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Daimler India plans operational break even in 2015 or 2016

Posted on Apr 10 2014 | IANS

Chennai, April 10 : German automobile major Daimler AG's Indian subsidiary is looking at higher local content in its trucks to be more price competitive and hopes to achieve an operational break even in 2015 or 2016, a top company official said Thursday.

"By 2015 or 2016, we want to achieve operational break even. We have to increase the localisation levels in our trucks from 85 percent to 95 percent. Then we will be more cost competitive," Daimler India Commercial Vehicles managing director and CEO Marc Llistosella told reporters here.

"We will also increase our exports as long as exchange rates are advantageous," he added while declining to commit any number as to the ratio of domestic-export sales.

Llistosella said the company is also looking at the possibility of getting into earthmoving equipment segment with a 49-tonne vehicle under the BharatBenz brand.

Currently the company sells Actros badged vehicles for the mining segment which has high level of import content, making it costly.

He said the market size for Actros segmentis around 1,000 units per year and the component vendors are not ready to make the components as it is not economical for them.

Agreeing that the company's networth has been eroded substantially, Llistosella said the company's loans were properly serviced and its credit rating is AAA.

According to him, the Indian company has the full backing of the German parent Daimler AG and India is one of the production hub for trucks and buses for the group.

Speaking about pricing pressure, Llistosella said Daimler India does not offer any discounts while the competition went to the extent of discounting their prices 30 percent upwards.

"When we wrote out business plan the price difference between our product and that of competition was put at 10 percent but with the discounts, the differential is as high as 30 percent," he said.

Last year the company rolled out 6,900 units from its Oragadam plant, around 55km from here.

In the domestic market it sold 6,500 units and the balance was exported.

According to him, the market is looking up now as the freight rates are picking up and the discounting has also come down to 20 percent as demand for trucks is also showing some promise.

Daimler India sold 2,203 units during the first quarter of 2014 up from 1,316 units sold during comparable period the previous year.

In March, the company sold 1,000 units.

Llistosella said the company crossed 10,000 units sale in a short time of 18 months since its market launch.

He said the company will increase its dealer network to 81 by the end of this year and to 100 by 2015. Currently Daimler India has 71 dealers.

Starting its marketing operations from the south, the company will train its focus on the northern region and more so in Punjab where a competitor has around 90 percent market share, Llistosella said.

He claimed that Daimler India has a market share of 9.2 percent in south india, 4.3 percent in the west and 1.8 percent in the north.

Within the four southern states, he said the company's market share is as follows: Kerala 26 percent, Tamil Nadu 9 percent, Karnataka 10 percent and Andhra Pradesh 7 percent.

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