Tata faces heat in India from Navistar, Daimler, Volvo

India's aim to pave 20 kilometers of highway a day for the next five years is stoking demand for heavy trucks to carry freight, and overseas makers Daimler AG, Volvo AB and Navistar are jockeying to challenge dominant Tata Motors Ltd.

Asia's third-biggest economy is spending about $53 billion to build and upgrade 54,454 kilometers (33,836 miles) of highway. The roads carrying 65 percent of India's cargo are plagued by single lanes and irregular surfaces, slowing trucks to an average speed of about 20 kilometers per hour, a 2009 study said.

Improvements begun in 2000 for the "Golden Quadrilateral" project linking New Delhi and Mumbai triggered a shift from trucks weighing less than 16 tons to those weighing up to 49 tons, a segment where sales grew 8 percent from April to December. Volvo, Tata Motors and Mahindra Navistar Automotives Ltd. featured heavy trucks at the Delhi Auto Show in January.

"The highways rollout is giving these new players an opportunity that did not exist earlier," said Viswanathan Vasudevan, who helps manage $300 million in funds, including India truck makers, at Aquarius Investment Advisors Pte Ltd. in Singapore. "They see a better possibility of making money and this is because of the Golden Quadrilateral and the transport system becoming better in India."

Daimler FactoryThe world's largest truck maker, Daimler AG, is building a factory in Chennai that will start production in 2012, Uta Leitner, a spokeswoman, said in an e-mail. Daimler India Commercial Vehicles Pvt. Ltd. may make 70,000 trucks of all sizes a year and export some to other emerging markets, she said. The Stuttgart-based company is investing 220 million euros in the venture with the New Delhi-based Hero Group."The Indian market is clearly defined for Daimler Trucks as a promising market," Leitner said. "Growth in the commercial vehicle segment will focus on the developing countries."India's economy will expand an estimated 7.2 percent in the year ending March 31, the government said yesterday, compared with 6.7 percent the year before.A total of 68,132 heavy trucks were sold from April to December, up from 63,044 a year earlier, according to statistics from the Society of Indian Automobile Manufacturers. Segment leader Tata Motors saw a 24 percent increase in sales to 50,103.'Face the Heat'In the six months from Aug. 7 to Feb. 8, shares of Mumbai-based Tata Motors gained 62 percent, New Delhi-based Eicher Motors Ltd. 33 percent and Mahindra Mahindra Ltd. 20 percent, compared with a 5 percent rise} in the Bombay Stock Exchange's Sensitive Index."It is one of the few markets where there is a good prospect," said Walter Rossini, who manages $352 million in an India fund, including Tata Motors, at Aletti Gestielle Sgr Spa in Milan. 'These foreign players are serious. Tata Motors will face the heat."Volvo, the world's No. 2 truck maker, started selling vehicles in India more than a decade ago. It formed a joint venture in 2007 with Eicher and put $350 million in the venture.Volvo will focus on higher-powered heavy trucks, assembling them in Bangalore and selling them through 25 dealers, said Somnath Bhattacharjee, president of Volvo Trucks India."The growth we see that this new company will be tapping will be from the heavy-duty segment," Bhattacharjee said. "We do not see an offering from Indian players to compete."Second-Largest NetworkNavistar International Corp., of Warrenville, formed a joint venture with Mumbai-based Mahindra Mahindra in 2005 and unveiled four trucks at last month's auto show. Mahindra Navistar Automotives Ltd. will start selling them by June, said Rakesh Kalra, managing director.Tata started selling 40-ton trucks and tractor trailers in November under the Prima name. The company is counting on its 183 dealers and more than six decades in India to stave off competition."There will be more players in the market," Ravi Pisharody, president of Tata's commercial vehicle business unit, said at the show. "We have a head start in terms of timing. We have relationships, second-generation and third-generation, built over the last 30 to 40 years."India has the world's second-largest road network after the United States, said the 2009 study by the Indian Institute of Management Calcutta, and Transport Corp. of India Ltd. The south Asian nation had 3.3 million kilometers of roads in March 2008, compared with China's 1.8 million.$5.1 Billion LossThe highways ministry in July set a target of building 20 kilometers of new road a day through 2015.About 27 percent of national highways are one lane each way and 59 percent are two lanes, creating congestion that delays deliveries. Trucks may travel 100,000 kilometers a year, compared with 400,000 in the U.S., the study said.That costs the economy an estimated 240 billion rupees ($5.1 billion) a year.The government in 2000 started upgrading 5,846 kilometers connecting New Delhi, Mumbai, Chennai and Kolkata. The Golden Quadrilateral will be completed in March, more than four years late.The finished segments already cut travel times between New Delhi and Mumbai from at least seven days to four, said Pardeep Bansal, director of Delhi Assam Roadways Corp., a logistics company near New Delhi."Our customers are able to reduce inventory costs and there is more money to be made with quicker turnaround times," said Bansal, whose clients include state-run Bharat Heavy Electricals Ltd., India's biggest equipment maker.