The FINANCIAL — The Indo-German joint venture Daimler Hero Commercial Vehicles (DHCV), which was founded a few weeks ago by Hero Group and Daimler AG, concluded negotiations concerning its production location this week.
The company decided in favour of the city of Chennai on the east coast of Southern India, which is also India's fourth-largest city and the capital of the state of Tamil Nadu.
The Memorandum of Understanding (MoU) was signed today in Chennai in the presence of M. Karunanidhi, Chief Minister von Tamil Nadu by M. F. Farooqui, Industry Secretary of the State of Tamil Nadu, Sunil Kant Munjal, Chairman of Hero Corporate Service, Andreas Renschler, Member of the Daimler Board of Management and Head of Daimler Trucks as well as by DHCV’s CEO Marc Llistosella and Co-CEO, Amit Chaturvedi.
The key factors leading to the choice of the Chennai site for the future production plant were proximity to important suppliers, city's infrastructure, transportation connections and the large number of well-qualified skilled workers in the region.
The plant site, which measures 1.6 square kilometers (approx 400 acres), is located at Oragadam, District Kanchipuram, in the direct neighborhood to several supplier parks where Daimler Hero Commercial Vehicles could also secure sites for future suppliers.
The Indo-German joint venture will soon begin the construction of a new factory in Chennai, where it will produce commercial vehicles under a new brand name for the Indian volume market and exports. Starting in 2010, the plant is to produce up to 70,000 trucks in its initial phase of operation. At a later point, the production of trucks for export markets whose product requirements are similar to those of the Indian market is planned.
DHCV is aiming to achieve a localization rate of up to 80% in order to optimally utilize cost advantages. The proximity of the Chennai plant to the local supplier industry will help greatly utilize these cost advantages and will also help the local industry and community.
Daimler AG and the Hero Group signed the contract establishing the joint venture in Delhi on April 21. Total investment in the Indo-German joint venture will amount to over €700 million over the next five years. The equity capital brought in by Daimler and the Hero Group will amount to €360 million. Daimler will contribute €220 million of this amount as a direct foreign investment in India.
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