Daimler India Commercial Vehicles (DICV) is banking on the services segment to augment growth, as the Indian subsidiary of the world’s largest truck maker Daimler AG, eyes 25% revenue from this segment, as per a senior company official.
This strategic focus on the services segment which currently constitutes 7-10% of revenues, comes on the heels of a strong performance in fiscal year 2023.
DICV’s revenue surged 30% to reach Rs 10,665 crore, driven by a double-digit jump in sales volume in FY23. This impressive performance translated into the company’s first-ever annual profit of Rs 304 crore in India, a significant turnaround from the nominal loss of Rs 1 crore in FY22. The momentum continued in calendar year 2023 (CY23), with DICV achieving 39% growth in domestic sales and 13% growth in cumulative sales, translating to a 21% increase in both revenue and parts business.
“Building the services business has been a long journey. The Indian market is still getting used to the concept of external support and data-driven fleet management,” said Sreeram Venkateswaran, President and Chief Business Officer, Domestic Sales and Customer Service, at DICV.
Venkateswaran highlighted the significance of construction tippers, which currently account for 40% of DICV’s sales. The company boasts a market share of around 8.2–8.5% in the heavy-duty truck segment, with its share in the tipper market nearly double at 15%. They recently introduced 320 hp mining tippers and have already deployed over 1,000 units. In the high-horsepower (up to 350 hp) mining tipper segment, DICV enjoys a dominant position with a market share exceeding 50%.
DICV’s focus extends beyond new vehicle sales. Its service expansion strategy reflects a broader trend within the commercial vehicle industry as manufacturers seek to diversify revenue streams and cater to the evolving needs of fleet operators who prioritise uptime and efficiency.
These (vehicles) are not used in the right way, explained Venkateswaran. “So we have an opportunity to use the remanufacturing of all kinds of services there. We always ask, how much can we target for spare parts per vehicle per year?”
Focus on ‘servitisation’
The Chennai-based company’s ‘servitisation’ efforts are creating new business models and revenue streams through innovative features and services. These include extended warranties and maintenance contracts, on-site “spot services,” and the monetisation of the telematics system by providing customers with business intelligence and fleet efficiency services.
“The goal is to develop new revenue models,” said Sreeram Venkateswaran, who is responsible for driving domestic expansion. His efforts encompass cultivating strategic relationships, expanding the BharatBenz sales and service network, and increasing brand awareness. Venkateswaran brings nearly three decades of experience to this role, having previously worked with leading companies such as Mahindra Logistics, Hero Cycles Ltd., Bajaj Auto Ltd., Tata Motors Ltd., and Eicher Motors.
Elaborating further, the top executive highlighted that total cost of operation (TCO) is becoming a deciding factor for customers. DICV has established round-the-clock services at about a dozen key locations, including a couple each in Gurgaon, Ghaziabad, Bengaluru, Cochin, and Hyderabad. “I am sure all our key hub locations will be operational 24/7 by mid-2025, totaling 170 locations,” he continued.
These 24/7 operations will further reduce vehicle repair time and help us meet our target of servicing most jobs within 24 hours,” he explained. Interestingly, the company initiated a pilot programme called ‘Rakshana’ to address the average turnaround time of 48 hours for vehicles coming to their service stations. Within the first few months of the programme’s implementation, the company successfully improved turnaround time to 24 hours for 90% of vehicles.
How does this compare against global benchmarks? While turnaround times vary depending on factors like OEMs, vehicle types, and geographies, industry experts estimate an average turnaround time of 36–48 hours for roughly 80% of vehicles in India.
With a smaller fleet compared to its larger competitors like Tata Motors or Ashok Leyland, DICV has a relative advantage in managing turnaround time. However, Venkateswaran emphasised that while some customers might be willing to wait a bit longer for servicing, it doesn’t make sense to make them wait, especially considering the 10-15% premium they are charged. “We should have more and more levers to justify the premium we charge,” he added.
DICV’s used vehicle business: A strategic growth area
Venkateswaran emphasised that the company’s used truck business remains another significant area for future growth. The certification process involves refurbishing trade-in trucks and providing a warranty to attract customers. This approach aims to increase the perceived resale value of used vehicles and unlock broader market opportunities.
The used vehicle segment remains somewhat opaque, with various companies and agencies reporting widely varying figures. For example, Shriram Auto Mall, the largest player in this space, claims to sell over 350,000 units annually.
DICV initiated its vehicle exchange programme last year, and 15% of the total 300–325 used trucks sold monthly are certified. However, the company leadership recognised a greater opportunity in exchanging older Bharat Benz trucks, refurbishing them, and then selling them under the brand’s superior market reputation.
“Our focus has entirely shifted to Bharat Benz certified trucks,” stated Venkateswaran, highlighting the company’s stringent 270-point certification checklist. Due to strong demand, the programme has begun at 5–6 locations and is slated to expand to 35 by year-end. The company’s ambitious target is to reach at least 60% certified sales, with the remaining vehicles falling under the non-certified category.
Expanding growth with refurbished engines, axles, and gearboxes
While after-sales services, telematics, and certified vehicle sales remain crucial pillars for DICV’s continued growth, Venkateswaran also highlighted the rising importance of engine refurbishment. He sees significant growth potential in this area, especially as the cost of new vehicle components continues to rise.
“Our approach involves replacing damaged engine components and rebuilding them with a limited warranty offered at a cost-effective price point, typically between 60-65% of a new engine,” Venkateswaran explained.
DICV conducted pilot testing by road-testing 45–50 remanufactured engines. The quick sale of these engines on the market suggests a strong potential demand for this service. Remanufactured engines offer a reliable alternative that could capture 5–6% of the overall market opportunity over time.
Looking beyond engines, DICV intends to explore the refurbishment of other critical components, such as gearboxes and axles, which can also be a significant cost burden for vehicle operators when they fail. The company anticipates a potential market capture of 5–6% for revamped axles and 7–10% for gearboxes.