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Stay abreast of the fast moving economic super-power — India!
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India: Growth in automobile sales not to exceed 6%: Radio taxi players expanding their fleet size, sales of Logan, Marina and Versa are up due to bulk ordersThe high interest rates and global slowdown have led to fall in automobile sales across vehicular segments. Car majors have delayed launches of new models and are targeting rural areas and smaller cities. Analysts are of the opinion that sales growth would not exceed 6% this year. The radio taxi players are expanding their fleet size; as a result sales of Logan, Marina and Versa are up due to bulk orders. Maruti is planning a ‘made in India’ car. Honda has slashed price of its hybrid Civic and Lohia group has launched e bikes. -Chillibreeze Business Research Team
Trends TrendsGrowing radio taxis set to give car makers a lift The fast emerging radio taxi market should spell relief for Indian car makers looking to survive a slowdown in demand. Bulk orders placed by radio taxi companies for passenger vehicle models such as Mahindra Renault’s Logan, Tata Motors’ Indigo Marina and Maruti Suzuki’s Versa, are buoying sales of these models. With radio taxis in growth mode across India, their fleet expansion plans are significant too. Leading the pack is Easy Cabs with a new fleet order worth Rs 60 crore. Earlier this year, Easy Cabs had purchased 750 Logans. Delhi-based Quick Cabs and Meru Cabs are also expanding their fleet size by 500 vehicles each There are an estimated 6,000 radio taxis operating across India currently, and observers say this figure is expected to double by March 2010. After the metro cities, radio taxi operators are now eyeing smaller cities to expand their business, which would further fuel demand. Domestic passenger vehicle sales dipped 9% to 1,26,098 in October 2008 from 1,38,653 units for the corresponding month last year. While Maruti Suzuki’s Omni and Versa collectively saw a decline of 22% in October sales numbers, volumes for Mahindra Renault’s Logan were down 52%. Bulk orders in such difficult times are a welcome development, agree industry experts. Quick Cabs, which operates in the Delhi-NCR region, entered this business three months ago with 200 taxis. It now plans to bring an additional 500 taxis into its fleet. Auto growth down to 5.6% in 7 months Automobile sales in the festive month of October fell by 14.42 per cent, dragging the overall sales growth of the industry in the first seven months of the current financial year to a mere 5.64 per cent. The total number of automobiles (which include cars, commercial vehicles, two-wheelers etc) sold in October was a mere 8.65 lakh compared with 10.11 lakh units sold in last October. This is the steepest fall in monthly sales for the auto industry in FY09. In the last financial year, the auto sector grew by a respectable 12 per cent. However, experts fear that the number will come down to single digit this year if the current trend continues. Industry analysts have also projected that the industry will not have a growth of more than 6 per cent in FY09. October provides over 15 per cent of auto sales. The key reason for the sharp decline in sales has been the credit squeeze as 70 per cent of vehicle sales in the country (90 per cent in case of commercial vehicles) are financed through loans. Consumer sentiment has been further hit by the depressed stock markets. Auto majors with rising inventory levels in expectation of high October sales are being forced to cut production by closing factories on certain days of week to bring down inventories. Passenger car sales in October dipped by 9 per cent as a result of which the total sales growth in the first seven months of this year went down to 4 per cent. Market leader Maruti Suzuki posted a negative growth of 8 per cent in October, while Hyundai sustained momentum by registering a 10 per cent growth on the back of its best-selling models such as the i10. The two-wheeler industry showed a sharper decline with sales dipping 14.4 per cent in October as a result of which total sales for the first seven months grew by 6.65 per cent. Total number of motorcycles sold last month stood at 5.38 lakh compared with 6.57 lakh for the same period of last year. The steep fall comes on the back of Hero Honda posting its first dip in sales since April this year. While Hero Honda sales declined by about 5 per cent, Bajaj Auto posted a sharp decline of 50 per cent last month. Sales of three wheelers de grew by about 7 per cent for the month of October. Was it not for the positive growth registered in the passengersegment of the three wheeler industry (grew by 16.21 per cent) the entire segment would have slid further. The flat sales of commercial vehicles witnessed between April - September which grew by 4% turned into a steep dip in growth in October. Sales for the month of October dipped by a whopping 36 per cent. While lack of credit continues to affect sales in this segment, analysts attribute the overcapacity in freight - built during the low interest rate regime, as another reason for sluggish sales. As for pick up in sales over the coming months, industry executives say the recent measures taken by the RBI by relaxing the CRR, SLR and repo rates is yet to feed through the system to reach the retail end. They say the intended effect of the RBI could take effect over the coming months which could boost sales and help the industry post double digit growth. Also, the expected launch of the Maruti’s A Star and Tata Motor’s Nano could also perk up demand towards the second half of the financial year. The other measures put in place by auto companies are interest rate subvention, andputting up best selling brands that survive tight credit conditions. Auto numbers down in Oct, confirms SIAM report The vehicle sales number for October released by the Society of Indian Automobile Manufacturers (SIAM) has just confirmed the slowdown in the industry with all sectors reporting a decline. Beaten by the high interest rate and credit crunch, the sales volume of commercial vehicles, passenger vehicles, three-wheelers and two-wheelers significantly came down last month compared to October 2007. The commercial vehicle sector took a beating with sales dropping 36 per cent to 28,027 units against the volumes clocked during the year-ago period, while passenger vehicle sales dropped to 1.26 lakh. Total two-wheeler sales were 15 per cent down in festival month at 6.78 lakh while three-wheeler sales also showed decline. Among commercial vehicles (CVs), medium and heavy vehicles sales shrunk to half the volume the segment clocked a year ago. From 23,352 in October 2007, it came to 11,786 last month, recording almost a 50 per cent decline. In truck segment, large players Tata Motors, Ashok Leyland and Eicher Motors showed drastic decrease in volumes. The passenger car segment reported 7 per cent sales drop at 98,900, with market leader Maruti Suzuki — which controls more than 50 per cent of the market share — and premium players Ford and Honda showing decline. Tata Motors showed a marginal growth last month on the back of recently-launched Indica Vista. In motor cycle business, sales of the second largest player Bajaj Auto’s were halved to 1.02 lakh while the market leader Hero Honda and the third largest TVS also showed decrease in volume. Honda Motorcycles and Scooters India and Yamaha Motor India showed significant growth in October. The electric two-wheeler is a sub-segment that showed growth, selling 1,000 units more last month. The sales of passenger carrier three-wheelers increased, while goods carriers’ sales slashed drastically, leading to negative growth in the overall segment. Car sales in reverse gear Passenger car sales fell 6.6 per cent in October — the third time in seven months of this fiscal — as high interest rates and tight consumer credit took their toll. Sales of trucks and buses were hit harder, suffering a decline of 35.95 per cent at 28,027 units during the month compared with 43,756 units in the same month last year. Industrial output in August, at an annual rate of 1.3 per cent, was the slowest in a decade. According to data published by the Society of Indian Automobile Manufacturers (Siam), passenger car sales in October fell 6.59 per cent to 98,900 units compared with 1,05,877 units in the same month last year.For the first time since 2005, car sales contracted thrice in a fiscal year, first in July (down 1.71 per cent), then in August (4.36 per cent) and again in October. In September the industry reported a sales growth of 2.84 per cent.Apart from a credit crunch, high prices also dissuaded consumers. Motorcycles, too, recorded lower sales at 5,38,353 units against 6,57,874 units last year, down 18.17 per cent. CarsMaruti to build made-in-India car Maruti seems to have come off age after more than two decades it was formed as a joint venture between Japan's Suzuki Motor and the Indian government. The company is set to develop an all-new model from scratch by 2011 using its Indian engineering strength. Maruti has been emerging as an important arm for Suzuki's global operations. Last fiscal marked a turning point when it overtook Suzuki in terms of sales in respective home markets when it sold 7.11 lakh units to Suzuki's 6.73 lakh units in Japan. Suzuki has said that of the three million cars that it wants to sell worldwide, almost 30% would come from Maruti. Maruti Suzuki's R&D capabilities began with modifying Suzuki cars to Indian conditions and have been growing in line with the company's rising sales performance. It has evolved over the years, becoming big enough to play a part in some of Suzuki's key global design projects like the Swift and the A-Star. Nearly 75 engineers at Maruti have trained in long-term projects at Suzuki, Rao said. GM gears up for launch of mini car next year General Motors(GM), plans to roll out its new mini car next year from its Talegaon plant, near Pune. This will be followed by the launch of a sedan category car named Cruz by 2010. The mini car, which is yet to be named, will initially use imported parts for production. This will be localised later. The company plans to upgrade its existing models too. GM India started making profits from 2004. The $200 million engine plant near the car plant in Talegaon has already started and will be fully commissioned by 2010. This the first flexi engine plant in the world which can produce petrol and diesel engines on the same line. The plant has a total capacity of 1,60,000 units. Hyundai to launch car smaller than Santro India's second largest car manufacturer Hyundai Motor India Ltd said it would soon launch a car that would be smaller than its Santro model. The car should be out by 2011. Honda's Civic Hybrid cheaper by Rs 8 lakh Honda has slashed the price of its Civic Hybrid cars in India by an unprecedented Rs 8 lakh, as it looks to boost sales of the environmentally-friendly sedan in an unfriendly economic environment. After the price cut— the sharpest in Indian automobile history and introduced with immediate effect—the hybrid Civic will cost Rs 13.36 lakh compared to its launch price of Rs 21.5 lakh. This is also the first time in its decade-long presence in India that Honda, which is absorbing the full impact of the price cut, is resorting to a formal price cut to sell its cars. The company, which operates as Honda Siel Cars India (HSCI) in India, said the decision to cut the price was aimed at making eco-friendly cars more affordable. The Civic Hybrid is India’s first full hybrid vehicle. Its 1.3 litre petrol engine and an electric battery give it an average mileage of 20 kilometers per litre of petrol, making it the most fuel-efficient car in its category on Indian roads. Car majors postpone launches The slowdown in the car market is affecting the launch plans of car companies. Italian automotive major Fiat India Automobile (FIA) will launch its new mid-size sedan Linea in December instead of October due to the poor sentiment prevailing in the market. Its second launch Grande Punto has also been pushed back and will now hit the market sometime next year instead of December. The company is reviewing its launch plans after taking stock of the poor demand sentiment in the car market. Linea will be available in 1.3 multi-jet diesel engine and 1.4 FIRE petrol engine. It will roll out from Fiat’s newly established Ranjangaon plant in Maharashtra and will be in the price band of Rs 6-8 lakh. Grante Punto, another locally assembled model from the Fiat stable, was supposed to be launched in December and will now come in the first quarter of 2009. Next in line is its luxury hatchback Bravo, whose launch timing is yet to be finalised. Maruti Suzuki and Hyundai have also pushed back their launches beyond the festive season. Maruti’s A-Star hatchback was slated to debut in October and will now be introduced later this month while Hyundai’s premium hatchback i20 is expected to hit the domestic market in January next year. GM to drive in 'Cruze' to India next year, no bankruptcy fear Struggling US carmaker General Motors said its India activities are on track and will launch its luxury sedan, Cruze, followed by a small car, in the next financial year amid reports that it is on the verge of filing for bankruptcy. The company is on track to drive in its luxury sedan Cruze, expected to be priced in the range of Rs 11-15 lakh. The car, meant for the domestic market, would be introduced during June-July, 2009. Also, the company plans to roll out a mini car from its Talegaon facility, which is currently under construction. The sedan could be produced either at Halol (Gujarat) or Talegaon itself. Car industry in India Still Hopeful The festive season in India was unable to ignite any spark in the car sales in the month of October. Though there was an increase in the sales figures for most of the companies and dealers and car manufacturers were able to clear their inventories, the sales figures did not reach the expected figures for most of the companies. According to the sales figures released by the Society of Indian Automobile Manufacturers, the domestic sales figures dropped by 6.6 percent in October 2008. The figures dropped to three years low of 98,900 units from 105,877 units in the same month last year. This has been the steepest drop in the last three years. As financing still remains the most important factor to boost the sales, the auto industry in India is still hopeful for the next year. Companies like Maruti and Hyundai have started targeting the rural India and the smaller cities of the country. These cities contribute significantly to the sales figures and the small car segment greatly benefits from these cities and rural areas. Till now Indian auto sales had been witnessing a double digit growth in the country but the cumulative growth for past seven months has now slid down to 5.64 percent only. The earlier forecast by SIAM had been a projected growth of 12-15 percent. Now, even premium car makers face heat of slump Just when premium segment car-makers thought they were insulated from the slump in the automobile market, unlike mass market car-makers, data from the Society of Indian Automobile Manufacturers (SIAM) seem to shake them out of their comfort-zone. In October, sales of high-end cars (priced between Rs 8.02 lakh and Rs 1.24 crore) fell by 30.51 per cent to 2,859 units compared to 4,114 units in the corresponding month of last year. The hardest hit was the luxury segment (price ranging between Rs 73.6 lakh and Rs 1.24 crore), which was considered to be the most insulated from the current credit crisis, declining by 61.19 per cent to 26 units from 67 units in the same month last year. In this category, German carmaker Mercedes-Benz's sales (the S-class model) in Indian market plunged by over six fold in October to only seven units from 44 units in the year-ago period, SIAM said, adding BMW India's sales (7-Series cars) in the segment also declined by 17.39 per cent at 19 units compared to 23 units in the same month last year. SIAM pointed out that sales of executive segment cars in October also plummeted by 34.29 per cent to 2,313 units from 3,520 units in the corresponding month of 2007. Honda Siel Cars India (HSCI) selling 'Civic' registered a fall of over three fold at 422 units compared to 1,421 units, while General Motors India posted nearly three fold decline in 'Chevrolet Optra' sales at 153 units during the month as against 436 units in the year-ago period. Toyota Kirloskar Motor (TKM), however, registered an impressive growth of over two fold in the executive segment riding on the novelty factor of its new offering 'Corolla Altis' with 1,110 units selling in October compared to 526 units in the year-ago period. Mercedes-Benz and BMW, which offer 'C-class' and '3-series' cars respectively in the segment, also managed to push their sales in the positive direction. While the 'Corolla Altis' priced between Rs 10.83 lakh and Rs 12.86 lakh, the 'C-class' and '3-series' are offered at range of Rs 26-30 lakh and Rs 27-33 lakh respectively. The premium segment also declined by 1.33 per cent at 520 units during the last month as against 527 units in the corresponding month last year, SIAM said. In the category, the sales of TKM (Camry) and Mercedes-Benz (E-class) plummeted by nearly four fold in October, while that of HMIL (Sonata) fell by nearly three fold. However, BMW, HSCI and SkodaAuto India registered jumps in their sales in the premium category, SIAM said. The October sales slip is quite contrary to confidence exuded by players in the high-end categoy. BMW had revised upwards its India sales target for this calendar in July by 40 per cent to 2,800 units from an initial 2000 units. Mercedes-Benz had also said they were expecting to sell about 3,000 units and a company official said in the Jan-Oct period it has already sold 3,141 units. Two WheelersLohia Group forays into auto sector; launches e-bikes Diversified business house Lohia Group today announced its foray into automobile sector with launch of two electric bikes, both priced at Rs 31,000 (ex-showroom, Delhi), thus expanding the fleet of eco-friendly vehicles in the country. The company is also planning to launch electric three-wheeler in the next three to four months even as it gears up to introduce three more two-wheeler models in 2009. The prices of the two models -- Oma and Fame -- were kept same and it was before the tax rebate being offered by the Delhi government. LAI, part of the Rs 500 crore Lohia Group , has set up a 30-acre greenfield manufacturing facility at Kashipur in Uttarakhand with an installed capacity of two lakh units per annum. For future capacity expansions, it would set up a new plant in the same campus. The company aims to sell 20,000 units in this fiscal, which it hopes to increase to one lakh units during 2009-10.The company targets to export about 20,000 units to some neighbouring countries. OthersHindustan Motors looks at components business for revival Hindustan Motors, maker of the Ambassador, for long the iconic Indian car, is moving ahead to become more of an automobile component manufacturer than developer of new models. As long as the Ambassador remained the car of choice for all Indian government purchases, whether at the federal or the state level, the company managed to stay in the green even as other manufacturers aggressively attacked the rapidly growing Indian automobiles market. Hindustan Motors refused to move away from the Ambassador. But when government orders began drying up in 2004, the company, once India's largest carmaker, was hit hard; it has been ailing ever since. Kubota Tractors eyes Indian JV Japanese major Kubota Tractors is exploring the possibility of setting shop in India through a joint venture (JV) with Japan’s largest integrated business enterprise Sumitomo Corporation for manufacturing tractors. The JV will focus on the mid-range 30-40hp tractors that account for the maximum sales. M&M and Punjab Tractors have a combined market share of 40% in the Indian tractor market, while global players such as John Deere and New Holland enjoy a small presence. Although four-wheel drives are characteristic of larger American tractors, the KTC powered 12hp became an industry benchmark. KTC leads the under-40hp tractor market, with a product range exceeding 80 models and including the BX, B, L and M series. The company has compact construction, turf, lawn and garden equipment, pumps and generators in its fold. New Plant for Burgeoning Automotive Sector The Indian automotive sector has been growing at an exponential rate in recent years, with growth predicted to increase in the future. The small car segment itself is expected to triple in the next five years. To cater to this budding sector, Delphi Corporation has started construction of a new manufacturing facility in Chennai. The Rs. 250 crore worth plant is expected to be operational by the end of 2009. The presence of major automotive OEMs in Chennai has made it a hub for both the auto and the electronics industries. The Chennai plant will churn out products in the areas of controls and security, safety, entertainment, and communications. In phase one, the plant will produce immobilizers, body computers, instrument clusters and driver information systems, followed by safety and entertainment products. |
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