Isuzu Motors reportedly is considering entering India’s fast growing small commercial vehicle and multi utility vehicle segment to take on Tata Motors’ Ace and Mahindra & Mahindra’s utility vehicles.
The Japanese truckmaker is planning a greenfield facility in India, which may entail an investment of over US$180m, the Economic Times of India said.
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ET has learned an Isuzu India project team met state government officials of Andhra Pradesh earlier this month and are expected to meet officials from Tamil Nadu and Gujarat to explore factory locations. The proposed facility is expected to have a capacity of 100,000 to 120,000 units and be ready in the 2014-2015 fiscal year.
Isuzu did not respond to a request for comment.
Indian truck makers dominate the small truck segment which is growing at 20% a year.
Andhra Pradesh state government officials confirmed the development stating Isuzu officials showed interest in setting up a manufacturing facility in the Nellore district of the state, which is very close to Chennai port in Tamil Nadu.
Chennai is an auto hub and home to Hyundai, among other foreign automakers.
Isuzu have shown some interest for setting up one of their units here. They have a huge range of products starting from cars to LCVs all the way to pickup trucks and heavy trucks. We don’t yet know which specific model they are looking at manufacturing here,”” the principal secretary (Industries), state government of Andhra Pradesh, K Pradeep Chandra, told Economic Times of India.
The company has already formed an Indian entity called Isuzu Motors India which will set up office in Chennai, in August. Isuzu will start with kit assembly and distribution before setting up full scale manufacturing operations.
The immediate plan is to import CBUs (completely built units) and knocked down units of the DMAX and large SUVs like the MU7 from Thailand – Isuzu’s light truck hub – by the end of 2012.
In the first year, the plan is to sell 1,500 units but with knowledge of the development told ET: “The mid-term plan of Isuzu is to develop [an] SCV model tailored for local needs, build localisation of parts and expand the sales channel, and eventually move towards a local manufacturing plant which will produce 120,000 vehicles per year by 2016, with almost 40,000 units exported.”
The location of the assembly plant is not yet known but reports have suggested the company had been considering contract manufacturing at the Hindustan Motors-Mitsubishi plant in Tamil Nadu.
Isuzu India is also working closely with a Mitsubishi team located in Chennai to plan its India strategy. Mitsubishi globally has a 9.2% stake in Isuzu Motor.
ET suggested the other option might be the SML Isuzu plants in Chandigarh, a venture in which Isuzu has a 15% stake and manufactures light duty trucks and buses. The Isuzu India project team is likely to visit the SML Isuzu plant next week, ET has learned.
People close to the development said the company had already approached some of the leading car dealers in the country to sell Isuzu products while customer clinics for a pick up truck, SUV and a small commercial vehicle are expected in the next couple of months.
Rahul Jain, director & partner at Boston Consulting Group, told the paper that, with the market for small commercial vehicles taking off, there is room for more players, however he cautioned: “”A me-too offering won’t work in India, Isuzu will have to study the market carefully and find a right niche which is large enough to cater to. There are plenty available. Is there an opportunity for a better segmented LCV? The answer is yes. Tata Motors convinced us with Ace, Ashok Leyland convinced us with Dost and there will be more specific application opportunity arising in the future with the retail sector opening up. Isuzu will have to pick their niche carefully.”
In the last quarter Isuzu increased its stake in SML Isuzu from 4% to 15% with a $10.8m investment.
It has also increased its stake in its joint ventures in Russia and India and last year finalised a joint venture with Qiangling Motors in China.
