Action in the Indian commercial vehicle industry has been heating up with Daimler, Scania and Volvo looking at a larger footprint in India. DaimlerChrysler may up its stake in Eicher Motors while Scania has also shown an interest in the company. S Sandliya, non-executive chairman at Eicher Motors gives the details.
Sandliya informs that talks of companies picking up stake in Eicher Motors are speculative. He also says that Daimler has indirect stake of 3 per cent since mid-1980s. He states that the company does not need any partner to grow significantly in the coming quarters.
Sandliya affirms that the company's growth rate is at par with the industry. He adds that the company has the capability to indigenously develop vehicles. Sandliya believes that the commercial vehicle cycle is positive with infrastructure growth and overloading ban.
CNBC-TV18 shares with domain-b its exclusive interview with Sandliya:
Is this a rumour or are you in talks with any of these companies?
Whatever has come in the papers, in The Economic Times, regarding people picking up stake is all speculative rumours. We don't have any confirmation on that. It is just that the media likes to speculate and come out with something sensational. There is no truth in what is being said in the The Economic Times.
No truth about the parties involved or no truth that you are looking out for a technology partner?
At any point of time in the commercial vehicle industry or any industry for that matter, there are global players who keep talking to people in various countries. The same is true in India also.
Almost all the world players will be talking to Indian companies. But this is not to say that XYZ is actually dealing with somebody and trying to finalise something.
As and when things get finalised, it will of course get reported. As things are discussed at the board meetings, and only when it is finalized, will it get reported. So to say that people don't discuss is not right. Many companies are discussing things, but who is discussing what, and at what stage- nobody would know.
Do you feel the need for a technology partner?
It is not a question of we feeling the need; so far we have managed. We had Mitsubishi as a collaborator; they have given us technology. We had built on that technology and developed our own new products.
In the complete LCV, HCV range, we have come out with our heavy commercial vehicle totally indigenously developed. So in terms of capability for meeting the emission norms, and meeting with future technology, we do have the capability.
However, if there is an opportunity in the international market to tie up with people and if it is going to be a win-win situation for our company and the international company, then it is worth it.
The Indian market is very exciting, it is growing, it's worthwhile, the product range is very different. The applications in India are extremely different as compared to what is there in the US or Europe, and the vehicle robustness and emission norms are going to be very tough and challenging. So in these matters it is good to have a wide technology spectrum especially if it is available.
What is the Daimler Chrysler stake in Eicher Motors at this point? Have they shown any interest in increasing that stake in your company?
Daimler doesn't hold any direct stake. Mitsubishi Motors Corporation has around 3.5-per cent stake in our company and that has been the case for quite some time. They had started this collaboration in the mid '80s and that continues.
DaimlerChrysler owns a significant stake in Mitsubishi Motors and so obviously there is an indirect holding of Daimler in Eicher Motors. So whether they would be interested in taking up further stake or not is totally speculative.
In terms of business, what share does Eicher have at this point and as a year-end target, how much would you want to take that up to?
Eicher Motors is growing significantly. It has had a growth rate of 24 per cent or 25 per cent so far in the first five or six months and it has been growing at par with the industry. In certain segments it has grown even above the industry, for example in the 7-tonne to 11-tonne segment we have grown significantly higher than the overall industry growth rate in the LCV and medium commercial vehicle space.
Overall, the growth rate is reasonable. We are comfortable with the kind of growth and we hope that in the year-end we will have significant growth, either comparable or higher than the industry growth.
What is your market share at this point from the entire pie?
In the 7-tonne to 11-tonne segment, our market share will be about 35 per cent plus, and in the entire CV segment, it will be around 9 per cent to 10 per cent market share.
Where do you stand in the CV cycle - have things improved with a drop in oil prices?
Actually this CV industry cycle has been difficult to predict in the recent past. The year 2005,2003 actually predicted negative growth, but it turned out to be positive. In 2006-07 we thought it could be moderate or negative, or marginally positive, but the first five months have proved totally different.
Growth has been significant, but I don't know how long this kind of high growth will last. But it will suffice to say that there is growth from 8 per cent to 15 per cent per annum on a consistent basis. That will be good for the industry because it is in tune with the overall economic growth in the country.
The overall economy is predicted to grow at about 8 per cent to 8.5 per cent, and with manufacturing growth in industrial production also significantly growing, I think it should auger well for the CV industry overall.
The railways are improving, but they can't improve at significant pace compared to the CV segment in the road sector. With road construction also prevailing and the government of India promising to put more money and more private participation, I think the CV segment is going to have a significant future in the next five to 10 years.
How sensitive is it to interest rates?
Marginal hikes in interest rates have not significantly impacted the industry. But temporarily there is am impact. With a couple of rate percentage points going up, people would hesitate to buy, but overall I think it will be positive.
In my opinion the growth in the CV industry is significantly dependent only on the overall economic growth. Diesel price hikes, and temporary fluctuations are some hiccups. But they will even out over time.
The Supreme Court orders of overloading being banned should also auger well for the industry. There should be a significant growth and especially infrastructure development.
To grow from here and to increase the market share that you have, is it necessary for Eicher Motors to make inorganic moves or to look at offering some of its stake or do you think you can indeed within the next few quarters go alone and increase your market share?
As far as the strategy for the company is concerned, growth can even be organic as we have a large enough product range.
We are also coming out with tractor-trailers and once we have the entire range out, growing in the market by virtue of product performance being significantly superior to the competition, should not be a problem at all.
So just for the purpose of growth, I don't need any partner. However, from a technology perspective, taking into account an overall international name and an export market, then it is always desirable to have partners of significant size, which give a kind of critical mass to grow significantly in the market place.