setback which may floor Daimler for a long period of time Timely aggression from the Indian CV players

Source: FIBRES Research

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FIBRES Research

Conclusion What Tata Motors should do??

We leave you with just 3 thoughts to ponder over

Lead in creation of the new-middle market by launching new products in that segment well ahead of its competitors thereby bridging the gap in the product portfolio on time. One way of doing this would be to consider the stripped-down version of the Tata Prima range of premium trucks by making many of its key features as optional than a standard fitment. Another benefit of doing this will help the company to upgrade the customers step by step from the Basic CV products to the New-Middle products and then further to Premium CV products will eventually help in retaining customers for a longer term. Focus on Services to sustain brand advantage. As the paradigm changes, the modern customer has started looking beyond just the product brand and into the consumer experience brand. This is visible in the second generation of customers who have shown their willingness to experiment with a new brand while making Services as one of its key consideration of his brand purchase decision. With the new entrants in the CV market plan to focus and market their services along with their products, it is imperative for Tata Motors to focus on its Services not only as a revenue earner but more importantly to sustain its brand advantage which it has built around the product till now. Continue to build and maintain a strong relationship with the channel partners lest they may jump over the ship and move towards new entrants like BharatBenz etc.

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FIBRES Research

THANK YOU!!

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