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Corporate Reports • June 14-27, 2010

Asia Motor Works, a new entrant to the heavy commercial vehicles segment, has made

giant players move into top gear to catch up with its series of hi-tech global trucks

The arrival of a new entrant into

the Rs40,000 crore heavy com-

mercial vehicles (HCV) market

has made well-entrenched players likeTata Motors, Ashok Leyland and

Eicher sit up and tighten their girdles

to meet the challenge posed by the

fully-loaded 'Global Truck' being

offered at 'Indian' prices.

Ever since the first in the series of

Global Trucks rolled out of the state-of-

the-art AsiaMotor Works' (AMW) plant

near Bhuj in Gujarat in December

200S, not just the market leaders but a

few other automobile manufacturers

have also started working on products

that can match these top-of-the-linetrucks.

Till 200S, the HCV market in the

country was dominated by two big

players - Tata Motors and Ashok Ley-

land. In 2002, when the then 26-year-

old and fresh-out-of-college Anirudh

Bhuwalka decided to get into truck

manufacturing, the Swedish auto giant

Volvo had already begun testing the

Indian market.

Bhuwalka was impressed by the sta-

tus of truckers in the US and Europe

and wondered why Indian truckers

worked under such harsh conditions.

"Indian truck drivers literally have to

sweat it out. The trucks they drive are

jerky and take a toll on their health.Why can't driving a truck be a pleasur-

able experience, as in the .uS and

Europe?" he asked himself.

"While trucking in the US and

Europe is a respectable career, with

many a college boy taking up a job as a

trucker during his holidays ' 0 earn anextra buck, a truck driver in India does

not enjoy the same kind of respect

from society. This is because of the

grease, grime and slime associated with

Indian trucks," points out Bhuwalka.

To scale up the Indian truck market,

Capacities

50,000

Press shop (tonnes) 25,000

Bhuwalka felt it was necessary to intro-

duce a world-class truck at a competi-

tive price. Already, Volvo and German

truck major Maschinenfabrik Augs-burg-Nurnberg AG (better known as

MAN) had forayed into the Indian mar-

ket. The challenge before Bhuwalka

was therefore to make available to the

Indian market a truck that had features

comparable to those of Volvo and MAN

trucks at amuch lower price.

Thus, the idea of making a Global

Truck culminated in the formation of

Asian Motor Works Ltd, a closely held

company promoted by BhuwaIka, his

friends and family. His uncle Shashi

Ruiachipped in with the Essargroup asa strategic mentor, guiding him along

the way. "From the very beginning, I

had decided to adopt the North Ameri-

can manufacturing model, which is

followed by the world leaders. This

model is based on sourcing essential

and critical parts and components

from across the globe, while retaining

control over innovation and the man-

ufacturing platform," says Bhuwalka.

"This business model not only helps

ensure that we use contemporary tech-

nology from leading manufacturers

.88•

•



BUS I N E S SIN D I A • June 14-27, 2010

across the globe, but also ensures inno-

vative products enter the Indian mar-

ket. This has worked to our advantage

as we are now able to plug the product

gaps that existed in the conventional

trucking industry," he says.

A golden opportunity to realise his

dream project came Bhuwalka's way in2002 when the Gujarat government

beckoned entrepreneurs, offering

them tax holidays if they invested in

the earthquake-devastated Kutch dis-

trict. Quick to respond, Bhuwalka

bought, at Rs15 crore, 600 acres ofland

adjacent to the Bhuj-Bhachau road,

near Bhuj.

The location of the proposed site of

the plant had many advantages. The

site, strategically located close to two

major ports - Mundra and Kandla - on

the west coast, provided easy access tointernational markets in the West as

well as Indian markets in the north,

south and west regions. Moreover,

logistically, it would be economical

and easy to source steel, the main raw

material used in the manufacturing of

a truck, from Essar Steel, which has a

plant in Hazira near Surat.

Having selected the plant site,

Bhuwalka went about scouting for

skilled manpower, technical as well as

managerial, and associates from whom

he could source the latest technology

and vital components.

Bhuwalka decided to source the

engine of AMW'S Global Trucks from

Cummins, the best in the market for

operating on rugged terrain; the gear-

box from ZF of Germany, which offers

a high power-to-weight ratio and

improved start-up even with heavy

loads; clutches from Valeo of France,

for easy gearshifts and less wear and

tear; axles from Meritor, US, for better

traction on uneven surfaces; and cabinshells from China.

For the design of the AMW assembly

plant, Bhuwalka commissioned Durr of

Germany, while C.R. Narasimhan was

employed as the architect. "The entire

plant came up in the record time of 18

months," says Shyarn Ozarkar, general

manager, manufacturing, engineering,

who has worked with the tractor divi-sion of Mahindra &Mahindra.

The Global Truck assembly line is

semi-automated, with the capacity-to

roll out 50,000 trucks a year. Besides

the assembly line, the AMW facility in

Bhuj also has a frame shop, a weld shop

and a paint shop. Over 1,000 engineers

and technicians were hired from major

Indian players.

Creating a stir

When AMW rolled out its first Global

Truck in December 2005, it created amajor stir in the Indian market, both

among truckers as well as manufactur-

ers. Here was a 25-tonne truck cher-

ried-out with a fully air-conditioned

crash-proof driver's cabin, power steer-

ing, nine-speed gear, FM radio set and a

resting berth - features that rival top-

of-the-line truck models. "The features

of a Volvo at the price of a Tata truck,"

is how the marketing team of AMW

likes to put it. To be sure, major com-

ponents of the truck - the engine, axle,

gear box, clutch, brakes and cabin shell

- were bought from local and overseas

suppliers. But here was a truck that

marked the entry of a serious player

into the market.

Since its first truck, AMW has pro-duced 10,000 trucks so far and plans to

ramp the number up by 25,000 in the

next couple of years. The company has

invested Rsl,400 crore so far into the

project. "We have made all the neces-

sary investment needed to acheive the

full planned capacity of the manufac-

turing facility at Bhuj," says Bhuwalka.

The company has no immediate

plans for going to the capital market

'with an initial public offer. However,

Bhuwalka is exploring the option to

rope in private equity participation.AMW plans to more than double its

production from 700 to 2,000 trucks

per month in the next eight to nine

months, a top company official said. It

also plans to hire 500 professionals to

meet the production challenges.

AMW has already launched 13 mod-

els in the Indian market and plans

more launches soon. ""We plan to

launch at least five new models by



Corporate Reports

mid-201l. The new models' price

range will be between Rs15-25 lakh,"

Bhuwalka said. AMW, which has

already sold 10,000 trucks, is now eye-

ing revenues of Rs1,OOOcrore in FYlO.

After the successful launch of

HCVS, AMW is now planning to foray

into the burgeoning LCV segment.

AMW showcased its LCV at the recent

Auto Expo in Delhi. AMW LCV will be

a 1.5-3 tonne vehicle. This mini truck

will compete with Tata's Ace and Piag-

gio's Ape trucks. Recently, Force

Motors also forayed into this segment

with its new M4.

Till a decade ago, Tata and Ashok

Leyland had a monopoly over the HCV

market in India. However, with a

booming economy and an ever-

expanding road network, foreign play-

ers such as MAN and Volvo as well

as Indian light commercial manufac-

turers like Eicher started eyeing the

rrcv market,

AMW first chose to enter the con-

struction, mining and bulk transport

segment. It launched trucks with maxi-

mum carrying capacities starting from

25 tonnes and 31 tonnes, and going up

to 49 tonnes. "We leveraged on our

low pricing strategy to be able to sell at

least 50,000 trucks a year to reach our

plant's maximum turnover capacity in

the next couple of years," says

Bhuwalka. Of the total trucks sold by

AMW, 70 per cent are utilised in off-

BUS I N E S SIN 0 I A • June 14-27,2010

road applications.

"In a short period, AMW'S models

like 4923, 2523 and 2518 have won

immense customer acclaim. Today, it

is part of all major National Highway

and other infrastructure projects, with

the brand capturing a healthy 10 per

cent of the addressable market," saysBhuwalka.

Its customers list includes mining,

bulk transportation and construction

companies such as L&T, HCC and Gam-

mon as well as major fleet operators

like DRS, TCl and Safex. .

"We found AMW trucks extremely

sturdy and suitable for Indian condi-

tions. We were also impressed with

their price points and would look at a

few units for our mining operations in

the coming days," says Raghavendra

Rao of MSPL, a leading iron ore miningcompany in Karnataka.

"The air-conditioned cabin is a big

bonus as our drivers are less fatigued

and able to operate without breaks,"

says Hazim, managing director, Munir

Enterprise, Bellary, Karnataka, who has

bought more than 30 AMW Tippers.

"The efficiency of our AMW trucks

has clocked a 30 per cent increase in

driver productivity and helped my

business grow. With more trips

being made, my revenues are higher

from day one," says K. NarsimhaReddy, managing director, KNR Con-

structions Ltd, which has bought over

100 AMW trucks.

Hard selling

Dr Wilfried Aulbur, managing director

and CEO, Mercedez-Benz India, dis-

misses AMW as coin petition to Mere's

Actros trucks, which are widely used in

mining. "They cannot rival our appli-

cations in mines," he says. "We have

800-plus Actros in over 30 locations

around India. These are high-perfor-

mance vehicles, which need to move

excavated dirt till you hit the coal."

Aulbur sees only Volvo and Scania as

competitors.

Having so far focussed mainly on

tractors and tippers, AMW now plans to

look at the mass haulage market keep-

ing in view the demand from construc-

tion, mining and bulk transportation

segments, which means it would have

to hard sell the trucks to individual

truck owners. "As much as 85 per cent



BUS I N E S SIN D I A • June 14-27, 2010 Corporate Reports

of mass haulage trucks are owned by

drivers. In order to enter into this

segment, we need to win the hearts of

truck drivers," saysBhuwalka.

"We are confident of building the

AMW brand as the preferred brand of

truckers through initiatives like service

mobile vans, providing options for

vehicle funding, and driver training,"

he adds. The company trains drivers atits facility in Bhuj before handing their

trucks over to them.

Keeping in mind the needs of indi-

vidual customers, AMW started offer-

ing fully-built vehicles as a one stop

solution rather than selling only the

chassis and leaving the buyers to get

the body built by a third party. AMW

has vertically integrated this business

and created a value proposition for its

customers, asthe fully built vehicle can

begin operations and generate revenue

from the date of purchase itself.

AMW offers options to build tip

trailers, skeletal trailers, sideboard trail-

ers, flat bed trailers, pallet carrier trail-

ers, fire tenders and various other

formats that are customised to meet

the needs of different applications. To

attend to truck breakdowns on long

haul trips, AMW has a 24x7 helpline

that attends to any call in two hours.

AMW has also put in place a real-time

vehicle tracking system and mobile

repair and service vans, which can besummoned by a toll-free call. It also

has 151 service stations across the

country. "We will shortly have 60

other service stations in 15 states.

These will be run by our distributors,"

saysBhuwalka.

Though at present, AMW does not

have an exchange offer to help cus-

tomers migrate to their brand,

Bhuwalka says the proposal is under

consideration. Among the incentivesthat AMW offers at present is cashless

insurance.

The price positioning of AMW

trucks - higher than entry-level

domestic trucks, but with petter fea-

tures; and lower than top-tmd· trucks

by international players - has posed a

challenge to competitors. AMW truck

prices are 5-10 per cent more than

entry-level trucks and the same

amount lessthan top-end trucks. MAN,

which has a plant at Pithampur in

Maharashtra manufacturing 16-tonne

flat-bed trucks and 40- or 49-tonne

Revenue

2006-07 2007-08 2008-09 2009-10

tractor trailers, has a commanding

presence in the 40- and 49-tonne cate-

gory. MAN is now focussing on the 16-

and 25-tonners.

MAN products designed for the

Indian market include 16- and 25-

tonne flatbed trucks, 25-tonne tip-

pers, concrete mixers and haulers,

and 40- and 49-tonne trailers for long-

distance haulage. The tippers arepriced at about Rs26 lakh, while the

tractors cost RsI7.7-29.9lakh. With a

full body, they cost Rs40-44 lakh. Its

plant has the capacity to produce

25,000 trucks, but the actual number

they manufacture is less.

AMW prices, however, are much

lower compared to either Volvo or

MAN. The company says its tractors are

designed for higher carriage capacity at

low operational costs and save up to 15

per cent on fuel consumption, while

their tipper comes with bogey suspen-

sion and bigger box body for higher

load-bearing capacity. Bhuwalka

thinks AMW'S price tag of Rs25-30 lakh

is a winner, because it is substantially

lower than that of similar tractor-trail-

ers manufactured by MNCS such as

Volvo, DaimlerChrysler and MAN.

Eicher, which has been a market

leader in the 5-12-tonne category, is

also coming up with 25-tonne tippers,

31-tonne haulers and 40-tonne trail-

ers. With a tie-up with Volvo underway, the company soon plans to tap



Corporate Reports BUS I N E S SIN 0 I A • June 14-27, 2010

the 49-tonne market, though it will

not be providing frills like AC cabins.

"With better road infrastructure

and the Supreme Court ruling ban on

the overloading of trucks, the demand

for higher tonnage trucks has

increased tremendously. With the

AMW Global Truck series, we have

consolidated our position in the HCV

segment. The 49-tonne segment is

expected to witness high growth, with

a potential market size of 3,000-5,000units per annum. We intend to cap-

ture a very significant market share in

the niche segment of 49 tonnage

vehicles," says Bhuwalka.

Frugal engineering

Bhuwalka points out that by adopting

frugal engineering, out-of-box think-

ing and innovation, AMW has gained a

cost-advantage over the competition.

For instance, he says, unlike the big

players who have a large contingent of

engineers and technicians, AMW hasemployed just 75 engineers and 2,000

workers. This, he said, was made possi-

ble because the company adopted the

North American model of outsourcing

all the major components of the truck.

Taking the oilrig business as its

model, AMW employs workers on a

contract basis, paying them on an

hourly basis, with .provisions for

putting in overtime. Instead of eight

hours, the workers at AMW put in 12

hours a day and are paid for the four

hours extra that they put in. Each

worker gets the equivalent of one

year's wages, though he works for

only nine months in a completely

air-conditioned plant.

"These young workers like this

arrangement of putting in 12 hours a

day for nine months, earning what

they would have earned by putting in

eight hours for 12 months. Thus, in a

year, they can avail pf three months

leave to visit their families back

. home," says Bhuwalka. Plus, he breaksthe time up into three-month stints.

For their comfortable stay in an oth-

erwise rural setting nearBhu], AMW

has built a residential colony, which

accommodates the 1,030 families of

executives and business associates, For

top executives, many of who are from

the US and Europe, the company has

taken on lease a resort equipped with a

swimming pool, a film-screening audi-

torium and about a dozen indepen-

dent luxurious residential units

fashioned after round-shaped huts.

Auto components .

Even before the first Global Truck

rolled out of the Bhuj facility, AMW

had gone ahead with manufacturing

wheel rims and sheet metal panels.

Seeing the emergence of India as an

important source of components for

the automobile industry at a fairly

early stage, Bhuwalka had also set up a

separate unit within the Bhuj facility

for the making of auto components.

"The outsourced global auto com-

ponents market is expected to be in the

region of $700 billion in 2015 and

India is expected to be an important

part of this market. The 'Automotive

Mission Plan' for 2006-16 envisages

that India will emerge as the destina-

tion of choice in the world for the

design and manufacture of automo-

biles and auto components, with an

output level of $145 billion," points

out Bhuwalka.

AMW'S auto component unit has amanufacturing facility for wheel rims,

sheet metal starnpings, chassis rolling,

fabricated components and crash bar-

riers. The facility at Bhuj is the largest

single location manufacturer of wheel

rims in the world, with a capacity of 15

million wheel rims comprising 12mil-

lion passenger car wheels and 3million

truck wheels.

The company caters to the growing

demand in domestic and export mar-

kets for OEM as well as replacement

demand. Says Anand Mimani, CEO,

AMW Auto Component, IIAMW aspires

to be present in all the models of auto-

mobiles that will be introduced in the

country in the next few years. II

AMW Auto Component's client

portfolio includes General Motors,

Maruti Suzuki, Mahindra &Mahindra,

TAFE, Eicher, Sonalika and New Hol-

land Tractors, to name a few. It also

exports high-speed wheels for trailers

that are attached to cars and utility

vehicles in Europe.

• NACHIKETA DESAI

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