Reports in the Economic Times clarify in part Volvo’s plans for its Indian operations. India is to become a sourcing hub for its world-wide operations, and, as a result, Volvo plans to increase its Indian R&D and engineering design activities, IT services and auto components sourcing. Last year, the Swedish OEM sourced €70 / $91.97 / £46.95 from India.
Initially, Volvo will increase the headcount at its engineering design office. "We currently employ 80 engineers at our engineering design office. We plan to employ another 100 this year. This office looks at product development primarily for the Asian market," said Eric Leblanc, managing director, Volvo India. In addition, the Hoskote plant will migrate to double shift production, allowing for output to be doubled to 2400 units per year. Volvo currently has sales of around 600 units per year within India. This move will facilitate the supply of Volvo product into Asian markets – such as Vietnam and Indonesia from Indian as opposed to European facilities. Hoskote already supplies Volvo customers in South Korea and Bangladesh.
Volvo claims this move is as much about freeing up capacity within its existing EU facilities as it is about developing a strong Indian manufacturing base. Given the somewhat parlous state of the EU heavy truck market post-Euro 4, we find this assertion to be rather odd. Intriguingly, other reports suggest that Volvo will – in time – export to China from India, giving further reason to believe that the relationship between Gothenburg and CNHTC is becoming increasingly fractious.

More mystery surrounds the exact nature of the relationship between Tata and Iveco as a result of this piece in the Times of India. The report, which suggests that Tata is to use Renault’s Trafic van platform in order to produce a three tonne passenger / commercial range, allowing it to plug the gap between its recently launched Ace one tonne product and the heavier duty 407 van.

The three-way alliance between SAIC, Tata and Fiat becomes yet more confused. Leaving aside passenger car business for a moment, it would appear that Iveco and SAIC are now well wedded, but the more obvious Iveco – Tata relationship is far from consummated. Indeed, with the exception of a joint strategy in Latin America – in itself a strange move given Iveco’s existing reckonable business in both Brazil and Argentina – there appears to be no obvious move towards consolidating the efforts of Tata – one of the world’s biggest CV manufacturers and indigenous to one of the world’s biggest potential CV markets – and Iveco – in itself a not unreckonable force in the CV business.

Post Ashok Leyland, Iveco has no presence within India at the moment. It – and any other CV manufacturer – probably needs one. So why the absence?

Is Iveco’s future as a part of the Fiat Group still uncertain? We can think of no other reason for the delay in sorting a Tata-Fiat relationship out. Certainly, there are one or two other European CV OEMs sniffing around a piece of the Indian giant – DaimlerChrysler for one – and so you’d have thought that Turin would have been keen to nail this deal down. That it isn’t suggests – possibly – that it might be keen to have an unencumbered Iveco ready to take to market at some point in the not too distant future.

Interesting report here about KaMAZ and its plans for India. This is the market to be in at the moment, and it’ll be interesting to see just how the Russian OEM gets on against the indigenous giants – Tata and Ashok – and the newly keen European OEMs – including Volvo, MB, Scania and MAN. Add to this heady mix the Chinese - through Asia Motor Works – and it all adds up to seemingly interesting times ahead.

Interesting to see here that GAZ has signed an agreement with Ural India. What could this be for, we wonder. UralAZ has an existing relationship with Iveco, and GAZ wants to take over the world.

LDV for the Indian market? Certainly a thought.

Good to see that the Cummins Inc Board of Management is getting out and about a bit, and is currently enjoying some R&R in India, from which many good things are predicted to emerge, and where the US Engine builder already has a considerable presence.

One does hope that the Economist was not one of the proffered publications on the plane from Indiana to Mumbai. The most recent issue has a somewhat pessimistic article contained within its covers that points to the imminent overheating of the Indian economy.

Oh well.

The seemingly on-off relationship between Tata Commercial Vehicles and Iveco – a potentially arranged marriage that could come about as a result of the alliance struck between Tata and Fiat - the respective owners of the two marques – is examined here.

At one level, the much-trailed possibility of a Fiat-Tata LCV JV has now been confirmed. Fiat will build a Tata pick-up truck at its Cordoba, Argentina plant. This vehicle will be retailed in selected Latin American markets, as well as through Fiat dealerships in some European countries.

But the broader picture is still very cloudy. Our view remains that any further collaboration seems at best conditional on a vast amount of things, most of which appear to be somewhat intangible. The Forbes article speaks of MOUs and study groups, and places an apparently open-ended timescale on any possible deal. Indeed, Tata's recent decision to cosy up with Renault seems only to confirm an ambivalence at least on the part of the Indian side.

But this reportsuggests that Iveco is being used by Tata as a replacement for that which was promised by Daewoo - acquired by Tata a couple of years ago - and to date, a far from stellar contributor to the Indian design effort. Make your own mind up.

We do not feel that Iveco looks comfortable with Tata. The original deal between the principles makes a lot of sense from the perspective of sourcing and cost-effectiveness in terms of car manufacture, but there seems to be some danger of Iveco being shoehorned into this. We see this as inappropriate.

Hence the current stance: there is no deal, but there might be. On the other hand, so there might not be. Only time will tell. But, with Iveco now a key player in the next round of OEM consolidation, it’s arguable if time is actually a commodity available to either side. Of course, a MOU does serve as a spoiler, but not one likely to be ultimately effective should Fiat be offered a decent sum for its truck business.

In truth, whilst Iveco would doubtlessly be a technology leader in any deal with Tata, it would be a very much junior partner in terms of scale. We come back to the elegance of an Iveco-MAN-Navistar alliance, into which input from Tata – and also Iveco’s Chinese partner Yuejin – would make a lot of sense.

We’ve already discussed the fate of Iveco’s previously-held 15 per cent piece of Ashok Leyland.

Volvo had been viewed as a front runner in this race, with Scania a close second. No longer – it seems that talks with Volvo have broken down for the same reason as the Scania discussions went nowhere: both Swedish OEMs wanted management control, and the Hinduja boyz – the owners of Ashok – were having none of it. A fact which presumably precludes any DC interest.

We assume that this derailment has caused a bell or two to ring in Bellevue, Washington. Paccar – as discussed previously here – is rumoured to have taken a look at Ashok before, and we rather like the look of the fit. Indeed, there’s some irony here: if DAF’s management had been slightly more long-sighted a couple of decades ago and acquired a piece of the Indian OEM as part of the whole Leyland debacle, then this situation would not have arisen today. As it is, we rate an Ashok-Paccar deal as a good solution – albeit one now 20 years overdue.

Asia Motor Works - a newcomer to the Indian market - wants a ten per cent piece of the pie, according to this article. We believe that AMW has Chinese money behind it, so anything's possible.

Here's some happy news for Cummins. For the third year in succession, it has seen turnover in its Chinese business top $1 billion. According to the report, the US engine builder now makes 50 per cent of its money away from its domestic market - probably a good thing given the current state of the NAFTA Truck business - with India and Russia coming second and third to China in terms of value.

How does Cummins celebrate? It buys out partner Tata's stake in the Tata Holset JV. Does this mean Tata is looking elsewhere for engine assistance?

Maybe the fog has just lifted a bit in terms of the Iveco-Tata relationship.

One of the stranger comments to come from Iveco executives during today's launch of the new Stralis was the assertion that "We didn't need to do this."

By 2012, Ashok Leyland aims to generate 20 per cent of its revenue from exports and international operations. This increase - current export earnings are eight per cent - could come through "exports, possible acquisitions and an expansion of our global manufacturing footprint", Vice Chairman Dheeraj Hinduja was quoted as saying by Reuters, with South Africa and "advanced markets outside the United States, Japan and Europe", being key targets.

Volvo's only 49 tonne competitor in India - Asia Motor Works - is to take the fight to the Swedes on price. Following a Supreme Court ruling in 2005, which finally put an end to overloading - or has certainly reduced any defence against the same - the 49 tonne market is potentially a high growth one.

AMW's 49-tonne tractor-trailer uses a ZF 9-speed gearbox, a Cummins 235hp engine, Meritor axles and Valeo clutch. Its gross combination weight allows a 36 tonne payload.

Here is news that DC is thinking - apparently seriously - about establishing a truck plant in India. It has - according to the report - earmarked a 15 acre site near Pune - coincidentally home to Tata.

"We haven't taken a decision yet, but there is a proposal to manufacture trucks in India. A decision on this would be taken shortly," a company official said.

Does this mean that DC has given up attempting to take either a piece of Ashok Leyland or a large lump of Eicher?

Some bus news.

Tata is to buy out the remaining 79 per cent of Spanish bus builder Hispano Carrocera for an undisclosed amount. The Indian OEM acquired a 21 per cent piece of the Spanish company in 2005, and is now exercising its option - which had another three years to run - to take on the rest.

We reported yesterday the rumour that DaimlerChrysler was considering going it alone in the Indian market by establishing a new truck plant at Pune, and this report lends some credence to the gossip.

It seems that the negotiations with Eicher have come to nothing - but quite what DC will do with its close to four per cent stake in the Indian OEM remains to be seen. This isn't the first time that Euro-Indian negotiations have stumbled as a result of arguments over management control - back in February we reported the demise of Volvo's ambition with regards to Ashok Leyland.

Of course, a standalone DC operation in India would cost more than a JV operation, but, ultimately, could allow the German OEM to develop business in a manner of its own choosing - we assume that components coming back to Europe is all part of the scheme.

At present, only the Actros range is sold in India, but we see some potential for the MD Atego and LD Sprinter ranges. Moreover, tropicalised versions of the same would be marketable throughout the rest of Asia as well. Of course, Mercedes-Benz already produces the Accelo in Brazil, and this would seem like a no-brainer for the Indian market.

According to this report, Tata is considering building a new CV plant in India.

The decision has been prompted by the significant growth it has witnessed in the Indian CV market over the past couple of years: in 2005-06, Tata's CV business grew by 13.1 per cent. In the first 11 months of fiscal 2006-07, cumulative sales of Indian CV sales stood at 2,68,453 units -- a 43 per cent increase on the previous year.

There is an interesting article in the Indian press this morning in which the Medium and Heavy Duty truck demand cycles are discussed.

We're not going to repeat it all here, but, in essence, there still seems to be sufficient demand momentum to maintain double digit demand for trucks over the next couple of years. The imposition of VAT and the Indian Supreme Court's dim view of overloading are both cited as factors in this.

And so the Indian market - which traditionally cycles in four-year periods - appears to have reshaped itself. Historical analysis would have pointed to a downturn during the past fiscal year: Indian numbers are calculated on an April - April basis, and so FY2005-2006 should have proved awkward. It didn't, suggesting that the Indian market is swapping one boom for another, without an intervening period of bust.

But, going back to the historical analysis for a moment, FY2009 - 2010 should prove to be bad. What is difficult to assess is how bad. Some supply problems mean that not all Indian truck buyers have managed to buy those trucks as yet. However, there will come a point at which this demand lag will end.

What happens then? Given the attention now being paid to the Indian market by the European OEMs: DaimlerChrsyler, MAN, Volvo, Scania - and, we believe - PACAAR - does this means that their major investments in India will bear fruit just at the start of a downturn? Intriguing - especially as both Tata and Ashok Leyland are on record as saying that it is export and foreign earnings as much as domestic growth that has got their attention.

More news on ArvinMeritor's global ambition is here.

Not only is it looking to more than double its procurement from India - spent $100 million there last year and is likely to scale that figure up to $250 million this year - but it is also planning to double the headcount at its Bangalore-based R&D facility.

BTW - the funding for this global expansion will come in part from the sale of ArvinMeritor's emissions control businessto One Equity Partners. That sale has now been approved by Federal antitrust regulators.

News here of Tata's March sales, and also some year-to-date numbers: the Indian market calculates on an April to April basis, so these represent eleven months of 2006-2007.

Tata's domestic sales of Commercial Vehicles (CV) in March were up 13 per cent at 30,720 vehicles as against 27,289 vehicles in March last year. Medium and Heavy Commercial Vehicles (M&HCV) sales stood at 17,673 units, up eight per cent over March last year. LCV sales were up 19 per cent at 13,047 units.

Cumulative CV sales in the domestic market for the fiscal year 2006-2007 were up 39 per cent at 299,173 units. Year-to-date M&HCV sales were 173,381 units, while LCV sales for the period were 125,792 units.

There's an interesting piece in Cargonews Asia today that details the efforts being made by the Japanese OEMs to stake out a piece of the Indian auto business, in particular, the huge investments being made to ensure quick turnaround vehicle shipping terminals.

Notably, the piece quotes Sontosh Mohan Dev, the Indian Heavy Industries minister, who says: "India is emerging as the destination of choice in Asia for the design and manufacture of automobiles and automotive components.'' Annual Indian automotive sales currently total $34 billion will rise to $145 billion by 2016.

Two Indian truck manufacturers have reported March sales today. Eicher - once thought to be a potential DaimlerChrysler partner - has seen its sales soar by 20 per cent, whilst Ashok Leyland - once a friend of Iveco, and which recently rejected both Volvo and Scania as suitors - has seen domestic sales dip, but exports rocket.

Eicher's March CV sales stood at 3,730 units, meaning that its 2006-07 financial year performance now stands at 28,077 units, a growth of 19 per cent over the previous financial year. Significantly, it sold 831 units in the plus 16 tonne heavy vehicle segment, a market sector that now seems to be gathering a lot of momentum.

Ashok Leyland, meantime, recorded a roughly two per cent fall in domestic sales during March, shifting 8,444 units as opposed to the 8577 units this time last year. However, its export business saw a 22 per cent rise, with 598 units being shipped against the 490 units of March 2006.

Ashok Leyland's year-to-date figures are equally impressive. For YTD March 31st - ie 11 months into the FY 2006-07 accounting period - the company's total sales grew 35 per cent at 83,101 units compared to 61,655 units in the previous year. Exports during the year were up 23 per cent at 6,025 units, in line with its previously reported aims.

But is Ashok Leyland still talking with Paccar?

And so the fog begins to clear. Tata will piggyback onto Iveco's distribution network in order to sell its heavier range within the emerging markets, whilst Iveco will bring its Daily van to India. Meaning that, if the PACCAR or Navistar deal comes off, then Iveco is selling the Daily in just about every world market.

Iveco also gets some good volume through what appears to be a solus deal ensuring that the Cursor engine is the de facto choice for Tata's heavy truck range.

All round, a rather nice deal.

This interview from Reuters underlines the importance that AB Volvo attaches to its Asian business.

It aims to increase its Chinese truck sales by 30 per cent in 2007; in 2006, it sold 1173 units in China, up 25 per cent on its 2005 figures. The Chinese market is expected to hit 340,000 units this year.

In order to achieve this, AB Volvo has to sort out the fiasco that is its JV with CNHTC. It seems to be angling for a bit of Dongfeng through its recent acquisition of Nissan Diesel, but the CNHTC non-deal could prove to be a real bar to progress. And, although the Chinese economy is still growing apace, it is very much export-driven, and the coming downturn in the US may put a crimp on future growth. Moreover, Sino-US trade relations are now getting somewhat frosty, a fact that does little to fill one with optimism.

India also gets a honourable mention; we've written in the past about Volvo's plans for its Hoskote plant, and we assume that it is now resigned to going it alone there.

Of course, any future growth will require investment, and it's very difficult to assess just how much the US downturn will cost AB Volvo. There is, after all, only one pot of money at the end of the day; how much of that will have to be spent propping up VTNA remains to be seen.

An interesting tale here about a new Medium Commercial Vehicle in the Ashok Leyland stable.

Whilst here is talk of another Ashok Leyland production plant.

There's an interesting tale in the Indian press that concerns local truck operators' plans to up freight rates as a result of interest rate increases that have increased cost-of-ownership by almost 40 per cent.

Truck companies are planning to increase freight rates by 10-15 per cent after the prevailing interest rate rose from 10 to 15 per cent a few months ago. Over 98 per cent of Indian commercial vehicles are financed.

Interesting interview here with Anirudh Bhuwalka, the man behind Asia Motorworks - AMW - in India.

Bhuwalka has just announced the launch of Asia MotorWorks' (AMW's) 25-49 tonne range on Indian roads, and, despite the fact that he's going up against some rather stiff competition - Volvo, DC, Tata et al - he ain't scared.

Not least because he seems to have worked a bit of a flanker as far as tax concessions from the Gujarat government for locating the AMW plant in Bhuj.

AMW has already put 900 assembled trucks on the road and hopes to sell 5,000 heavy commercial vehicles by 2008. According to the piece, Bhuwalka is hoping for a 90 per cent piece of the 49-tonne market. Which, given that he only started in 2002, does seem a little bit ambitious. However, this report seesm to look quite favourably on the prospects for the Indian OEMs during the enxt fiscal quarter.

Anyway, here's a pic of the AMW product. Any Chinese DNA - or money - in there we ask?

Confirmation that Isuzu is taking the North American market very seriously indeed.

As we reported last week, it is returning to the US as a truck manufacturer, having purchased a large lump of land in Alabama.

Now here's news of its intentions to establish a Canadian distribution operation, complete with dealerships, and a goal of 2000 unit sales by 2010.

And just for good measure, here's something about Isuzu and India - don't know what weight range, but notable nevertheless.

This Reuters interview doesn't give much away in terms of fact - save that the Indian leviathan is building an auto components plant in Nanjing - not a million miles away from new ally Iveco's existing Naveco operation, but it does point to an interesting shift in emphasis.

The west tends to regard China and India as equal runners in the low cost sourcing race. But India also boasts a large number of highly skill engineers and designers, and, just as importantly, a highly motivated young workforce.

Put that lot together with Chinese cost advantage, and you get somewhere good pretty quickly.

Here's some interesting news c/o Reuters.

Ashok Leyland has acquired Defiance Testing and Engineering Services Inc, a not insignificant player in the vehicle testing biz, from GenTek.

There's not a great deal of significance in an Indian company buying a non-Indian company at present - in fact, by our calculations, the Indian's are investing more overseas at present than the overseas is investing in India.

But, the fact that Ashok Leyland is now investing down the production chain - think components manufacturers and now testing facilities, rather suggests that it is going it very much alone.

A good piece here in India's Business Standard newspaper indicating that a plateau may have been reached in the previously buoyant Indian truck market.

True, there is still strong demand for trucks, but, increasingly, finance costs and year-on-year raw material cost increases are beginning to have a negative impact.

Cause for thought here, with the news that Tata, India's largest CV OEM, took a 14 per cent knock in April in terms of its medium and heavy CV business.

Conversely, Tata's LCV business grew by 22 per cent during the month, and CV exports were also in the black. Passenger car business rocketed by 26 per cent.

Does this mean that the steam is now coming out of the Indian market? We'd expect a downturn to be led by heavy CV's, and this sector is down. That passenger car and LCV remain buoyant suggests a time lag effect.

One to keep an eye on, we think.

Confirmation here of our previous view of the Indian CV market.

Whilst the sub 3.5 tonne and the heavy sectors are both booming, it looks like the MCV sector is crapping right out.

We tend to forget that International has a JV with Mahindra & Mahindra, the Indian OEM.

Called Mahindra International, it has - until now - given the appearance of being all mouth and trousers. But here is some concrete news; it seems that the JV's first progeny will be a 25 tonne truck, with a launch slated by the end of 2007.

The report makes reference to components sourcing, quoting an un-named spokesperson as saying that different vendors are being approached. We wonder quite where MAN may fit into this. It has a strong relationship with International in the US - vid the MaxxForce engine range - but also an infant JV with Force Motors in India - capable of around 20,000 units per year, based upon old MAN products.

Conflict of interest?

There is an interesting piece in the Wall Street Journal that talks of a future post-Chrysler for the Daimler operation.

This bit catches the eye: "The deal to relinquish 80.1% of Chrysler Group to private-equity firm Cerberus Capital Management LP -- approved yesterday by DaimlerChrysler's supervisory board, the equivalent of a U.S. company's board of directors -- will allow DaimlerChrysler to focus on strengthening its luxury Mercedes brand and on boosting its commercial-truck business. Mr. Zetsche said the company may seek deals to expand its truck business, known as the Truck Group, especially in the U.S. or India."

We are uncertain as to how Daimler might expand its US truck business through acquisition without bumping into a number of anti-trust issues. As far as India is concerned, we've made reference in the past to the then DaimlerChrysler aim of taking a piece of Eicher, maybe some of AshokLeyland, or simply establishing its own standalone truck operation therein.

One thing we can't quite work out at present is the likely direction for the Sprinter in the US. It is marketed both by Dodge and Freightliner, built from CKD kits by the latter, but sold mostly by the former.

We have to assume that the 19 per cent of Chrysler retained by Daimler makes reference to products such as the Dodge Sprinter. As such, buying into a Medium Duty OEM - such as taking on GM's apparently for sale MCV business - looks unlikely. But, the WSJ article makes reference to the recently acquired 24 per cent piece of Beiqi Foton - the Chinese OEM with a reckonable van business. A Daimler-branded Chinese low-cost MCV for NAFTA? Surely not.

So where is this additional US growth to come from?

There is some logic to be had in the notion of OEMs moving down the production scale and getting involved in transport. If, after all, a large slice of the costs accruing from the transport task involve the possession of the asset central to the same - to whit, the truck, then it makes a certain amount of sense for the manufacturer not just to manufacture the thing, but also to maintain, staff, fuel and ultimately dispose of it. The haulier's task would be his core competency - namely maximising vehicle utilisation.

This same theory was trotted out some years ago, when we had a rash of downstream M&A stuff involving OEMs buying transport providers. Volvo and BRS, Fiat and Fraikin etc.

But here is talk in India of a similar sort of shift. Volvo has applied to the Indian government to include "logistics, freight forwarding and transport" -- as well as allied areas like cargo handling and clearing, packing, warehousing and store keeping -- in its roster of domestic activities.

If we approach this from an emerged market perspective, then such a move would seem odd. It would, however, allow the Swedish OEM to spend more money, much to the presumed chagrin of Christer Gardell.

But India isn't Europe. Is there a market for a truck provider, as opposed to merely a truck producer there? As the Indian vehicle parc gets more complex, warranty issues raise their head. Moreover, buying a truck in India is becoming expensive. Buying use might provide an admirable compromise.

Worth keeping an eye on.

Let's draw breath for a moment, and have a look at the rumours surrounding both Navistar and GM and Navistar and Fiat.

Ashok Leyland is to establish a wholly-owned Used Vehicle sales operation in India. Called ALTRUX, the new operation will purchase and recondition used Ashok Leyland vehicles, which will then be marketed with a six-month warranty.

According to this article here.