Volkswagen to buy a stake in Navistar to grab a share of Indian CV market

German automobile manufacturer Volkswagen, renowned for its cars, witnessed its comparatively low profile truck division come in the limelight last week. According to rumours, VW is gearing up to buy a stake in US-based Navistar, which has good presence in India due to its Joint Venture (JV) with Mahindra & Mahindra. Industry players believe that the possibilities for something like this are extremely high; however, the car maker and Navistar did not divulge any details on this.

MAN and Scania are other high profile truck brands in the fold of the German automotive giant. Both the companies are all set to make an entry in the country and grab a sizeable market share. MAN had a JV with Force Motors for a couple of years; however, it went solo later after buying the latter's stake. The Swedish truck manufacturer, Scania, is eager to carve a niche for itself in the Indian market. Its earlier presence in India was limited to a distribution agreement with country's largest engineering and construction company, Larsen & Toubro.

On the other hand, Mahindra Navistar is a relatively new entrée in the highly competitive Commercial Vehicle (CV) segment and has recently set up its retail network. In case VW acquires a stake in Navistar, it will be interesting to see whether the progress of Mahindra Navistar will be affected in the country.

All the three brands under VW will be synchronised at back-end level, though they will retain their individual brand identity under the front-end strategy. The three companies will work together on grounds of common sourcing of parts and pooling R&D skills, amongst other. This is especially significant as international automotive manufacturers are facing the challenge of high costs and slow market, particularly in the West.

Even though developing markets like India are quite profitable in comparison to the West, the hyped cost advantage is no longer prevalent here. Across the BRIC countries, the price of the labour and commodities has been northbound. Diversified companies like Volkswagen, which is in partnership with Skoda and Audi in its India car operations, are well aware of the fact. By applying the same business plan in its truck business, it will synergise its MAN, Scania and most likely Navistar brands.

However, established local manufacturers like Tata Motors and Ashok Leyland together with multinational brands like Daimler and Volvo will pose a stiff competition. Even though there has been no news, China-based Foton may also prove to be a tough contender. However, the competition is yet to begin in the industry, though the experts believe that Daimler will dominate the market. International manufacturers are particularly attracted to the Indian market as it is set to become the largest bus market in the world. According to an industry expert, “This is a bonanza at a time when Europe is sinking and the only option left for European companies are the BRIC economies.”