Daimler Is Trucking To Higher Market Share In India

by Trefis Team
87.12
Trefis
DAI
Daimler AG
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Daimler (DAI) is presenting its new line of trucks in India, branded BharatBenz, as a serious alternative to the locally manufactured trucks. With low cost, less power and locally built by using local materials and labor, Daimler is positioning these trucks as highly efficient, low maintenance vehicles that can withstand tough environmental conditions. To build these new products, the company has invested $850 million in a facility in India, which is Daimler’s largest greenfield investment outside of Europe. This is departure from the firm’s earlier strategy of assembling and selling high-end premium trucks in the country.

Daimler’s Mercedes-Benz competes globally with BMW (GR:BMW), GM (NYSE:GM), Ford (NYSE:F), Honda (NYSE:HMC) and Toyota (NYSE:TM), among others. We currently have a price estimate of $72 for Daimler’s stock, which is well above its market price.

See our full analysis for Daimler’s stock here

The Indian truck market  is growing at a rapid rate and is expected to double from the current levels to reach 1.6 million by 2017. Truck sales grew by 18% last fiscal reaching 800,000 vehicles. The Indian truck market is dominated by local firms like Tata Power and Ashok Leyland, which make trucks aimed at delivering high value at a low price to their customers.

Foreign truck makers account for less than 10% of the market, and the low share is primarily attributable to high costs of their products that are assembled from components delivered by foreign players at higher costs compared to the local players. Foreign players who operate in others sectors of engineered goods segment in India have also realized that the Indian customers will not purchase their product, however good the quality, unless it falls in their price range.

The new Daimler trucks, which are manufactured locally with local materials and labor, will be sold at prices less than half of comparable trucks retailing in Europe. We think this is a great move by Daimler and will help it capture more volume of the high growth, but cost conscious Indian truck market.

A similar strategy in Brazil has worked well in the past for foreign players who now dominate the country’s automobile market.

We currently estimate Daimler’s automotive market share in international markets will reach ~0.85% by the end of Trefis forecast period. However, the success in the Indian truck market can increase the market share to around ~0.87%, leading to a 2% upside in the stock price.

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