AN inefficient and exorbitantly-priced railway freight system, which is shunned by a large chunk of manufacturers, importers and exporters, resulting in hefty growth in the road transport business, and the phenomenal increase in the national highway network, is driving leading international truck-makers to India.

India’s trucking industry, the fourth largest in the world, with annual sales of over 400,000 vehicles, is dominated by two leading players – Tata Motors, which is part of the Tata group of companies (with a 60 per cent share), and Ashok Leyland, controlled by London-based Hindujas (which has a 30 per cent share). Both these companies dominate the mid- and heavy-vehicles segment.

Last week, two European truck-building majors – Volvo and Daimler – announced moves to challenge the monopoly of their Indian rivals in their home ground. Volvo, which has had a phenomenal success with its luxury coaches and construction equipment business in India, has tied up with the country’s third largest – though insignificant – commercial vehicle-maker, Eicher Motors.

Daimler, which had a tie-up with the Tatas for the manufacture of Mercedes Benz cars in the country, is likely to go in for a joint venture with the Munjals, whose Hero Honda Motors makes the country’s top-selling bikes.

India’s commercial vehicle market – which includes heavy-duty trucks, mid-sized ones, and light commercial vehicles – is valued at over Rs300 billion, and till earlier this year, was growing at about 20 per cent annually. According to Siddhartha Lal, CEO, Eicher Motors, the company was on the look-out for a strong international partner to take on the likes of the Tatas and Ashok Leyland. Lal says his firm will also hopes to use Volvo’s extensive distribution network in emerging markets to sell its light commercial vehicles.

Sweden’s Volvo, the world’s second largest truck-maker, will be investing about $350 million in the new joint venture. It will acquire an over eight per cent stake in Eicher Motors and will have a 50 per cent share in the new venture.

Though Volvo has a factory in Bangalore – where it produces its luxury coaches increasingly used by many bus operators, including state transport undertakings – it has not been able to make a mark in the truck business. Tatas and Ashok Leyland have a strong and loyal base in the price-sensitive Indian truck industry, and international manufacturers have found it difficult to crack their stranglehold on the market.

Eicher has been winding down its operations in recent years; it used to make tractors and high-end motor-bikes (after acquiring Royal Enfields from another Indian firm), but has over the years sold off its tractors division and has not been doing too well in the bikes business.

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DAIMLER, the world’s largest truck-maker, has also been looking around for partners in the truck business in India. It is investing in a new plant in Pune in western Indian to produce Mercedes Benz cars, and has also started assembling trucks in the country.

Earlier, it was learnt to have been toying with the idea of a joint venture with either Ashok Leyland or Eicher. Ashok Leyland, however, entered into a $500 million tie-up with Japan’s Nissan Motor Company for producing light trucks, engines and transmission systems. With Eicher now signing a joint venture with Volvo, Daimler is desperately hunting for a potential partner.

Two-wheeler giants like Hero Honda and Bajaj Auto are also on the look-out for potential international partners to help them diversify into the passenger cars and trucks business. But Daimler is expected to shortly announce an agreement with Hero Honda.

Other smaller players have also stitched up alliances with foreign majors in recent months. Mahindra & Mahindra, which makes sports utility vehicles, has joined hands with International Truck & Engine Company of the US, while Germany’s MAN AG has a tie-up with Force Motors of Pune.

Indian and international truck-makers are estimated to have lined up investments of nearly $10 billion in new plants to meet the expected demand for trucks. Most of the existing fleet operators have vehicles that guzzle fuel and have out-lived their utility. Indian courts are taking a stern view of out-dated vehicles and are forcing state transport authorities to cancel permits of ageing vehicles.

With Indian Railways showing virtually no signs of speeding up its freight movement division and freight trains – or introducing realistic freight fares, which at present are high and cross-subsidising the low passenger fares – demand for trucks is expected to remain buoyant.

But during the first half of this fiscal (April to October), demand for heavy trucks fell by 11 per cent to 116,472 units. However, both Tata Motors and Ashok Leyland are preparing to face the challenge posed by the likes of Daimler and Volvo.

Tata Motors is launching half a dozen new vehicles, including in a 49-tonner in the tractor-trailer category. The new product is from its Korean subsidiary, Tata Daewoo Commercial Vehicles. Ashok Leyland has also recently launched a 49-tonne truck

Tatas are also investing over $40 million in a new factory in Thailand to produce pick-up trucks. The unit is expected to produce about 30,000 vehicles annually in about three years.

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BOTH international and domestic truck manufacturers are expecting a surge in demand for modern commercial vehicles following the breathtaking pace of construction of new highways. The National Highways Authority of India (NHAI), which has been undertaking a massive highway widening and upgradation programme, now plans to pump in billions of rupees to further enhance the programme.

The NHAI’s ambitious Golden Quadrilateral (GQ) project – which envisaged improving the highway network linking the four metros of Delhi, Mumbai, Chennai and Kolkata – has virtually been executed. According to the NHAI, almost 97 per cent of the work has been completed at a cost of over Rs300 billion.

The state-owned agency now plans to expand the four-lane highways into six-lane ones at an additional cost of over Rs240 billion over the next five years. The GQ project has been hugely popular among truck operators, who do not mind paying toll charges for using the widened highways.

Most of these highway projects are being undertaken under the Build Operate and Transfer (BOT) system. Those building the highways are given the right to collect the toll and manage the highways for a few years.

India’s National Highway Development Programme also envisages the development of 15,000 km of expressway over the next five years. About 1,000 km of expressway are currently being built in the country. At present, there are just two operational expressways – with controlled access points – in India: the Mumbai-Pune expressway and the Ahmedabad-Vadodara expressway, both of about 100 km each. The latter is being extended all the way to Mumbai.

The government is also planning to introduce new legislation governing expressways, and is also toying with the idea of setting up a separate expressway authority on the lines of the NHAI.

However, the massive expansion of highways and expressways is coming at a huge cost in terms of human lives. India recently achieved the dubious distinction of topping the list of countries with the highest number of accident victims.

According to the World Road Statistics, 2006, 101,439 people were killed in road accidents in India in 2006, as against 94,968 deaths reported in the previous year. India tops the global list.

Unfortunately, very little is being done either by the federal government or the state governments to improve driving standards and skills in the country. Many truck-drivers are guilty of over-speeding on the highways, and also driving under the influence of liquor.

The easy access to driving licenses, thanks to corrupt licensing-issuing bodies, is resulting in nightmarish driving conditions, not just in the cities, but even on national highways and expressways.