Hero Group, the industrial conglomerate controlled by the Munjal family, has abandoned a project to jointly assemble Mercedes-Benz trucks with Daimler of Germany in Chennai, Daimler said Wednesday. Left with 100 per cent of the project, Daimler said it would press ahead anyway.

A joint announcement by Hero and Daimler blamed the end of the joint venture on "the economic situation and the continuing weakness in demand in India" and said Hero Group would return the 40-per-cent stake it had earlier acquired from Daimler Trucks.

The statement quoted Hero Corporate Service chairman Sunil Kant Munjal saying, "Hero Group has decided to ... continue to grow its core business and not to pursue the commercial-vehicles business at this time." The move followed "amicable and mutual decisions between the partners, and we shall continue to explore doing business together in the future," he added in a statement.

New Delhi-based conglomerate Hero's business interests include Hero Honda Motors Ltd., the world's biggest motorcycle maker.

Daimler said that the truck venture would be renamed once Hero returns its stake. Plans call for it initially to produce light, medium and heavy-duty vehicles for the Indian market, with production for export to "other emerging regions" following later.

Production of trucks for export from India to other emerging regions would be delayed. About 280 people have already been employed at the Chennai plant, which is projected to turn out up to 70,000 trucks yearly for India's roads.

"I really regret the Hero Group's decision, but Daimler Trucks will nonetheless enter the truck volume market in India," said Andreas Renschler, Daimler executive board member responsible for sales. "India is more than just a market; it's the key to a completely new generation of products," Renschler said, adding that Daimler has to "realize that the economic crisis does not pass India without any impact. But this gives us more time" to increase the company's footprint there.

Daimler Trucks is the world's largest producer of commercial vehicles by sales and comprises the Mercedes-Benz, Freightliner, Mitsubishi Fuso and Western Star brands, as well as Thomas Built Buses. The division sold 472,100 vehicles in 2008 and posted revenue of €28.6 billion.

The Stuttgart-based automaker is pushing to cut costs at its truck division by at least €1 billion as demand for trucks has collapsed in major markets around the globe amid the recession. But Daimler's commercial vehicle projects in emerging markets remain cornerstones for the division's long-term growth targets.

Earlier this year, the board of China's Beiqi Foton Motor Co. approved plans for a 50:50 truck and engine joint venture with Daimler, with a total investment of around $928.5 million. In December, Daimler announced that it paid $250 million for a 10 per cent stake in Russian truck maker Kamaz.

(Also see: Daimler, Hero in $1.1 billion JV to make commercial vehicles)