Commercial Vehicle Megatrends Magazine – Pilot issue / Q3 2012

Pilot Issue: June 2012

Marc Llistosella: How BharatBenz will raise the bar Walk through DICV’s new Chennai plant

Ravi Pisharody: Tata’s strategies in the developing marketplace

The India Issue

In association with

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The India Issue 5

Editor’s welcome

6 Conference Review: Commercial

Vehicle Megatrends

India 2012

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plant profile: AutomotiveWorld.com takes a behind the scenes tour at BharatBenz’s new truck factory and analyses the brand’s success.

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Interview with Gordon Lamb of Castrol

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Interview with Rakesh Batra of Ernst & Young

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Plant profile of the new BharatBenz plant

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Interview with Marc Llistosella of Daimler India Commercial Vehicles

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Interview with Andreas Weller of Dana

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Interview with Raj Singh Rathee of KUKA Robotics

37 Interview with

Jens Zeller of Fleetboard 44

Interview with Ravi Pisharody of Tata Motors

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GERMAN ENGINEERING FOR CLEAN AIR

editor’s welcome

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Commercial Vehicle Megatrends Magazine:

The India issue Welcome to the first issue of Commercial Vehicle Megatrends Magazine, Automotive World’s new digital publication dedicated to the commercial vehicle industry.

This online magazine develops some of the key topics discussed at Automotive World’s Megatrends conferences, the most recent of which - Commercial Vehicle Megatrends India 2012 - was held in late April in Chennai.

In our conference review, on page 8, we look back at some of the key issues debated at the event, which brought together all of the major commercial vehicle OEMs and key CV industry suppliers, in what is thought to have been India’s first dedicated commercial vehicle event.

After two days of presentations and debate, day three of Commercial Vehicle Megatrends India 2012 gave delegates the opportunity to visit the brand new Daimler India Commercial Vehicles factory at Oragadam, on the outskirts of Chennai. Production of the company’s all-new BharatBenz trucks begins this month (June 2012), and Automotive World was given a behind-the-scenes tour of the factory, including a rare walk through the paint shop. Read our plant profile on page 16. We also talked to Marc Llistosella, the company’s Chief Executive, about how he expects the BharatBenz brand to perform in a market dominated by established domestic OEMs; the full conversation can be found on page 24.

Further on, Ravi Pisharody, the head of the Commercial Vehicle division at Tata Motors, talks about his company’s Indian strategy on page 44.

Interviews with senior executives at two major global suppliers, Eaton’s Dr Arun Jaura and Dana’s Andreas Weller, (pages 41 and 29) highlight the changing shape of the Indian market, and the importance of this fast growing economic power to their global operations. On page 29, Raj Singh Rathee, the Managing Director of KUKA Robotics India, illustrates the need for automation to ensure repeatable quality in vehicle manufacturing in India, and the significant potential for automation in CV manufacturing in particular.

With growing congestion, the opportunities for fleet management technology and telematics are considerable; so too are the challenges facing suppliers attempting to bring such technology to the Indian market, as Jens Zeller of Daimler subsidiary FleetBoard explains on page 33. There is also considerable potential for advanced engine oils in the Indian commercial vehicle market; you can read what Castrol’s Gordon Lamb has to say on the matter (page 10), or click on the link to watch a video of the interview on AutomotiveWorld.com. We also talk to Rakesh Batra, Ernst & Young’s India Automotive Sector National Leader, who provides an analytical view of the megatrends in the country’s CV industry (page 12).

We hope you enjoy the first issue of Commercial Vehicle Megatrends Magazine, and welcome your comments and suggestions for future issues.

Martin Kahl Editor, Automotive World

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conference review:

Automotive World’s Commercial Vehicle Megatrends India 2012 - the first dedicated CV event to be held in India - brought together leading names from the industry to examine the opportunities for growth in India’s commercial vehicle market over the next ten years.

Commercial Vehicle Megatrends India 2012

Held in April, in Chennai, the event hosted some 250 delegates from 70 different companies, including suppliers like Castrol, Dana, Eaton, Albonair, Afton Chemical, Shell, KUKA Robotics India and Taikisha.

OEMs in attendance included Ashok Leyland, Asia Motor Works, Daimler Commercial Vehicles India (BharatBenz), Mahindra & Mahindra, Mahindra Navistar, Navistar, MAN Truck & Bus, Paccar, Tata Motors, VE Commercial Vehicles and Volvo Truck & Bus. The three-day event included two days of presentations and a visit to the new BharatBenz factory at Oragadam, on the outskirts of Chennai. During the conference, key topics for discussion included conventional and alternative powertrain technology; transmission and driveline; logistics and fleet management; and manufacturing.

In April, Automotive World hosted Commercial Vehicle Megatrends India 2012, an event dedicated to the CV industry in India, featuring speeches and presentations by some of the country’s leading CV OEMs and suppliers

Among the 27 speakers were senior executives from the leading truck OEMs and suppliers in India. OEM speakers included Marc Llistosella, Chief Executive and Managing Director, Daimler India Commercial Vehicles; Ravi Pisharody, President, Commercial Vehicles Business Unit, Tata Motors; and Anirudh Bhuwalka, Managing Director and Chief Executive, Asia Motor Works. Representatives from the supplier side included Gordon Lamb, Diesel Engine Oil Technology Programmes Director at Castrol; Dr Arun Jaura, Vice President, Technology, Eaton Corporation; Santiago Salazar, Senior Director, Global Product Planning, at Dana; and Don Remboski, Dana’s Vice President of Innovation.

As with all Automotive World events, slides and videos of the presentations are available to view online at AutomotiveWorld.com.

Keynote address - Marc Llistosella, Chief Executive and Managing Director, Daimler India Commercial Vehicles

In his keynote address, Marc Llistosella, Chief Executive and Managing Director of Daimler India Commercial Vehicles, said the Indian commercial vehicle segment is moving from a supply-driven market to one that is driven by demand. Furthermore, Llistosella predicted that the local CV market will witness a substantial change in India, including a wave of new incumbents and a period of modernisation: “Strong fundamentals of the Indian economy, coupled with infrastructure growth, will drive truck industry volumes.”

Anirudh Bhuwalka AMW at CV Megatrends India 2012

Llistosella believes that global players’ lack of success in India can be attributed to a lack of market-specific products. The Indian marketplace is still very heavily slanted towards local CV manufacturers, which hold around 98% of the local market.

Changes to India’s emission standards and the emergence of new segments will impact the market, as will sales service, the availability of choice and fuel efficiency. Future CVs in India are expected to feature more electronics, more systems and have an increased lifetime, said Llistosella. “The Indian CV market is expected to follow in the footsteps of peer and developed markets, in terms of volume and technology.”

A slow start to the fiscal year

The Indian commercial vehicle industry will get off to a slower start in the first half of financial year 2013, compared with the fiscal 2011-12 period, said Ravi Pisharody, President of the Commercial Vehicles Business Unit in Tata Motors. Pisharody attributes this slow start to factors including generally lower GDP growth rates, increase in excise duty and interest rates.

In the last three years, there has been a significant recovery from the recession in the Indian CV market.

Pisharody expects a shift in CV customer preference in the next two to three years, especially in the areas of engine power and torque. Emphasising Marc Llistosella’s comments, Pisharody said that one particularly important factor in the evolving marketplace will be value-added services. This has been, and continues to be, a weak link in the Indian CV segment. A one-stop-shop, Pisharody said, may become a majority expectation among CV buyers.

With regard to the manufacturing outlook over the medium term, a host of CV OEMs are expected to make major investments in India in the next three to four years. This will create more than adequate capacity in the country. Increased capacity, then, is expected to drive all OEMs to diversify risk by planning exports from India.

“Greater scale across the Indian CV industry will lead to a more optimal cost scenario at the vendors’ end. This will translate into the use of Indian manufacturing plants to export vehicles, especially to SAARC (South Asian Association for Regional Cooperation), the Middle East, Africa and Latin America,” Pisharody said.

There is, according to Pisharody, a high internal demand for CVs for passenger application.

India is thus bound to become a base for the development and manufacturing of these vehicles.

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9 While CV output numbers and scale in China are expected to remain higher than in India, Pisharody further believes that there is an opportunity for the local CV industry to establish superior build value for locally built vehicles.

GST: a milestone for India’s CV industry?

In the fiscal year 2011-12, Indian commercial vehicle manufacturer Asia Motor Works (AMW) reported sales of 10,000 CVs, a 50% increase on the previous year; and company is now targeting a fivefold increase in the next three-to-four years.

The company’s Managing Director and Chief Executive, Anirudh Bhuwalka, sees the forthcoming introduction of Goods and Services Tax (GST) as a milestone for the Indian CV industry; helping to improve efficiency, and lower logistics costs.

“The fundamental difference between India and China is the logistics cost involved,” Bhuwalka stated, adding that the Indian CV industry was witnessing infrastructure trends, including a rapid expansion in urban cities, continued impetus on road infrastructure development, and upgrading of ports.

Other noticeable movements include a shift towards seamless inter-state travel, new legislation on replacement of trucks and a ban on overloading - of which there is only a 40-50% adherence in India.

Bhuwalka also mentioned environmental developments, such as tougher emissions norms which reflect Euro4 and 5 standards and the need to control developmental costs therein. One of the local CV industry’s main requirements, he said, is for the Indian government to provide cleaner fuel. This holds much significance in the industry’s move to adhere to emissions norms.

Factors such as the opening of construction and mining segments, the development of the highway network, and reforms in the Indian economy have contributed to the growth of the Indian commercial vehicle market recently, Bhuwalka said.

Cutting costs and improving efficiency in logistics

At Daimler India Commercial Vehicles (DICV), the current logistics focus is supplier readiness. DICV’s Vice President of Procurement & Supply Chain Management, Erich Nesselhauf, said that the company has derived certain strategies to achieve target costs, including logistics costs. He sees logistics as a cost factor that should be reduced to a minimum.

DICV sources 70% of the parts from around Chennai in the state of Tamil Nadu, where its new plant is located. By sourcing the bulky parts locally, DICV has been able to reduce

the size of its warehouse in Oragadam. Transport costs of parts have been curbed as well, thanks to direct delivery which avoids multiple handling.

DICV has also been able to keep logistics costs low by adopting smart packaging concepts. A milk run concept via external logistics service providers ensures full container loads and allows for thorough tracking and tracing.

Wanted: truck drivers

There was agreement among speakers and delegates that a major issue facing the Indian CV industry is the stigma attached to truck driving. Among drivers, education, wages and esteem are low, staff turnover is high, as is petty crime and the theft of goods and fuel.

First raised by Marc Llistosella, who stated clearly that “We have to take care of the drivers”, this issue appeared in numerous presentations and Q&A sessions throughout the conference. As one delegate was heard to say, “It is the responsibility of all of us at this conference to make the job of truck driving a respectable one.” AMW’s Anirudh Bhuwalka said that the resultant effect on fleets of driver shortage is cause for serious concern in the Indian CV market.

India’s obsession strengthens the case for hybridisation, says Ashok Leyland...

There is an obsession with diesel in India, which has led to high consumption of the fuel, said Dr M Sathya Prasad, Section Head, Advanced Engineering at, putting forward his case for the need for hybridisation of commercial vehicles in the country.

“Given the demographics and conditions of India, there is a much more compelling reason for us to quickly get on to the hybrid bandwagon ... Eventually, alternate modes of propulsion could supplant conventional ones,” he said.

Prasad said India’s crude oil deficit has become a serious challenge to the country’s fuel security. The local CV industry is a big part of this, he said, as goods vehicles and buses consume nearly 42% of the diesel in India.

With regard to diesel hybrid, plug-in hybrid diesel and electric commercial vehicles, Prasad said “India should follow a more aggressive approach rather than catching up.”

Hybridisation of CVs in India would also result in increases in the market for advanced electronics and control systems. The increase in the electronic content of such vehicles stems from the need for a fairly nimble control system, in order to track changes occurring in a hybrid CV from second to second, he said. ...while Eaton says India needs a different approach to the hybridisation or electrification of CVs

However, Dr Arun Jaura, Vice President of Technology at Eaton, said the Indian approach to the hybridisation or electrification of commercial vehicles needs to be different, suggesting that downscaling hybrids and EVs to the actual needs of the consumer, and then scaling it up for the larger ecosystem would be a good tactic.

Furthermore, the industry in India needs to carry out “reverse innovation” and then take this technology to other parts of the world.

“If we can put a lot of thrust on electrification or hybridisation of CVs (passenger vehicles), we will then get economies of scale, we will be able to reduce the cost. This is the approach we should be looking at,” Jaura said.

“Diesel and gasoline are here to stay. But, that does not mean we don’t have to transition into something that will actually make fuel efficiency even better and optimise the conditions that we have.”

In Jaura’s opinion, scalability of hybrid and alternative fuel vehicles, could be achieved by developing an electric vehicle powertrain modular enough to incorporate in a diesel, gasoline or CNG engine.

In the area of CVs and e-mobility, he emphasised three driving forces: energy recovery, vehicle operation and powertrain efficiency.

The core factors, however, are controls, electrification and communications.

Jaura believes, that the electric vehicle segment is still nascent. Despite numerous initiatives and government partnerships worldwide, the number of electric vehicles on the roads remains low.

The industry therefore needs to focus on systems integrators and components and understand the usage pattern, reliability and value proposition of the hybridisation of CVs. Jaura suggested that collaborative innovation among the various OEMs in this field would make a difference.

“Hybridisation of commercial vehicles and public transportation will create the greatest penetration, and that will bring cost and affordability to a great extent to the common person.”

India needs a modular design approach

by OEMs

Tendencies towards higher-tonnage vehicles and replacement demand are expected to drive the Indian heavy commercial vehicle industry; around 57% of the country’s freight is currently transported by road.

Rakesh Batra, India Automotive Sector National Leader at Ernst & Young, said India’s

light CV segment too is seeing growth drivers such as last mile connectivity; demand stemming from the replacement of three-wheeler cargo and passenger vehicles, and restrictions on entry of heavy CVs. “Western multinational corporations tend to focus on global and glocal [global-local] product segments as part of their product and marketing strategy for emerging markets,” he explained.

The local CV industry faces a variety of challenges, including rising fuel costs, rising interest rates and a shortage of drivers. Batra added that there is a need for a modular design approach in order to decrease time to market and to cater to a wider range of customer segments. “Not every country needs to follow the path of more mature and developed economies,” he said.

The growth of a large mid-market

Rahul Jain, Partner and Director at Boston Consulting Group, identified five key megatrends that will transform the Indian CV market by 2020: growth of a large mid-market; local segment shifts including demand polarisation and growth in special applications; fragmented volumes in HCVs; convergence in technology and the rise of global Indian OEMs and suppliers.

Jain defines the mid-market as the point at which global products and Indian products meet; offering global-standard products which are at the top of the Indian market, yet which contain only the specifications that Indian customers are willing to pay for, and exclude content that Indian customers do not want.

And the mid-market will be significant, says Jain. “In our assessment, at BCG, today the mid-market accounts for less than 5% of the market. Our expectation is that by 2020, close to 60-70% of the demand will be in the mid-market in India. And that will be driven by regulations, demanding customers, and the supply standards that everybody will expect.”

Factory tour: Daimler India Commercial Vehicles, Oragadam (Chennai, India)

Day three of the conference gave delegates the opportunity to tour Daimler’s new, state-of-the-art Daimler India Commercial Vehicles plant at Oragadam near Chennai. Inaugurated on 18 April 2012, the factory has brought forward the start of vehicle production from 1 July to 21 June. The plant will build a 17-model range of new light, medium and heavy trucks under the BharatBenz brand, including a heavy-duty model based on the Mercedes-Benz Axor platform, and light- and medium-duty models based on the Fuso Canter series.

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Interview:

Gordon Lamb Formulation Advisor, Global Engine Oil Programmes, Castrol

Castrol’s Gordon Lamb talks to Automotive World about the potential for advanced engine oils in the Indian commercial vehicle market

How do OEMs and fleet operators in India respond to the products you market here, and how does this differ from mature markets like Western Europe and North America?

We have always had a good relationship with the Indian OEMs, and we’ve worked very closely with them as they have introduced new technology.

They respond positively to our technology, and in many cases we will work with them to introduce new technology as they introduce their lower emission engines.

Much of the Indian market is made up of small owner-driver operations. What do you, or can you, do to convince them of the benefits of your products over lubricants which might be cheaper to buy off-the-shelf in India?

The truck means everything to an owner operator, so it is very important that you don’t let those customers down. We have to give them reasons to believe in our product, and that it’s not going to let them down. We do this by running lots of product demonstrations, we do lots of field testing inregion, and that gives our customers reason to believe in our products over other products which may not have had that level of testing.

How do the products that you offer the Indian commercial vehicle market differ from products that you offer in other markets?

Historically, products in India have been higher viscosity-grades. 20W40 has been a typical grade. As we move towards 15W40s, we are starting to see some of the North American specifications, specifically API CH-4 and CI-4, becoming more prevalent. This means the Indian market is maybe three to five years behind the North American market. API CI-4 is now being widely adopted for BSIV trucks in India, and that was in North America only four to five years ago. India is generally using products which are used in other parts of the world, just maybe five years behind.

Lubricant suppliers often talk about the benefits of reduced viscosity lubricants - engine and truck manufacturers tend to shy away from this. Where does Castrol stand on viscosity, and what efforts are being made specifically for the Indian market?

Gordon Lamb is a Formulation Advisor for Global Engine Oil Programmes at Castrol. In his presentation at Automotive World’s Commercial Vehicle Megatrends India 2012, Lamb said the increased cost of trucks resulting from new emissions legislation needs to be offset by productivity. He showed a chart which broke down the cost of ownership into three areas: truck - including the purchase price and the resale value; servicing - including maintenance intervals and unscheduled down time; and fuel consumption.

Focusing on the role of lubricants, Lamb said advanced engine oils are essential for new lower emission engines; key to the introduction of new types of engine oils is that they are affordable, widely available, and are proven to maintain or improve engine performance and deliver small but significant fuel economy benefits.

After his presentation, Lamb spoke to Automotive World about the potential for advanced engine oils in the Indian commercial vehicle market.

A video of this interview is available on AutomotiveWorld.com.

From Castrol’s perspective, what will be the key technologies and chemistries relevant to the Indian commercial vehicle market over the next ten years?

With BSIII and BSIV becoming more widespread, we will see the need for better oils; oils that can deal with high levels of soot and higher operating temperatures. The technologies we’d expect to see are better base oils, Group 2, possibly synthetic base oils, higher dispersant formulations, and formulations using dispersant viscosity modifiers to deal with the higher levels of soot.

You have to work very closely with the OEM when introducing a low viscosity oil. That might mean running their specification, or it may mean working very closely together when introducing a new model. In India, we certainly are looking to introduce low viscosity oils; we have in the past introduced low viscosity oils. Market acceptance is very difficult, and that is something that we have to work with, not only with the OEMs, but also with our customers to get them to accept low viscosity oils. And of course we have to demonstrate that there is a good reason for that. In the main, that means improved fuel economy, and we have to be sure to able to prove to the customer that they will see some fuel economy benefits from the low viscosity oil.

How do you develop your lubricants for the Indian market?

We have local product development and R&D based in Mumbai, and that has been there for many years to develop products specifically for the Indian marketplace. We have been doing that for many years, and we will continue to do that to serve the needs of the Indian customers.

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Interview:

and costs enabled by hub-and-spoke models of distribution, demand will be driven for increased supply chain visibility and telematics.

Rakesh Batra India Automotive Sector National Leader Ernst & Young Photo: Rakesh Batra

According to a new report from Ernst & Young, CV sales in India are expected to grow at a CAGR of 9% to reach 140,000 units by 2016-17. India’s demand-driven economic progress, coupled with rapid urbanisation, will, by 2025, lead to the emergence of at least six cities of 10 million inhabitants or more, and 63 one million-plus cities.

Can you please outline the key trends that OEMs need to address to stay ahead in India’s truck market?

Rakesh Batra is Ernst & Young’s India Automotive Sector National Leader.

At Automotive World’s Commercial Vehicle Megatrends India 2012 conference, Batra gave a presentation entitled Mega trends shaping the Indian commercial vehicle sector, outlining the findings of a new Ernst & Young report by the same name

The findings of our megatrends briefing show that, going forward, fleets will be focused on reducing operating costs, diversifying their customer base, and on capacity utilisation. In India, we have many domestically-built trucks, but as fleet operators are opting for higher tonnage, multi-axle trucks, their investments are increasing and they’re looking at further adoption of technologies like telematics - putting more focus on total cost of ownership. A similar number of alternate fuel-powered buses are being introduced, hopefully resulting in a more efficient public transportation system.

The second trend is the rapid urbanization happening in India, combined with improvements to road infrastructure. With mushrooming of small cities, demand will increase for passenger vehicles and goods and passenger transport. Improved road infrastructure will enable vehicles with higher tonnage and more power, allowing them to travel at faster speeds.

Other factors include forthcoming emission norms and greater control of overloading. The private operators taking on some toll ways will also play a role in managing overloading, so new products will be introduced to cater to this.

The third key area covers global OEMs positioning themselves in the market, and domestic OEMs repositioning themselves through greater outsourcing and modularisation. In the past couple of years we had issues with local capacity, so the fourth trend requires suppliers to develop their R&D capabilities because the Indian supply industry is mostly built to plan.

The fifth key area is really around managing manpower and supply chain risks. While India supposedly has an abundant supply, getting skilled and trained people is still a challenge, and there isn’t enough workforce available for all of the planned investment. When you think of people, you have to think not only of OEMs, but of suppliers and dealers. Across the value chain it’s quite a challenge.

Lastly, OEMs and foreign fleets are looking

at various value-added services. As we get a more sophisticated market with sophisticated products, higher costs, and the need for greater total cost of ownership factors, it will automatically drive value-added services as a way of recouping their return on investment and improving their profitability.

Do you envisage the development of western style large-scale professional logistics operations in India in the next ten years? And will that be sufficient to have any impact on commercial vehicle sales in India over that period?

Yes, we will see global logistics players entering the market, and there already are. India’s logistics market is not very efficient, it’s fragmented.

As the demand for transportation grows, there’s a customer need for improved visibility, supply chain capabilities, and so forth. That will create demand for global fleet operators to come in with experience in this whereas the Indian industry may not even have the capacity to invest in warehousing management systems, telematics, navigation systems and the like.

But that will be driven by customer demand for better supply chain visibility and to drive improved efficiency in the logistics marketplace.

The development of a professional logistics service would increase the need for telematics and fleet management.

Do you see evidence of that in place now and do you think that will change significantly over the ten year period?

There is some evidence but it’s limited; we will see greater adoption over a ten year period.

India has learned one of the ways to get ahead is through leveraging technology. There’s a lot of focus in different parts of the economy around utilising technology to leapfrog ahead that’ll be a similar story in fleet operations.

The implementation of GST (Goods and Services Tax) should have an impact on nationwide and inter-state freight movement. How do you think that will affect the way fleets operate now and what impact might that have on truck sales?

GST is slated to be good for the economy overall, and past experience shows that wherever GST, or a value-added tax regime, has been implemented, generally it provides a boost of a point or two in GDP growth. It will help in overall economic growth as well as more efficient hub-and-spoke models of distribution, which aren’t really possible today given the cascading and step-by-step kind of taxes we have. With the rationalization of networks

Infrastructure and traffic are major concerns in India. At the same time, vehicle sales are increasing. Is India’s infrastructure capable of supporting increased truck sales?

Even the infrastructure that we’ve had up to now hasn’t slowed truck or car sales. The question is not can the infrastructure support it: car and truck sales will happen and the infrastructure will need to deal with it. The bigger question is: are they going to bring in any regulatory policies or mechanisms to control congestion? That might have a bigger impact on than infrastructure.

90% of the commercial vehicle market is controlled by domestic established brands. How serious is the threat to those truck manufacturers presented by new entrants? Will the established brands be able to maintain their status quo or will the structure of the market change?

One has to assume that the structure will change, because the global brands are well established and well-known. But how it will change depends on the strategies of global OEMs entering the market. The Indian market is different: customers have different buyer values - it’s not necessarily a case of having a product in your global portfolio that can come and meet the needs of the Indian market.

Developing a local product from the ground up, using local suppliers, is likely to work better than a strategy of bringing in products from other markets.

To have a reasonable market share in proportion to your global brand and strength, in India, requires a different approach, based on fundamentals like designing, manufacturing, sourcing the product locally.

The established Indian players have a huge reach and distribution network. It can take at least three to five years to establish a profitable dealer network that covers a sufficient proportion of the market, because it depends not only on vehicle sales, but on parts and service sales.

What needs to change for foreign OEMs to invest in local manufacturing?

Firstly, you need to have a long term perspective, and to plan your investments for that perspective. Secondly, your approach to the market matters: how does the product range look, how does it compete against local products and the value proposition offered to customers?

Thirdly, there are some unique things about this market. As an OEM, you need to be clear which customer segment are you catering to:

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“As the demand for transportation grows, there’s a customer need for improved visibility, supply chain capabilities, and so forth.” if it’s a global fleet operator, local fleet operator or entrepreneur, it’s bound to be a different value proposition for each. You have to segment your customers, and decide your product strategy and customer value proposition accordingly. It’s not the same as in other markets.

Is it best for a foreign OEM to take on a particular niche or to have a broad product range, and take on any segment available?

You have to take on a niche and establish the brand, because if you go with a shotgun approach, it’s going to take time. Really you’re establishing your brand so people can say they’ve tested it, it’s within a niche but it has good value proposition.

Given the various customer segments we have, that’s a better approach to establishing a brand and competing against two or three juggernauts who dominate the market. The chance of penetrating a niche segment is higher than taking on the whole market.

Do you expect alternative powertrains or alternative fuels to play a significant role in the structure of CV sales over the next ten years, or do you think it will be minor compared to diesel powertrains, for example?

We already have some level of compressed natural gas (CNG) vehicle penetration, but that’s limited to certain cities and by the distribution network for gas. We will see some CNG expansion because we already have a head start on that and a new pipeline has been commissioned to make gas accessible to many other cities. As we have increasing urbanization, policy will move towards CNG being adopted into some of these high growth and new urban centres.

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I’m not sure electric works in commercial vehicles other than for local delivery and the cost to value proposition for a hybrid isn’t really there at this stage. The extra you have to pay for hybrid technology doesn’t justify the investment, and the Indian customer isn’t ready to adopt hybrid because it’s environmentally friendly or morally the right thing to do. Until there is some breakthrough in hybrid or electric technology, it’s going to remain fringe.

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How do you think the Indian CV market will develop over the next ten years?

The importance of total cost of ownership is something that’s only growing now: would you agree with that?

There is an increasing awareness of total cost of ownership as opposed to a lower capital or operating cost. The arrival of higher-capacity and higher-value trucks is driving this. New OEMs are also educating customers to say they have a low total cost of ownership to differentiate themselves from the competition.

The market is probably going to double in size from about 800,000 trucks and buses across all sizes, to around 1.6 million vehicles; doubling in size in the next four to five years, up to 2017. The small commercial vehicles are going to keep growing faster than medium/heavy. But there is also a shift towards higher tonnage vehicles, and we’ve already seen some of that over the last few years.

Do you foresee any particular incentives to increase the market size, or barriers to growth?

GST could be an incentive and an enabler, as could increased consumption: India’s population is growing as the middle class gets wealthier, and more people are coming into the middle class.

That means more food needs to be transported. The railway network isn’t really improving fast enough or capable of increasing its share, because there is not as much investment in railways as there should be. All that growth is going to be catered for by the road transport industry. Railway will remain where it is, sea transportation isn’t that prevalent yet, and has its limitations. That’s going to continue putting a burden on road transport.

In terms of barriers, I think it’s going to be infrastructure, the availability of skilled workforce for the industry and land availability for setting up new dealerships. And, of course, emission norms and oil prices, which are a barrier everywhere.

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plant profile: Daimler India Commercial Vehicles, Oragadam

By Martin Kahl, Automotive World

With its BharatBenz truck brand and assembly plant located at Oragadam on the outskirts of Chennai, Daimler has taken not one gamble, but several at once: it is launching an all-new brand in a new market, building new products at a new facility, sourcing from a new supplier base and distributing the products through a new sales network

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BharatBenz: “the best thing to happen to India’s CV market”

BharatBenz (“India’s Benz”) is Daimler’s whollyowned India-specific commercial vehicle brand, and is operated by Daimler India Commercial Vehicles (DICV). Vehicle production is due to begin in mid-2012, with sales commencing in September. Marc Llistosella, DICV’s Chief Executive and Managing Director, is confident that Daimler’s entry will make a significant impact on India’s CV market, telling Automotive World that “BharatBenz is the very best thing to happen to India’s CV market.”

At full tilt, DICV will employ more than 3000 people turning out 17 truck models by 2014 ranging from light to heavy duty. The OEM has invested Rs44bn (US$850m) in its DICV operation, including the new manufacturing facility at Oragadam, the associated research and development, and the all-new BharatBenz brand.

The initial installed capacity of the plant at Oragadam is 36,000 units, with production set to run on a single shift, five days of the week.

Output will ramp up over two years and, if all goes well, the capacity of the facility can be increased to a technical capacity of 70,000 units per year. Indeed, between the supplier park and the industrial training centre (ITC), where DICV trains dealers and employees, lies a large open area, reserved for future expansion.

Automotive World was given a behind-thescenes tour of the plant in the weeks prior to the start of series production, including a rare walk through the heart of the plant’s paint shop.

Greenfield to production-ready in two years

Arne Barden is Head of Facility Management, Operations at DICV. Barden was involved in the construction of the plant from the outset, and was responsible for the installation of all facilities including electricity, utilities, HVAC, propane, diesel, medical services, food transport, catering, canteen and housekeeping. Barden points out that it has taken just two years to build the plant, “on time and well within budget”. All that remains to be finished are the non-production buildings which, when complete, will house the administrative functions currently being run out of the company’s Chennai city office.

One new brand, 17 brand new trucks

The plant will build 17 models, ranging from light duty rigid trucks up to 49t heavy duty tractor-trailer. Eight of these truck models have already been unveiled: a 914 Rigid, a 1214 Rigid, a 1217 Construction, a 2523 Rigid, a 2523 Construction, a 3123 Rigid, a 3128 Construction and a 4928 Tractor-Trailer. The remaining nine models will be presented sequentially over the next 20 months. The power range for the LDT series is 110HP - 170HP, whilst HDT power ranges from 230HP - 280HP. The LDT is based on the Fuso Canter, and

BharatBenz product range

The plant will build 17 models, ranging from light duty rigid trucks up to 49t heavy duty tractor-trailer.

Eight of these truck models have already been unveiled: a 914 Rigid, a 1214 Rigid, a 1217 Construction, a 2523 Rigid, a 2523 Construction, a 3123 Rigid, a 3128 Construction and a 4928 Tractor-Trailer.

The remaining nine models will be presented sequentially over the next 20 months. The power range for the LDT series is 110HP 170HP, whilst HDT power ranges from 230HP - 280HP.

the HDT on the Mercedes-Benz Actros. The BharatBenz brand combines the genes of the two brands with locally-adapted design to withstand local demands, road conditions and climate, and extreme overloading - a commonality in India, truck OEMs always design for overloading.

the vehicle in the plant; the core range includes classic load bodies and tippers. Doing this inhouse gives DICV responsibility for the quality of the body, explains Barden; it also means the customer can buy the complete truck from Daimler, without the need to search for a separate bodybuilder.

DICV’s production will be for chassis-cab products; as of now there are no plans to introduce a cowl version, although in his interview with Automotive World, Marc Llistosella confirmed that DICV would continue to observe the marketplace and consider a cowl should the market demand it. In parallel, the company has begun bodybuilding. DICV buys in bodies from outside suppliers and assembles them onto

Recruitment and training

DICV will ultimately employ more than 3000 people, with roughly one third being white collars. “We try to recruit young, well-educated people from outside the big cities,” says Marc Llistosella. And caste, creed, gender and age play no role at DICV, says Llistosella, who is enthusiastic about building a factory and recruiting in a fast-moving market, rather than downsizing. Llistosella is a strong believer in treating staff well, in order to get the maximum return and ensure the best quality production.

Marc Llistosella’s insistence on treating staff well is evident in the canteen and the highlyequipped medical centre. DICV’s canteen is for all factory workers; the intention from the outset was that the canteen area should not segregate blue and white collar workers - all staff eat together. A benchmark for the industry, the canteen is air conditioned, and serves a high standard of food, for which DICV specifically pays a premium. DICV’s on-site medical centre has all the facilities for trauma care, including a fully-equipped emergency room with X-ray machines and ECG. Having such a facility gives workers peace of mind; it also helps management avoid losing an operator’s shift should something basic like a quick blood test be required, for which the nearest facility would otherwise be 90 minutes away in Chennai.

Only 35 expatriates work at DICV, making it a truly Indian company. The recruitment strategy was a key element of the company’s blueprint for DICV. “We wanted to hire fresh minds”, says Vijay Tuli, Vice President of Operations.

“That is why we went for the ‘10+2’ students fresh from college.” DICV wanted to “mould them to our own culture”, he says, thereby avoiding the difficulties associated with retraining experienced workers fixed in the ways of other companies.

“All our shop managers have been to [Daimler’s] Turkish plant, because it is very similar to ours,” explains Tuli. The shop managers “spent a week observing each station, and worked for two or three days on every station for which they are responsible. The total programme lasted around four to six weeks.” First line supervisors were sent next, working for one month on all relevant stations, to ensure they were masters of their area. Once back in Chennai, on-the-job training included dismantling and reassembling trucks, because “all our shop floor people should be able to do their job with their own hands,” explains Tuli. “In the third phase, at our plant, we gave blue collar workers fifteen days of HR training and general orientation about the products. Then we gave them ten days of shop floor and body shop training on critical aspects like spot welding, sanding and defect identification. Finally, all critical areas like welding, sanding and finishing were recreated in the learning islands. There each worker worked for six to seven days on each station.”

BharatBenz - the best of Daimler, the best of Fuso

All processes and technology have been borrowed from the German parent organisation, says Vijay Tuli, and “Fuso are experts in shop floor technology and management, so we have taken shop floor technology from Fuso. We have integrated the two to make the DNA for our BharatBenz trucks.” Based largely on Daimler’s Saltillo, Mexico plant, the Oragadam plant also combines best practice from other group facilities.

Purchasing, supplier management and logistics

DICV has pooled purchasing, supplier management and logistics - functions which are commonly run separately. Doing this has been hugely beneficial in establishing the supply chain, says Erich Nesselhauf, Vice President of Procurement and Supply Chain Management. DICV’s Supply Chain division controls 70% of the DICV value chain, which takes in production and non-production material, and supplier management. He says three

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21 and delivered directly to the line using dock levellers, helping inventory control.

key targets formed the basis of DICV’s supply chain strategy from the outset, in order to reduce or avoid costs wherever possible: high localisation, low vertical range and minimised logistics costs. From manufacturing machinery and equipment to truck components, every effort has been made to source locally where possible.

As a result, DICV has the lowest vertical range of any Daimler plant.

In terms of procurement, DICV’s initial target was for at least 80% localisation at the start of production.

“We will easily over-achieve this”, says Nessehlauf. By basing suppliers in the plant’s vendor (supplier) park, and by using high levels of local sourcing, DICV is able The initial installed capacity of the plant at Oragadam is 36,000 units, with production set to reduce supply chain lengths and times. Outsourcing to run on a single shift, five days a weekThe initial installed capacity of the plant at Oraghas been the strategy wherever possible, especially for adam is 36,000 units, with production set to run on a single shift, five days a week major modules and parts like side frames, to reduce the need to invest in manufacturing equipment and machinery. Milk runs, managed by an external LSP, ensure parts are brought to the plant, with much of the outsourced material delivered to the line on a just in time (JIT) or just in sequence (JIS) basis.

The plant’s vendor park currently houses two suppliers: MSI, which supplies sheet metal, and KLT, which supplies the frame and side members, for which it employs a 50,000kN Siempelkamp draw press. Up to seven or eight suppliers could eventually be housed in the vendor park.

The use of JIT/JIS accounts for at least 50% of material value, and packaging has been optimised so that only five standard container sizes are used for the majority of deliveries; and most of the containers are returnable. A specially-designed packaging concept to reduce multiple-handling enables parts to be delivered directly to the line without the need for re-packing.

85% of DICV’s material value is sourced in India, with around 40% of the total sourced from Tamil Nadu. The 15% that is imported comes predominantly from Germany, followed by Japan, with the remainder coming from Brazil and NAFTA, and around 5% from other sources. And Nesselhauf says this level of international sourcing will be reduced in time. Material sourced from within India comes mainly from the Chennai region. A third party logistics provider (3PL) operates a milk run to collect parts and deliver them to the plant. DICV is one of the first, if not the first, CV suppliers in India to operate a milk run system; all movements are monitored through EDI (electronic data interchange) track and trace, ensuring complete visibility of shipment locations.

In addition to endurance-testing the trucks prior to series production (prototype trucks drove a total of 4.5 million test kilometres on Indian roads or on the DICV test track), the company tested material transportation; full truck loads of production material drove around 16,000km of Indian roads to assess the routes and the appropriateness and stability of the packaging. Whilst a 3PL is used for the milk run, DICV handles inbound logistics internally.

The accompanying chart illustrates the short distances some of the key parts and modules travel.

Cab-in-white (CiW)

Part / module

Distance of source from plant

Wheel rim

50km

Glass

35km

Transmission housing

30km

Wiring harness

20km

Cooling systems

20km

Four cab types are assembled in the CiW shop: HDT (heavy duty) and LDT (light duty, including medium duty) vehicles, each of which is available in sleeper or day configurations. All four are assembled on the same line. Welding techniques used in CiW include MAG, projection and spot welding, and almost 70% of CiW is automated, although over the plant’s entire assembly process, automation stands at around 50%. 16 robots, supplied by KUKA Robotics, ensure repeatable quality and accuracy.

Leaf springs

20km

Paint shop

Axles

20km

Seats

15km

Dashboard, trims

10km

Cab in white (CiW)

2km

Frame

2km

KLT delivers the completed chassis from the vendor park to the line, and HDT and LDT chassis assembly then begins along dedicated line space. Each chassis begins its journey down the line in an inverted position, and is rotated along the line in time for marriage with the cab at the end of the “J”. The HDT chassis passes through 36 stations, and there are 12 stations on the LDT section of the line.

DICV employs a two-coat paint technique based on Fuso processes: e-coating and top coat. Both coats are applied through a totally-automated process, although sealant application is manual

automated process, although sealant application is manual.

Bodies to be painted are brought into the paint shop on an electrical monorail system; rather than rotating the bodies, the monorail system can tilt and shift them as required.

Once oil, stains and dust have been cleaned from the cabs, the base coat is applied by cathodic electro-deposition, a process which sees the cabs positively charged, and then dipped in a negatively-charged corrosion protection coating. This base coat is sufficient to protect the metalwork; the top coat, applied in a fully automated process, is purely aesthetic. Seam sealant is supplied by Henkel, and the paint is supplied by Kansai-Nerolac; unlike most other markets, the cab’s finished colour is dependent on the use for which it is intended. National Permit Brown is the only colour which can be used throughout India.

In order to reduce energy use in the paint shop, Daimler has installed a false ceiling; by lowering the ceiling height, dust levels are reduced, as is the volume of air which needs replacing.

Entry to the paint shop is via a dust trap corridor, with doors at each end and large fans to remove dust and loose hairs. This technique is a benchmark in India; although now accepted practice in Europe, even there it took a long time to implement dust trap corridors, says Barden, and the challenge is to ensure that all doors and windows are kept closed in the Oragadam paint shop - not easy in a hot country where people naturally want to leave them open.

Truck bodies take four and a half hours to pass through the paint shop. Once complete, they leave the paint shop on an elevated suspension rig, before being lowered onto manuallycontrolled trolleys in the assembly hall.

Main vehicle assembly area

At 490 metres, DICV’s “J” - shapped main assembly line is the longest CV assembly line in India. One side of the line includes a dedicated storage area for around 40% of the materials used in main assembly, including critical and long-distance material. All other assembly material is sourced from in and around Chennai

Trucks are built according to Daimler’s own manufacturing system, which it calls TOS, or Truck Operating System (the Mercedes-Benz Car group uses MPS, Mercedes-Benz Production System). TOS specifies lean manufacturing, teamwork, shop floor management, KPI (key performance indicators), poke-yoke, safety and environmental policies.

Assembly processes for every production shop station have been carefully developed using Station Development Workshops (SDW), a technique borrowed from Daimler which involves a team of representatives from design, production and maintenance.

Depending on the assembly stage in question, a truck, engine or transmission is disassembled; all relevant work stations that would build the part in question are prepared - including laying out tools and identifying every assembly stage - and the process is carefully analysed to ensure optimum efficiency.

Each production shop has a line-side ‘learning island’, which contains a simulation of the assembly line set-up. The idea of the learning island technique is to provide on-the-job practical training in dedicated areas within the assembly hall, rather than off-site. Here, workers learn how to quickly master even seemingly simple tasks like bolting on complex parts in awkward positions - crucial, if the 11.5 minute work station takt time is to be adhered to.

The paint shop was the first building to be finished, and is the tallest on site. Taikisha’s 11 month installation involved construction of full paint line facilities, including pre-treatment, ED coat, painting booths, automatic spray systems, conveyors, large air supply houses and bake ovens.

DICV employs a two-coat paint technique based on Fuso processes: e-coating and top coat. Both coats are applied through a totally-

Despite seasonal demand fluctuations, Tuli says it was important to maintain a standard work time for each station, in addition to JIT production and continuous improvement. The takt time at each work station (chassis and cab assembly) is 11.5 minutes. Between one and three people operate each workstation, depending on the complexity of the task. For reasons of flexibility and multi-skilling, operators may spend their shifts working in any one of four allocated work stations.

PTA: powertrain and transmission assembly

Almost 70% of CiW is automated, although over the plant’s entire assembly process, automation stands at just 50%

The plant’s PTA has one engine line for assembly of the 6-cylinder HDT engine; the 4-cylinder LDT engine is outsourced.

There are two transmission lines, on which variously-sourced parts are assembled into

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the completed transmission. Test benches are used to test all engines and transmissions that leave the factory; once tested, engines pass through a dedicated small-scale Durr-supplied paint shop for corrosion protection coating.

The end of the line

When the finished trucks roll off the line, they go through an inspection process which includes paint touch-up, if required; brake test; water leak test; and a short spell on the test track. In the water leak test, each truck passes through a large shower area, which sprays the cab from all angles.

After visual leak tests have been carried out from inside the cab, RO water with almost zero salt and mineral content is sprayed onto the windscreen to prevent stains and streaks. A series of bumps shake the water from the cab as it passes over them, and a final drying procedure removes the remaining water from the truck before it leaves the shower test area.

Quality control - customer-like product audit

120 assembly line staff will be tasked with quality control from the outset, rising quickly to 180. During normal assembly, parts are removed randomly from the line for quality control, including visual and geometric checks. Quality control also assesses raw materials. DICV says quality control starts with the supplier’s delivery, and runs through the service period, so that when the truck is brought in after five years, the user can expect the same level of quality as the day it was built.

Finished vehicle quality is monitored through DICV’s Consumer Product Audit (CPA). Finished vehicles are selected at random and taken aside to be checked as if through the eyes of a customer; staff from logistics, production, quality and R&D departments audit the vehicle together, checking for scratches, imperfections, panel fit, screw torque and so on. Doing this avoids paper-based quality approval, and ensures accountability.

Test track - the best in Asia outside Japan

The primary function of DICV’s test track - which Vijay Tuli says is the best test track in Asia outside Japan - is not for finished vehicle testing, but for product development. Typical road profiles from various parts of India were identified and, based on this, they designed the two-part test track.

One section is a high-speed bowl with a super-elevated curve enabling long-term test-driving without the need for steering. The other part of the test track is the rough road, which is made up of 48,000 pavement blocks set at various angles, with an accuracy of +/-5 degrees providing defined conditions to enable long-term analysis. Trucks are run on the track 24/7, in various conditions, such as fully loaded, or with a tow dynamometer to replicate long-term hill driving.

Test track: The rough road, made up of 48,000 pavement blocks set at various angles, with an accuracy of +/-5 degrees providing defined conditions to enable long-term analysis.

Erich Nesselhauf,Vice President of Procurement and Supply Chain Management

Daimler debuting the new Indian trucks at Hyderabad

DICV and the environment - shedding (natural) light on vehicle assembly

DICV operates a zero-discharge plant, meaning that all water used in the factory is reused; the only discharge is in the form of waste sludge. The process is costly, but this is considered a positive, putting the plant ahead of any legislation requiring such measures, and giving DICV a competitive edge in terms of environmental performance.

BharatBenz already has a good reputation in India, built up over a long period of time before sales started

The roof of the main assembly hall has been constructed using a combination of double-layered aluminium air-chamber foil and translucent polycarbonate sheet panels. The insulated panels keep the heat from the sun to a minimum, and the bright sunlight is used to light the shop floor, meaning that no electric lighting is required during daylight hours. Shop floor ventilation ensures ten air changes per hour; and large fans generate a constant air stream. Arne Barden says this roof construction - which is new to the Daimler group - is an example of the benefits of constructing a Greenfield plant.

In the near future, the plant will also make use of solar panels, which will be installed on the roof of the spare parts warehouse currently under construction. When completed, it will be equipped with 400kW photovoltaic panels, making it a zero emission green warehouse. Daimler also enjoys uninterrupted power supply, as confirmed in a Memorandum of Understanding with the Government of Tamil Nadu. Nonetheless, in critical areas, such as the paint line, full power back-up is in place.

Elsewhere, the plant uses regenerative thermal oxidiser (RTO) in the paint shop to treat exhaust fumes. And all around the plant is evidence of grounds maintenance, for three reasons, explains Barden: first, aesthetics; secondly, plants help with dust reduction; and thirdly, it is an opportunity for Daimler to put something back into the Greenfield site on which the plant is built.

Dr. Dieter Zetsche, Andreas Renschler, Marc Llistosella, greet Chief Minister of Tamil Nadu, J Jayalalithaa, at the inaugural ceremony of the Orgadam manufacturing facility

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Interview:

Marc Llistosella Chief Executive and Managing Director of Daimler India Commercial Vehicles (DICV)

Marc Llistosella tells Automotive World about the positioning of the BharatBenz brand in the Indian market, and how the company plans to “raise the bar” and improve the efficiency of India’s CV market

By Martin Kahl, Automotive World

Production of commercial vehicles at the new Daimler India Commercial Vehicles plant at Oragadam, near Chennai, begins this summer, two years after construction of the factory began. Originally scheduled to begin on 1 July 2012, the start of production has now been brought forward to 21 June. A network of dealerships is being developed, and by the end of 2014, BharatBenz trucks will be sold and serviced by a network of more than 100 dealerships.

Here, Marc Llistosella, the Chief Executive and Managing Director of Daimler India Commercial Vehicles (DICV), tells Automotive World about the positioning of the BharatBenz brand in the Indian market, and how the company plans to “raise the bar” and improve the efficiency of India’s CV market.

Daimler India Commercial Vehicles’ plant at Oragadam was inaugurated on 18 April. Can you please outline the stages to full production?

We have been in tryout production since November last year. Serial production of transmissions and engines began in May 2012, this year we will have six production starts: the production starts for the engines and transmissions, and then the production starts of the heavy and light-duty trucks. Of the 17 heavy and light-duty vehicles, production of four will start this year.

How is the planned range of 17 models made up?

There will be nine heavy duty and eight light or medium duty trucks.

How have you decided to approach marketing the BharatBenz brand, and how do you expect the brand to perform against the well-established domestic brands?

The brand already has a very good reputation, even before sales begin. It took us a long time to create this brand - it is not just out of the blue that people say BharatBenz is a good brand. The names Mercedes and Benz both have a reputation in India: Mercedes is associated with expensive, premium cars, and for historic reasons, Benz is associated with trucks. So it was very clear early on that we needed the Benz name. And Bharat is the mother of India in 27 of the 29 official languages in India, so that was the hit. It sends a very clear message to customers and potential customers that this is an Indian Benz. The BharatBenz brand combines the attributes of German engineering and the heritage of everything that Daimler stands for, with the creativity, cost consciousness, flexibility, and the colour of India.

Since the brand launch in February, we have had a very positive response from the market and from dealer groups. To date we have had roughly 700 applications from dealer groups around the country - without any advertising, dealers came to us and asked whether they could apply. We have very stringent processes and guidelines to follow, and a new board member responsible for integrity, law and compliance. So we have a unique opportunity to establish in India the most compliant network from the outset. That is one of the advantages of a Greenfield operation. It’s more difficult to do this with a Brownfield operation. We now have really outstanding dealers and dealer groups, all of whom have been in the business for at least ten years.

So they have an existing client base and understanding of their customers’ needs...

Yes, and they’re in tune with their respective community, and know the competitors. They know exactly how to deal, how to manage, how to open and how to ramp up. And for each location, we had at least six applications from different dealer groups, giving us the luxury to choose the best one, and ensure compliance from the very beginning.

What will BharatBenz dealers offer to differentiate the brand from other brands?

The appearance of our dealerships is unique.

The corporate design and standardised layout will mean that wherever you are, you will immediately recognise a BharatBenz dealership.

We have developed a service format with the dealers which is ideally suited to trucks.

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27 And we have made sure that these locations are tailored specifically to the needs of trucks and truck drivers. We offer secure areas for truckers, and they can observe how their truck is serviced. For us, the drivers are key, and we want to make sure they feel welcome.

Owner/operators or sub-contractors account for a high number of truck registrations in India. Are you targeting large fleets or these smaller operations?

We will first target the big logistics providers, which have growing fleets and are becoming increasingly professional. The question is whether those fleets own all their trucks - here we have contractors using sub-contractors who use sub-sub-contractors. India is a country of perception, and word of mouth is sometimes more important than facts and figures. The opinion-makers are mainly bigger truck operators, who can influence the owner-operators.

So the big fleet operators will influence the smaller fleets; but how do you intend to influence the big fleets?

It is essential to offer the best finance package on these trucks. The most important thing here is the monthly rate: if one OEM’s monthly rate is significantly higher than a competitor’s, nobody will go for it, so the monthly rate has to be competitive. With BharatBenz, you will pay no more per month than the rest of the market. We already have maintenance contracts and insurance in place which, in combination with the superior fuel efficiency of our trucks, will deliver our customers the lowest total cost of ownership.

Our customers should focus on their business, while we focus on our business. Our business is making and maintaining trucks. Their business is using the truck and getting the most out of it.

Will BharatBenz dealerships be service points as well?

Yes, all dealerships will have service points, but we will have more service points than dealerships. We even have mobile service vans which enable us to quickly reach a customer’s truck in remote locations. For us, service is essential.

Where does the BharatBenz brand sit in market?

Our 85% localisation allows us to be competitively priced in the volume segment, but at the same time we will deliver a much higher quality and technology than you usually find in that segment. Thus we target the so-called modern domestic market - a segment of modern trucks at affordable prices that will grow to be a major part of the Indian truck market.

For instance, cowl versions are still widely used and sold in the volume segment because of their lower initial price, and reduced accident repair costs and insurance. However, driver security and fuel efficiency is much lower than with fully-fledged cabins, which is why we believe in a change and offer our trucks with a metal cabin. We’re observing the market, and could easily offer a cowl if our customers demand it.

The security standard of our trucks is higher than other brands, and repairs can be done very cost efficiently. By offering branded insurance with our captive financer, we can offer attractive insurance rates for these vehicles.

So to sum up, we will always be ahead in technical terms, but we will not be far away from the mainstream when it comes to pricing. I think BharatBenz will not only raise the bar but also transform and modernise the whole commercial vehicle market in India, because our competitors will follow our lead. At the end of the day, BharatBenz is the very best thing to happen to India’s CV market. In raising the bar for ourselves, we will raise it for our competitors, and this will improve the efficiency of the whole market.

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Andreas Weller Vice President, General Manager Commercial Vehicle, Dana

Andreas Weller, Vice President and General Manager of Dana’s Commercial Vehicle business unit, spoke to Automotive World, about the importance of India to the company’s global CV business

Dana made a number of strategic investments in emerging markets in 2011, including the acquisition, in April, of the commercial vehicle axle business from its Indian joint venture, Axles India. This gave Dana full control of the operation’s axle drive head and final axle-assembly operations, as well as its marketing, sales, and engineering activities. At the time of the acquisition, Dana said the US$13m investment was expected to generate annual revenue of approximately US$50m.

Months earlier, in December 2010, the company formally broke ground for its new US$20m technical centre at Pune, where it carries out product engineering for Dana’s products for India and for its global products.

Andreas Weller

From the perspective of a supplier to the commercial vehicle industry, how does India differ from other emerging markets?

India is a huge market for us, and a market that is growing significantly. It’s an increasingly attractive market for us in terms of future growth opportunities. I think it’s still lagging behind some of the other emerging markets in terms of infrastructure, and in terms of regulations and the enforcement of them. But we certainly believe that India will catch up over the next few years, in terms of infrastructure along with growth in population and a growing middle class. We believe that growth and a stricter enforcement of regulations creates opportunities for suppliers like Dana.

The industry in India is changing, and it’s going to put more emphasis on fuel efficiency, greenhouse gas emissions and so forth. China, Brazil and other emerging markets have already changed and are ahead of India with regard to regulations, fuel economy and infrastructure - but India is not far behind.

What level of growth do you expect from emerging markets over the next decade and how much of that growth will be from India? Your comments suggest that you might expect more growth from India than from other markets.

For us, certainly at Dana, that’s the case, yes. We expect significant growth of our business in India over the next few years. We expect a growth in the market as well as an increasing market share as we continue to invest heavily in India.

“India is very important to Dana.

We have ten plants in India, we have several partnerships, and a significant and growing engineering centre in Pune.”

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31 How important is India to Dana?

India is very important to Dana. We have ten plants in India, we have several partnerships, and a significant and growing engineering centre in Pune.

Andreas Weller predicts new entrants to the OEM market will represent a small proportion of the market for the foreseeable future

Is that engineering centre exclusively for the local market, or does it also serve other markets?

We utilise this engineering centre for the local market and for the rest of the world. We use this to offshore, if you will, some of the engineering tasks to our resources in India. We have around 225 engineers there, and over the next year and a half we plan to double that number. We’re building a new engineering centre in Pune right now to house these additional engineers. This facility is very important not just for the Indian market but also for our global engineering activities.

You mentioned some of the regulations that offer opportunities for you, such as fuel emission regulations. Can you please expand on this?

As fuel efficiency and greenhouse gas emissions become more important, and as the infrastructure expands, it improves the needs and expectations of the customer, such as the durability of their vehicles, and a bigger focus is on lifetime cost of the vehicles. India has traditionally been a market for very low cost trucks with a limited lifespan. Most trucks do not last more than three or four years. As this expands, as the expectations of the customers on the durability on the warranty expand, this creates the opportunity for us and our products which are more durable than some of the things that are in the market right now.

We also have lightweight designs, two-speed axles and other products that can help improve fuel economy, improve durability and just help meet the needs, requirements and expectations of future truck buyers in India.

Is the fact that your products might be more durable than the trucks that they go in a factor that you need to consider during product development?

It’s all about meeting customer expectations. If you have a product that’s going to last ten years on a truck that only lasts four years, maybe that product has been engineered, and contains costs that customers may not be willing to pay for. So you need to have the right products to meet the expectations of the respective customers.

You mentioned Dana’s R&D centre at Pune. How do you go about developing your product portfolio for India, and how do you develop specific products for India? Do you have products that are specific to India or do you sell global products in India as well?

I think it’s a combination of both. Obviously, we leverage our expertise and experience with different products across different applications globally.

But at the same time, I’m a firm believer you cannot sit in the US or in Europe or somewhere else in the world and understand the requirements and expectations of a customer in India. That’s why it’s extremely important that we have this engineering force in India, and that’s why we are developing products and/or applying products to the specific needs of the Indian customers.

There is an increasing level of collaboration between suppliers and OEMs in Europe and North America. Do you find that to be the case in India as well?

Yes, definitely. We work very closely with all our major customers in India, discuss their future needs, how they see the market developing, and the kinds of products we could provide that would help them meet their requirements. And then, together, we determine what the most appropriate solution is going to be for them going forward. This is not something you can do in a vacuum. We obviously are interested in developing products and employing our resources where it meets the needs of our customers, and that’s why we work very, very closely with the OEMs in India to make sure that we have the products available that are going to meet their current and future needs.

In emerging markets like India, is it easy to sell off-the-shelf products? Or do you need to create product-specific solutions because of the way that the trucks are built and developed?

We are most successful if we have a solution that’s specific to the needs of the individual market.

If we take an axle out of North America and just try to sell it as it is in India, we would very quickly find that we have engineered this to specifications and expectations that don’t exist in India. And we have an axle here that is designed to go at least 500,000 miles when most trucks in India will only see a fraction of that over their lifetime. So some of the materials that we use, some of the designs that we use are not appropriate for those applications, and that’s why it’s important that we have solutions, designs and products that are specifically tailored to those needs and those markets.

Focusing specifically on axles, they of course need to be designed to withstand extremely poor road surfaces, which is not exclusive to India, but it’s very noticeable in India.

Yes. The condition of the roads is an issue. Overloading is another issue, particularly in India where regulations are not enforced or not well enforced. Some trucks in India are incredibly overloaded, but the expectation of the customers is that obviously the truck and the axle still perform. Also we talk about, and this is particularly an issue in South America, where we talk about ‘tropicalisation’, where these products must withstand a much higher level of heat and humidity. They’re exposed to water and all kinds of climates in markets in which products designed for North America or Europe would very quickly fail if we hadn’t identified with the partners what we might need to change to make sure the product can withstand that market’s climatic conditions.

Are you asked by OEMs to design for overloading when you’re developing your products for India?

Oh, yes, absolutely. Everybody knows that trucks will be overloaded. The OEMs design their trucks so they can operate with the loads that they expect. So I think that is generally accepted practice and if you don’t follow that, your products will fail quickly and you will not be successful.

What are your specific areas of interest in terms of commercial vehicle products for India?

Our main products are axles and drive shafts. We’re currently launching a new axle family in India right now with Ashok Leyland that will cover a wide range of its vehicles. That’s going to be launched in one of its plants. We’re looking at two-speed axles as a way to meet some of the fuel

efficiency requirements going forward, as well as help with startability, particularly on overloaded vehicles. In general we are looking at opportunities to meet requirements in terms of fuel efficiency and greenhouse gas emissions going forward, while taking into account the level of durability needed for the applications in India as it relates to the poor road conditions and vehicle overloading.

Do you see the greatest opportunities for your company coming from the established, domestic OEMs or from new entrants?

Tata and Ashok Leyland still represent over 90% of the truck market. Obviously those are established clients, and if you want to be successful in India, you’ve got to be doing business with them. However, we do expect some growth from new players, be it Chinese or European OEMs. We work with all of those and we have products available to support them.

But at least for the foreseeable future they will continue to represent a relatively small portion of the overall market.

In summary, can you please provide a projection of how you see the Indian commercial vehicle market developing over the next ten years, and Dana’s role in that?

I think we will continue to see significant growth in population that’s going to drive the need for transportation and commercial vehicles. That, along with the improving infrastructure and increased focus on enforcing regulations both in terms of overloading as well as greenhouse gas emissions, creates a need for different kinds of trucks, more durable trucks, which I think we are uniquely positioned to help our customers achieve. We think that this is a very attractive market, will continue to be an attractive market for the foreseeable future and is a market in which we will continue to grow our business and continue to invest, both in terms of our products and our manufacturing base.

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Interview:

Raj Singh Rathee Managing Director, KUKA Robotics (India)

TIMES AROUND THE WORLD…

…And still as good as new!

Even though this axle pinion has travelled 1,200,000 kilometres on the road, it still looks as good as new!

Getting into www.aftonchemical.com © 2012. Afton Chemical Corporation is a wholly owned subsidiary of NewMarket Corporation (NYSE:NEU) www.aftonchemical.com

TM

The number of robots used in commercial vehicle manufacturing is set to increase from around 500 currently to somewhere in the thousands, says Raj Singh Rathee of KUKA Robotics (India), as OEMs seek higher levels of quality and repeat accuracy

KUKA Robotics India was established in 2006, and currently employs 30 people in sales and marketing, and customer support activities like training, on-site installations and after-sales support.

Headquartered in Gurgaon, KUKA Robotics India has training and service centres in Pune.

The company’s operations in India began in 2006 with a major project for TATA motors. The company now has a roster of commercial vehicle customers which includes TATA motors, Mahindra & Mahindra and Ashok Leyland. Daimler’s BharatBenz factory at Oragadam, near Chennai, uses 100% KUKA Robotics, as will the Ashok Leyland plant currently under construction. KUKA says it is also expecting other companies to start using KUKA robots very soon, typically in applications like spot welding, arc welding and handling.

Raj Singh Rathee is the Managing Director of KUKA Robotics (India). He described to Automotive World how he sees the Indian commercial vehicle market developing over the next ten years, and

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the differences in the approach to automation in CV manufacturing between the established domestic OEMs and the new entrants. He also discussed the low level of automation in the CV market, and how he expects this to develop over the next decade.

How important is India to KUKA Robotics’ global strategy?

For KUKA Robotics, India is an important market. The market is not growing as quickly as our other neighbours in Asia, but the growth rate is reasonable and sustainable.

Typically for an emerging market, India has been targeted by OEMs for its low cost workforce. Where do automation and the use of robotics fit into OEM strategy when investing in manufacturing in India?

India is a labour intensive market, but we have companies producing high-quality products for export to the international market. There are also companies seeking a high quality product for consumption in the Indian market. This means OEMs are now looking at more and more robotic automation because the kind of quality, and consistent quality, combined with manufacturing safety, is not possible manually.

Truck manufacturing is more labour intensive than light vehicle manufacturing. How does the level of automation in truck manufacturing compare with cars in India at present?

The present level of automation is quite low, but it is growing at a faster rate than expected.

Until some years ago, commercial vehicle manufacturing used small lines with 10, 15 or 20 robots in a particular line. Now this trend is changing, and we have lines already operational in India using more than 20 robots in a line.

Some companies have gone a step further, using more than 50 robots in a line.

Can you quantify the number of robots in use in India at present in the commercial vehicle sector?

We estimate that around 500 robots are in use in commercial vehicle manufacturing in India.

How does that compare with robots in use in light vehicle production in India?

Light vehicle production in India accounts for around 2,500 robots, five times the commercial vehicle sector.

Where in truck manufacturing are the robots used, and where throughout the production process do you see particular opportunities?

megatrends The biggest use of robotics is in the manufacturing of the cabin, and specifically for spot welding. The cabin differentiates the model, even if the chassis and the majority of the components used are similar or identical. The other area where the robots are in use or can be used is in chassis production, for handling or production applications.

Which operations are OEMs considering for future robotics applications?

New opportunities will continue to arise.

The increase in robotics applications in car assembly is a good example of an area that previously did not involve robotic automation.

But now our new robots have made it possible to use robots in assembly. Successful trials in Europe showed that our small robots can fit into very small or congested work spaces. They have been successful, and our users like them a lot.

Similarly, you can imagine small robots being used to enter a cabin, fit components and carry out some assembly or sub-assembly.

Do you take ideas about robotic solutions to OEMs? Or are you producing robots according to demand?

The OEMs’ engineering teams decide on the robotics applications. But we do share with our users and potential users ideas for new robotics applications, or areas where our robots might add value to an OEM’s production. In some cases, our users implement those suggestions in the planning stage and tell their engineering teams they would like robots for particular tasks.

Where do you see the greatest opportunities at truck OEMs in India - with the established, domestic brands or with the new entrants to the market?

I feel it is with the new market entrants, because the existing commercial vehicle manufacturers have already made substantial investments in their production lines, and calculated their return on investment. Also, it is not easy implementing higher productivity into existing lines, because these lines are planned for a particular capacity and for a manual operation.

Trying to add robotic automation into certain areas could be more work than it is worth.

For the new entrants, however, this will not be the case. They have set targets, based on trends they have observed in production, and they know how they want to proceed based on the growth of infrastructure and industry in India.

Power supply is unreliable in many parts of India. What effect does this have on the performance of your robots in a production environment?

Our robots are sturdy and designed with plus/ minus tolerances on all the parameters that we have for input voltage fluctuations, frequency fluctuations, and temperature fluctuations.

We considered these parameters in the design of the robots.

The new series of robots are much more adaptable for use in developing or undeveloped countries, and are suitable for the conditions you describe. We have the previous series of products running successfully in the Indian market, and the new series will be even better.

On a more general level, how does the demand for robots in India’s CV market compare with other emerging markets, like the other BRIC countries?

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“For KUKA Robotics, India is an important market. The market is not growing as quickly as our other neighbours in Asia, but the growth rate is reasonable and sustainable.”

Among the BRIC markets, we have China at one end of the scale, with the greatest demand for robots. Brazil comes second, then India followed by Russia. And the difference is vast.

China purchases thousands of robots per year, compared to very few robots in Russia.

Are the robotic solutions for India any different to robotic solutions for mature markets like Western Europe, North America and Japan?

We are using the same products as the European markets. The only difference is in the Americas, where they have different safety standards.

Most robotics applications replace manpower. Are there any cultural challenges in India when trying to introduce robotic solutions into tasks that have previously been done by people?

No. The thinking has changed over the five years that we have been in this market. Companies have started to realise that robots are not taking over from people, which was the case some years ago. Now they understand that robots are important for safety, quality, and for tasks which might be very difficult and dangerous for humans to carry out. Whilst there are some companies which intend to replace humans with robots, we do not have that intention. We are sometimes asked to replace a certain number of people, and we have to explain to them that you cannot directly compare a robot with a human.

Selling robots to an OEM is only part of the process; maintenance of those robots by engineers is also essential. Is the technical understanding or engineering capability in India sufficient to deal with these situations, and what are the challenges that you as a supplier face in making sure that you can fulfil maintenance requirements?

We do understand this challenge, and that is the reason why, when we started our subsidiary in India, we also established a local training centre, which has been running successfully over the last six years. We have trained hundreds of Indians in our training centre in Pune. We understand that training is an integral part of the product establishment, and it has been well accepted by our users in the market. We have a strong base of trained engineers available in the Indian market. As far as our own team is concerned, all of the engineers in our Indian team are from India. However, since we do not have expatriates working in India, we face some challenges when there are issues in which our team is not experienced. That said, we have reached a level where we are not dependent on headquarters for providing technical support - this is a big benefit to our customers, as well as to us.

We have talked about truck OEMs in this interview, but there are opportunities for robots at supplier companies as well. What is your view of the level of robotic use in automation at Tier One suppliers in India, and how do you expect this to develop over the next ten years?

There is still a differentiation between the Indian Tier Ones and the multinational Tier One suppliers. International Tier One suppliers are much more open to the use of robots, and they understand where and how robots are to be used. For the Indian Tier One manufacturers, we have to educate them about robot applications, and it takes time for them to understand the price versus quality issues on the lines that they are setting up.

How do you expect the use of robots to develop in India’s commercial vehicle market over the next decade?

Over the next decade, we expect the market to grow exponentially, not linearly. We can expect in ten years the number of robots in commercial vehicle manufacturing to reach somewhere in the thousands.

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37

Interview:

Jens Zeller

A C K Birla Company

Head of Logistics Management and International Sales FleetBoard

Jens Zeller, Head of Logistics Management and International Sales at FleetBoard talks to Automotive World about the potential for fleet management technology in India “Major Independent Manufacturer of Power-Train and Components” Jens Zeller was appointed Head of Sales and Member of the Management Board of Daimler FleetBoard GmbH in 2003. Today, Zeller heads the Logistics Management and International Sales department of FleetBoard, Daimler’s wholly-owned commercial vehicle fleet management subsidiary.

Transmission

Engine

Major Clients: Allison Caterpillar Daimler EATON

Ford General Motors Tata Motors

Visit us at: www.avtec.in

Components

Despite being a Daimler-subsidiary, FleetBoard is not restricted to Daimler group customers, and can work with any brand, and in any type of commercial vehicle. “The only thing we need is standardised CAN bus technology to get the data”, explained Zeller to delegates at Automotive World’s Commercial Vehicle Megatrends India 2012.

Here, Zeller outlines the current potential for fleet management technology and commercial vehicle telematics in India, and how it is likely to change over the next decade. He also explains how the Indian market would need to develop for it to become an interesting market for FleetBoard.

How would you describe the current status of commercial vehicle fleet management and telematics in India?

I think at the moment it’s similar to many other countries - it’s mostly track and trace, and location-based. Sooner or later, other services will be added on to this single service, relating,

The FleetBoard TiiRec is the end device used to transfer technical data; a card is used to identify the current driver and start the tachograph

megatrends 38 for example, to driving behaviour, enabling fleet operators to educate the drivers via data from the truck. If you want a quality delivery service, you need a good driver.

A key issue in India is the shortage of educated drivers, due to the fact that it’s not a respected profession in India...

Correct. By the way, it is not respected in Europe either, and I would say the image is getting worse and worse. So first of all, education of the drivers is essential. Then logistics services must be improved. Therefore you need a reliable truck, and that leads to the next thing: maintenance of the truck based on telematics. That will come too. And the third issue is logistics based on telematics. Following on from that will be features like security - for the driver, truck and the goods.

Those are your suggested stages of development of a fleet management and telematics system in the commercial vehicle market in India. Where would you say India currently stands in that sequence?

We’ve got already basic functionalities on truck data, but that’s far from enough because you need all this electronic information on the CAN bus, and that doesn’t exist at the moment. That leaves fleet operators with simple track and trace, and very simple truck data, like speed - basically the data and information you get from GPS signals.

How does the current fleet management situation in India compare with other emerging markets?

India is at an earlier stage than the other BRIC nations. Brazil, Russia and China are ahead, because they already have more information, more technology, more education and more developed professional logistics services.

What presence does FleetBoard have in the key emerging markets, and how does this compare to India?

We are present in Brazil, where we have 14 people. In China we have five FleetBoard staff, but there we have the Mercedes-Benz organisation behind us, as we do in Brazil, assisting us to sell our products. We use the truck sales guys to help us, to support us. In Russia, we are close to entering the market. And we are still discussing when to enter the Indian market. In my eyes, we have still time to enter.

Much of India’s commercial vehicle fleet is made up of small owner-operators. Do you see that remaining the case over the next ten years, and is that a challenge to you and other competitors developing a telematics presence in India?

New entrants like Daimler in Chennai cannot rely on small owner-operators. They need larger suppliers with greater logistics operations. That said, if you have a really good logistics workflow, you can integrate smaller companies. So a good logistics workflow can integrate different hauliers, different companies and smaller companies more easily into the network than would be possible without telematics.

Indian drivers and fleet operators face many issues that they may consider a greater priority than telematics and fleet management: fuel costs, regulations, operating costs, driver shortage, poor roads, overloaded trucks, maintenance, and the fact that many of the trucks are old or low cost. How do you convince these fleet operators that they should also pay for fleet management services?

You are right - these are reasons why market entry will take time. However, you cannot produce highest quality products without a professional logistics service behind you. Bigger and more professional hauliers are needed. Goods will be more sensitive, and there will be a need for temperature control. There is an increasing need for goods to arrive at the right time in the right place, so there will be a need for more professional logistics. It will develop, but it will not happen tomorrow or next week. I think it is too early to convince the market at this stage about professional telematics solutions. But SAP will come; ERP systems will come; logistics software will come; estimated time of arrival will be important; and just-in-sequence production will come. There will be a need for increasingly professional logistics services.

Those are long-term benefits. When you’re marketing your services to fleet managers, what are the immediate benefits that you’re presenting to them, and is there an interest and enthusiasm for this technology?

The data journey of the FleetBoard telematics system

At the moment we are analysing our options in combination with BharatBenz in India. And there we get much more information from the CAN bus. We can do a lot with that information: we can carry out a professional telematics-based after-sales diagnosis. This means we are able to offer a new level of quality to the market, thanks to the combination of Mercedes-Benz and FleetBoard. And with that combination we are able to offer a professional truck aftersales service. We can prevent breakdowns, and if a breakdown occurs, we are able to solve the problem in the most efficient way.

Are there any regulatory or technical barriers to implementing your kind of services, whether it’s your company’s or a competitor’s, in India, that need to be overcome before it’s possible to get the services in place?

megatrends Yes. Track and trace and a few other things can be done via GPS. For most other things, you need a CAN bus and information on the CAN bus. If you don’t have the information on the CAN bus, then you are not able to do certain calculations. I think you need a standardised CAN bus with a lot of information and, at this stage, that is not available in India.

In addition, you need GSM or GPRS coverage in India. And as we present our data over the internet to customers, good internet access is essential.

Can you please provide some idea of how your services could help inbound logistics and outbound or finished vehicle logistics for OEMs producing vehicles in India at the moment?

The high level of local sourcing in India is a sign that the industry is not able at the moment to rely on long supply chains. The quality may be good, but I think the prices are relatively high because they have to produce everything in the same area. Nevertheless, you need the right goods in the right place at the right time, and therefore, with our logistics modules, we are able to deliver exactly that - we can calculate when the goods will arrive, and that is important for a professional manufacturing operation.

Automotive logistics supply chains are less developed in India than they are in Europe and North America. More generally, there is an absence of the big supermarket chains that are present throughout Europe and North America, with their own large vehicle fleets and partnerships with large logistics providers. Presumably your entry to the Indian market depends on the development of these types of services?

In China, people are starting to like coffee chains. It’s like a new way of life, going out to drink a coffee in the morning. And that requires professional logistics management to deliver fresh coffee and milk, always at the same price and quality, often to small outlets

An in-cab view of the FleetBoard system at work

with limited storage. And that will come to India. I believe the lack of supermarket chains in India will change too. Supermarket chains went to Brazil, China and Eastern Europe, and they will come to India.

39 The FleetBoard fleet management app allows users to trace the journey of utility vehicles live on a smart phone

With that in mind, at what point will it become interesting for you to consider India as a market for FleetBoard?

It’s difficult to say in one or two sentences. First of all, the standard of living has to reach a higher level. India is an interesting market because of the large population, and it is interesting for production because it is a cheap production place, but that will change. So population, higher standard of living, more professional production, higher quality of production facilities, and then better technology in the trucks the level of truck technology has to improve.

How do you see the role of commercial vehicle fleet management developing in India over the next ten years?

The buyers of trucks will quickly and easily understand the benefits of services like after-sales and maintenance, and you can easily build a business on that. They will see that they can prevent breakdowns, ensure that their drivers use the trucks correctly, on the right routes and for the correct length of time. And that change can happen, in my eyes, even in a relatively short term - maybe in 2013.

From there, it goes to the next level - more professional training, logistics and security. After that comes trailer telematics, for example, to control the temperature in the trailer. At that point, the market would be at the same level as Europe is now. But that will come, I would say, from 2013.

In general, it’s hard to convince people in the market about the total cost of ownership - they look at the up-front price, but not so much at the longer term benefits. In general, we say it would be possible to have a return on investment within one year, basically

because one main use for FleetBoard is to reduce fuel consumption by improving the driving style of the drivers, and if the drivers drive their trucks more efficiently, they save fuel - usually this alone is sufficient motivation.

Any fleet management or telematics services which rely on vehicle-to-infrastructure data are dependent on a high number of vehicles containing appropriate devices in them in order to be able to really get the best data of where there’s traffic, how to get round it, and so on. Most vehicles on Indian roads contain little more than a cell phone to provide this kind of data.

Yes, I agree. You cannot work against the market - you have to push the market a little bit and try to influence it. And then the market has to develop, then you push it a little bit more, and step-by-step it will develop. But it will be an organic development, and it has to go hand in hand with a general improvement in the standard of living.

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Interview:

Dr. Arun Jaura Vice President of Technology, Eaton and Head, Eaton India Engineering Center

2050

Dr Arun Jaura talks to Automotive World about the changing shape of the Commercial Vehicle industry and how Eaton has adapted to the Indian market

Between now and 2050 the global population is expected to increase from 7 billion to more than 9 billion, with 98% of this growth happening in cities and in the developing and emerging world.*

Eaton is providing solutions to the challenges, such as the growing demand for energy and natural resources, that our communities are facing now.

At Indira Gandhi International Airport in Dehli, Eaton is making sure the new T3 terminal has the vital backup power protection it needs to manage the airport’s surveillance capabilities, emergency lighting, food courts, boom barriers and ground freight movement.

Dr. Arun Jaura is Vice President of Technology and Head of the Eaton India Engineering Center, one of the key engineering centres in Eaton’s global engineering and innovation footprint. Eaton’s India operations are part of the company’s Asia-Pacific region and, within the region, India is the company’s second-largest market after China.

Eaton inaugurated its Professional Services Center at Kharadi, Pune, in India in March 2008.

Automotive World spoke to Jaura about the role of the Eaton India Engineering Center, the importance of India to Eaton as a global supplier, and the development of products for India’s commercial vehicle industry.

How important is India to Eaton as a global operation?

Electric vehicle drivers are staying on the move thanks to Eaton’s Pow-R-Station DC Quick Charger. Already today, our charging technology brings fully depleted EV batteries back up to full charge in 30 minutes or less.

Buses are the world’s people movers. They operate round-the-clock in nearly every city and every country in the world. Eaton has hybrid power systems in city passenger buses globally, reducing fuel costs and emissions for the average vehicle by 25 to 30 percent.

Anticipating tomorrow. Achieving today.

*Source: United Nations

Powering Business Worldwide

India is one of the strategic growth markets for Eaton, both in terms of growing engineering and technology prowess, and in terms of growing its local business presence. We are very well aligned with the OEMs in the business areas that we serve in the country and much of the engineering and technology development that is needed to enable this growth is done by the Eaton India Engineering Center.

Can you please outline the role of the Eaton India Engineering Center?

Close to 900 people currently work in the Eaton India Engineering Center. It’s one of the largest engineering and innovation centres that Eaton has outside the US. The engineering for all Eaton businesses is carried out at this centre. The team works on worldwide products, technology and innovation. This is done in collaboration with global teams, whether they are in the EMEA region, Americas or APAC. Teams at the Engineering Center work with the global product planning teams and local businesses on engineering projects for the Indian market.

They are centres of excellence in the areas of electronics and software, modelling and simulation, and control and reliability. In addition, the teams work in the areas of sustainability and lifecycle assessment, and intellectual property.

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43 How different are the products that you sell in India to products that you sell in other markets? Do you sell products in India that you would also sell in the US, for example?

Is the level of collaboration between suppliers and OEMs in India as good as it needs to be? How does it compare to other emerging markets or even developed markets?

Well, things have evolved over the last few years. Today, for India, we adapt and modify products that we have in other emerging and mature markets. One product or solution does not fit all. As you know, we have a wide range of products worldwide that can be adapted for applications relevant to India. This gives us the agility and flexibility over our competition.

In comparison to other emerging markets, it’s more or less the same. In comparison to mature markets, there is room for improvement. It has come a long way but there is more to cover. We have a strong technical and engineering footprint in the country and are able to offer that advantage to the OEMs. The opportunity to work with OEMs from day one, creates an exciting partnership and helps build a great relationship.

How does India compare to other emerging markets in terms of the products that you offer for commercial vehicles?

In terms of application, where do you see the greatest opportunity for a form of hybridisation in the commercial vehicle industry in India? And which type of hybrid do you think is most applicable?

The kind of product range that we offer in India is pretty similar to other emerging markets, although the market requirements may fluctuate based on local needs.

What is your key product range in India for commercial vehicles, and how do you see that changing over the next ten years?

In the truck applications, we offer transmissions; in the automotive space, we have M & E Lockers for SUVs; valves and valve trains; fuel vapour systems; air-conditioning conveyance systems and plastic components. We do have hybrid electric solutions for commercial vehicles.

As for plug-in hybrid technology, that will probably not gain much traction in India for cost and other reasons. One has to think deeper and understand if the mature market models actually apply to the Indian ecosystem and are they really needed in this particular context.

The power supply in many parts of India is unreliable. Is the electrical infrastructure in India currently sufficient to support plugin electric vehicle technology?

In India, the government is focusing on infrastructure growth. The hub and spoke model will enhance the need for trucks and buses and similar platforms. The OEMs that we are working with are harnessing these opportunities, and we are working with them on developing transmissions for India. If you look at the projections made by the planning commission and the government, we believe infrastructure growth will continue year on year for the foreseeable future.

In terms of other products, fuel efficiency is another imperative that the government is focusing on, so that is an area where we will continue to grow and focus on through our automotive product range and hybrids.

Hybridisation is most appropriate for buses in the Indian context because of the set route and frequency of start-stops. For a market like India, a parallel hybrid could be more economical, because in a series hybrid there is more hardware, electronics, larger battery and of course, a lot more integration effort and after market requirements. All of that increases the cost. With a parallel hybrid, all these aspects scale down, so the upfront hardware cost and payback span is much shorter for the end consumer.

Studies from the government show that a large percentage of India is still without electricity. One of the focus areas of the government is to pursue expansion of the footprint of electrification. The national solar mission and other energy programs are in place and the government is starting to fund and strategise implementation. So this will grow for sure. The question is ‘how fast’ since there isn’t enough electrical infrastructure available today to support large scale e-mobility in the country.

Automated manual transmission presents a growth opportunity for Eaton.

Do you offer your automated manual transmission (AMT) products in India, and is that one of the areas where you see good potential?

Yes, that’s a growth opportunity for us. There are applications in the truck space that actually could leverage this technology through us in India, and we are working with OEMs since it is one of our niches in the marketplace.

Considering road surfaces, terrain and overloading, what is the advantage of an AMT versus other technologies that Indian commercial vehicle OEMs might use?

It depends on the payload, and the kind of application one wants to use. One of the big challenges is overloading. Although there are regulations in place to control and manage overloading, the enforcement is not strong enough so there will be end-users that will still overload their vehicles.

One of the big opportunities for Eaton is to deploy AMT solutions in India that are ergonomically more efficient for the drivers, and also offer the efficiencies of our solutions.

Other aspects that we are looking at include fuel efficiency, and ease of driving. Driver comfort is a critical factor since better expressways in India now offer higher range, resulting in longer working hours for drivers.

In any country, fleet operators and truck manufacturers face an array of challenges, but there seem to be more immediate problems facing operators in India than in many developed markets. AMTs, for example, may help with total cost of ownership, but upfront cost is a real issue. Is TCO a challenge when taking your products to OEMs and fleet operators?

Adapting and deploying an affordable product is a great challenge for engineers, in general. The excitement is to be able to meet these expectations.

OEMs that have seen the advantage of an AMT are willing to invest upfront because they know that this is going to provide a different proposition to their customers. Eaton has created a network of dealerships which gives our customers greater confidence and flexibility. Coming to your question on total cost of ownership, it is critical to understand that the holistic cost of AMT kind of products, tangible long-term savings, lesser driver absence, and haulage flexibility that create a stronger value proposition along with a low carbon footprint.

Global suppliers often find the products they supply to Indian CVs outlast the trucks that they go in. Is this a consideration when you’re developing a product for India?

Yes, and that’s where the product rationalisation and cost optimisation comes in. If we design a product that’s going to go in an application that has a certain product lifecycle, then we’d better design and adapt to that requirement without compromising on the value proposition, and that applies to offerings in India, as well.

Where do you see the greatest opportunities - with the established domestic OEMs or with new entrants to the market?

Both. The new OEMs are looking for their USPs to customers. The established OEMs want to maintain their market strength and grow their business to expand market share. As a global technology company, we have the advantage of being able to offer technology to the new OEMs, and also to the existing OEMs. The advantage for us is to continue to have the same partnership with OEMs in and outside the region, and work with new and established OEMs in different markets to meet customer needs.

How do you see the Indian commercial vehicle market developing over the next ten years, and what role do you expect Eaton to play in its development?

In terms of the Indian commercial vehicle market, the industry is moving towards bigger and heavier tonnage and haulage, so our transmissions, which are very well geared for these applications in other several markets, will be a natural good fit in the marketplace. We will be adapting a few of these for Indian driving and road conditions, and with the changing regulations in the country, it should be a win-win for all stakeholders. The other advantage we have is that the new OEM entrants in India are also our partners in other regions and markets so that gives a head start anyway.

We also have niche products from different markets that we can bring to India with short developmental cycles. To sum it up, Eaton is very well positioned to expand the footprint and work with stakeholders in the areas of fuel efficiency, reliability and driver comfort to enable in country and regional growth.

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Interview:

Ravi Pisharody President, Commercial Vehicles Business Unit, Tata Motors

Ravi Pisharody voices his opinions on the Indian market and offers an insight into Tata’s strategy to cope with the developing world of commercial vehicles

What are the key issues the Indian commercial vehicle sector is currently facing?

growth will also see a renewal backed up by generally healthy industrial growth.

The high interest rate regime has meant that the GDP growth in India has slowed down.

This, coupled with an increase in excise duties, leading to higher costs of ownership for consumers, has dampened the CV sector growth rate marginally. This economic scenario is short to medium term at best, and we are confident of the generic trends in the country. A good monsoon and increased spending in construction and infrastructure will revive the trend.

Will any of these present particular opportunities or threats to Tata?

What are the opportunities or headwinds that you anticipate in the next decade, and how will these boost or impact commercial vehicle sales in India?

The small commercial vehicle (SCV) market will remain robust over the next business cycle, as rural penetration and purchasing power further increases. The medium, heavy and intermediate commercial vehicle (MH&ICV) markets will see another growth spurt in the next two to three years on the back of increased government infrastructure spending, after the current limited period slow-down. Overall, CV

The dealer network strength Tata Motors possesses will be an important asset which will help us capitalise on the increasing demand in SCVs, further helped by our planned expansion. The MH&ICV industry may see a sluggish period in the short to medium term, but Tata Motors has the product portfolio to leverage generic growth-oriented economic trends.

How are the established domestic OEMs responding to the competition presented by new entrants to India’s commercial vehicle market?

Domestic OEMs have been expecting competition and, to remain competitive, have invested greatly in upgrading their products and manufacturing technology. There are multiple new generation products that have been launched in the recent past, and there are several in the pipeline. Additionally, Indian OEMs have been strengthening their value propositions by introducing a host of new services.

How important is India in Tata’s longterm strategy?

Tata Motors is the market leader in India and this position lends itself to a large domestic volume base. The volume base and resulting economies of scale improve our competitiveness in the world market. Thus, maintaining a strong position in India is key to our overall success.

In your presentation at Commercial Vehicle Megatrends India 2012, you mentioned the potential for developing a superior build brand value for “Made in India” products: when do you think this will be possible?

Tata Prima

Tata Super Ace

In most markets where Tata Motors is present, the brand value of “Made in India” products has been well established. The brand will be further strengthened by way of introduction of our new range of products over the next one to two years. The new range and its enhanced value proposition will require another two years to be firmly established, and this will lead to the superior brand value we know Indian made products can achieve.

What changes do you expect over the next ten years in the level of commercial vehicle manufacturing in India for the domestic market versus manufacturing for export?

There are several international majors that have either set up, or committed to set up, shop in India. This will mean that CV production capacity, which has in the past lacked demand, will get a boost.

In the medium term, capacity will exceed demand in India and manufacturers may export products from India to maintain good capacity utilisation. Knowing this, most manufacturers have already invested in facilities to cater to both these types of demands.

Finally, how do you see the Indian commercial vehicle market developing over the next ten years? And what role will Tata Motors play in this development?

Consumer preferences in India are expected to shift towards more advanced products and services. This would entail large investment from OEMs and channel partners to gear up to provide a basket of services. This is a great opportunity for Tata Motors due to the present depth and width of infrastructure, and also due to the existing vehicle park. It is also to our benefit to lead this change, as it will lead to far greater brand loyalty, a value that will help retain our market position.

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“BharatBenz is the very best thing to happen to India’s CV market. In raising the bar for ourselves, we will raise it for our competitors, and this will improve the efficiency of the whole market.”

megatrends

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