The German truck major almost broke into net profit for FY22, ending with a miniscule Rs one crore in loss.
03 Nov 2022 | 22519 Views | By Ketan Thakkar
Buoyed by a strong revival in the Indian economy and a sharp uptick in demand for trucks and buses, Daimler India Commercial Vehicles (DICV), the German truck major, posted a 250 percent growth in operating profit of Rs 332 crore in FY22, the highest growth among the top truck makers in ...
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Buoyed by a strong revival in the Indian economy and a sharp uptick in demand for trucks and buses, Daimler India Commercial Vehicles (DICV), the German truck major, posted a 250 percent growth in operating profit of Rs 332 crore in FY22, the highest growth among the top truck makers in India.
The listed truck makers in India — Tata Motors, Ashok Leyland and Eicher Motors’ commercial vehicle businesses had an operating profit growth of 40-90 percent in the last fiscal year as industry volumes bounced back by 45 percent.
This is the third consecutive year of operating profit registered by the German truck major. A strong rebound in the domestic market, record exports volumes and a rise in shared services business helped the company in improving its margins.
All the right moves
Strict cost control on other expenses as well as pruning of employees has helped boost operating profits. Employee cost, as a percentage of sales, dropped to 7.1 percent in FY22 against 8.39 percent in the previous year, while other expenses rose just seven percent in the last fiscal year.
Other expenses as a percentage of sales have nearly halved in the last five years. This has reduced the company's net loss to just Rs one crore in FY22, compared with loss of Rs 426 crore in FY21.
The operating margin of DICV stood at 4.05 percent in FY22, which was about 35 basis points higher than India’s largest trucker maker Tata Motors, as per the financial filing by the company at MCA.
Helped by a healthy volume growth, DICV revenue rose 55 percent to Rs 8,217 crore in the last fiscal, compared to around 15 percent for Tata Motors and 37 percent for Ashok Leyland’s turnover. Tata Motors and Ashok Leyland account for more than 80 percent of domestic sales. However, the cumulative loss of the DICV in the past five years still remains Rs 1,722 crore.
Here to stay
The global board of management asserted last month that the company is in India for the long haul and it expects to drive modernisation of trucks and participate in the economic growth in the future. The Stuttgart-based global truck maker who finished 10 years of its operation in India recently stated that the company is operating at almost 100 percent capacity due to strong off take in both domestic and global markets.
Speaking on the side-lines of a 10-year-celebration conference, Satyakam Arya, Managing Director, Daimler India Commercial Vehicles said the company is set to operate at full capacity in the next few months.
"The focus was on building a solid foundation over the last 10 years and we have done that quite well. We have localisation levels of over 95 percent, we have over 300 touchpoints, we have successfully created a local performing business and now, when the Indian market has come back, we are prepared," he added.
Daimler India produced about 24,000 commercial vehicles in 2021 posting a growth of over 50-70 percent. In the domestic market it sold about 14,222 vehicles registering a growth of 48 percent in the last calendar year. According to sources, the German truck major has plans to produce about 30,000 vehicles in the calendar year 2022.
The growth could have been higher if not for the semiconductor shortage and lack of options in the CNG space in the medium duty truck space. With the price parity between CNG and Diesel narrowing, the market is again shifting towards diesel which augurs well for DICV.