Stay abreast of the fast moving economic super-power — India!
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Stay abreast of the fast moving economic super-power — India!
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India Reports: Indian auto makers planning to enter US marketIndian automakers are eyeing the US markets; Maruti is all set to export it new model A star to Europe. Car sales have hit a five year low following the slow down and the terror strikes. The government has reduced certification requirements on import of luxury cars and imposed restrictions on import of certain automobile components. -Chillibreeze Business Research Team
Trends Cars Two wheelers Others TrendsCar sales hit the slow lane after 5-year joyride After five-years of uninterrupted growth, car sales seem to have hit the skid row. And the terror attack on Mumbai will only make things worse for the sputtering demand. While October’s decline of 6.59% to 98,900 vehicles (compared with 1.05 lakh vehicles last year) was the largest drop in sales in eight years, November numbers are pointing towards a much bigger dip. Mumbai, the second-largest car market in India, sells 7,000-9,000 cars per month. As most actual sales transpire towards the month end, the terror attack has wiped out more than half the expected sales numbers. Top car makers Maruti Suzuki India, Hyundai Motor India (HMI), Tata Motors, Honda Siel Cars India, General Motors, Ford Motor India and Mahindra & Mahindra (M&M) are heading towards a significant drop in sales in the coming months. Senior company executives and dealer sources say that the footfall in showrooms has dropped by 50-70% in November. And the terror attack on Mumbai is pretty much the last nail in the coffin. Total passenger vehicles (including SUVs and multi-purpose vehicles) dropped 9% to 1.26 lakh vehicles in October after five years of straight growth, which took the annual domestic market to 15.7 lakh vehicles in the last fiscal. Things started slowing down middle of this year due to rising prices, high interest rates and the economic crisis. Now things have become so bad that dealers are refusing fresh deliveries and are busy clearing the inventory pile up. India's automakers rev up for run at U.S. car market Yet another challenge is facing the U.S. auto industry. And this time, it isn’t coming from Japan, South Korea, or Germany — or the meltdown of the economy. In the next few years, Indian automakers and parts suppliers, long outcasts because of lackluster innovation and stagnant technology, have ambitious plans to sell cars to American consumers and peddle parts to carmakers in this country. India’s anticipated foray into the downtrodden U.S. automotive market poses an immediate threat to Detroit’s Big Three and their domestic suppliers, already teetering on the brink of bankruptcy because of lagging sales stemming from a tightening credit market and competition from Asian automakers. Indian automakers, aggressively recruiting top homegrown engineers and ramping up research and development teams, are emphatic that their entrance into the U.S. and global markets should be taken seriously. For the first time, they believe they can compete globally. India’s entry into the U.S. auto market will have deep ramifications for the entire manufacturing sector of the United States, but especially in automotive centers such as Toledo and Detroit. Mahindra Motors is setting its sights on the American SUV market, looking to place its diesel-powered Scorpio on U.S. roads in the near future and taking aim at Jeep, which already faces challenges from domestic and Asian automakers. A Mahindra dealership is slated for Toledo’s Central Avenue strip, the heart of auto sales in the area, where the company expects to begin selling pickups late next year before introducing its SUVs. Also next year, another Indian company, Krishna Maruti, plans to begin supplying seats for Toledo-built Jeeps. The automotive products supplier, headquartered near New Delhi, India’s capital, has long built seats for Maruti Suzuki, India’s leading car maker. Krishna Maruti is expected to take a large share of the Toledo Jeep work from Johnson Controls of Northwood. The move could mean the loss of up to 75 local jobs. And over the next several years, Tata Motors, India’s highest-profile automaker, plans to expand its global reach to include the United States. By next spring, Tata’s Nano, the world’s cheapest automobile at $2,500, will begin rolling off production lines and onto India roads. India is well on its way to meeting its stated goal of joining the ranks of the world’s auto industry leaders. Interviews with executives from India’s Big Three — Maruti Suzuki, Tata Motors, and Mahindra — show the urgency of the nation’s leading automakers to compete not only domestically, with an influx of foreign automakers laying roots in India, but to become global players in the world’s automotive industry. When Tata Motors earlier this year introduced the Nano, the world’s cheapest passenger car, it had every intention of taking it global. Amid much fanfare, the $2,500 Nano put Tata Motors on the global automotive map and made it the symbol of Indian ingenuity when it comes to car design and forward-thinking. The Nano, which is within reach of middle-class Indians, would aim to replace the rickety three-wheelers that clog Indian roads and offer a safer alternative than motorbikes for transporting families across busy city streets. On Jan. 10, the day the Nano was unveiled, Tata Motors’ Web site attracted 7.9 million hits from around the globe, giving a sense of the worldwide interest in the vehicle. Tata Motors plans for the Nano to initially be sold in India but later sold in other developing countries. Just as the world community was getting to know Tata Motors, the rapidly growing Mumbai-based company purchased the luxury Jaguar and Land Rover brands from Ford in a $2.3 billion deal. Tata, like the other Indian automakers, has joined into agreements with other car companies across the world, including South Korea’s Daewoo, Spain’s Hispano, and Brazil’s Marco Polo. While India’s automakers map their entrance in the U.S. auto market, some Indian parts suppliers are already exporting to the United States. There are hundreds of parts suppliers based in India, which historically have served Indian automakers such as Tata, Mahindra, Maruti Suzuki, Bajaj Auto, and Ashok Leyland. But as India’s reputation rises for producing quality auto parts, the demand for Indian-made components is increasing. Terror-breaker for cars As Mumbai is the second-biggest car market in India after Delhi, the terror attacks have dampened the hope of any revival of car sales, which have been witnessing a slowdown. A more alarming issue could be that the low sentiment would even offset any gains that would have come when the interest rates on car financing came down, he added. Mumbai terror attack yet another blow to the auto industry The terrorist attack in Mumbai has come as yet another blow to the Indian automobile industry, which is already reeling under a sales slump due to high interest rates and lack of finance availability. According to industry experts, Mumbai accounts for about seven per cent of total car sales in India, selling about 7,000 units a month. End of month is when most of the sales happen and the terrorist attack has come as yet another setback in the overall negative situation, they said. As such these are difficult times for the auto industry and the incident will at least temporarily affect business. In October domestic passenger car sales went into reverse gear with a 6.59 per cent fall at 98,900 units, against 1,05,877 units in the same month last year. VE to make India hub for emerging market CVs VE Commercial Vehicles (VECV), the joint venture between Sweden's Volvo and domestic firm Eicher Motors , said it has planned to make India its global hub for commercial vehicles to cater to the emerging markets. The idea is to develop and manufacture commercial vehicles which has the robustness, at price-points that Eicher has been doing. Products developed by VECV would cater to markets like Africa and South-East Asia besides, catering to the domestic demand. Such vehicles would fill the lower and mid-rung of the markets, where Volvo does not have products at such prices. The JV would look at leveraging on the worldwide sales network of Volvo to export Eicher branded commercial vehicles. Firms shying away from spot hiring The demand from companies looking to hire workers at the city employment exchange is set to witness a dip this week. On most Wednesdays, there are 50-60 openings available, while around 200 people apply for these jobs. In the last two weeks, the demand has been only around 40. Most of the jobs are temporary and the records show that many companies keep coming back to the exchange on a regular basis. The jobs on offer include helpers, assembly operators, office assistants, agents, trainees in various fields like marketing/sales. The requirement for labour could have dropped slightly in the manufacturing and the production sectors — especially in the automobile sector, but the services industry was still going strong. Importing luxury cars now easier Luxury sedans such as Toyota's Lexus and Mercedes Benz S-Class will be easier to import, especially from the US, with the government doing away with safety and emission certificates from the 'country of origin' but the vehicles must comply with European standards. A new imported vehicle with FOB (freight-onboard) value of $40,000 or more with over 3,000cc for petrol- run engine and over 2,500cc for diesel engine would be eligible for the easier norms, the directorate general of Foreign Trade said in a notification. Under the relaxed rules, imported vehicles which need homologation to make it suitable for Indian conditions , need not have a certification from an authorised body in the country of origin, as was required earlier. But, they need to comply with EU standards. Industry experts say the move will help companies like Toyota, which can now import its Lexus brand, and Mercedes Benz to bring its S-Class. US does not have a nationalized certification authority and makes import of vehicles cumbersome. At the time of customs clearance, a Type Approval Certificate of a global accredited agency from the country of origin would be required. Auto industry cries foul over import restriction on components The Indian automobile industry, which has been undergoing a downhill drive, decried the government's recent decision to impose restrictions on import of critical components saying it was akin to returning to the 'licence-raj' period. Last week, the government had slapped import restrictions on key steel items and critical automobile components. It had put automobile transmission shafts alongwith hot-rolled coils and other articles of iron, including engineering items, under the 'restricted' list. Commenting on the development, Society of Indian Automobile Manufacturers Director General Dilip Chenoy said the automobile industry was not consulted on the matter. The decision could backfire as it could lead to a price increase of end-products as companies will now face longer time period to get such components while there could be pile up of other inventories. Also while companies need to take license to import such critical components, if they want to develop a local vendor, it is going to take time and it will end up increasing the manufacturing cost. CarsMaruti plans to drive up presence in Europe Maruti Suzuki India, the country's largest passenger carmaker, is poised to expand its presence across European markets. The company, which aims to notch up exports of 2 lakh cars by 2010-11, will kick off exports from its upcoming dedicated car terminal at Mundra Port in January 2009. The first consignment to be shipped through this port facility will comprise Maruti's newly launched small car, the A-Star . The terminal has been set up by Maruti Suzuki for exports meant for the European Union only. The company will export 1 lakh units of A-Star to European markets. In Europe, Maruti's major markets include France, Netherlands, Hungary, UK and Italy. Netherlands, in fact, is the biggest export destination for Maruti Suzuli with over 67,700 units. Maruti Suzuki India is also tipped to double exports of existing models to non-European markets from around 53,000 units in 2007-08 to reach 1 lakh units by 2010-11 . Back in 2000, the company had started exporting the `Alto' to Europe. But three years ago, it discontinued selling the Alto across Europe Even Maruti 800 has remained a popular choice in some European countries. By October, the company had exported over 73,000 units of Maruti 800 since Maruti Suzuki started operations in India in 1986. Incidentally, the Indian facility has so far exported over 5.43 lakh units of different models since inception. Out of this, over 2,81,000 units were exported to Europe alone. BoB, Maruti sign MoU for car finance Bank of Baroda and Maruti Suzuki India, have signed a Memorandum of Understanding whereby dealers of Maruti cars would apprise prospective Maruti car-buyers about the car-loan advantages of the bank and help them in applying for it. The nearest branch of the bank will promptly process the application and disburse the loan within 48-hours. Presently, the bank provides car loans at a competitive rate of 11.25 per cent, the release said. This tie-up will cover over 600 Maruti dealers and over 2,800 branches of Bank of Baroda across the country. Honda to hike car prices by up to Rs 1.5 lakh from January The weak rupee is showing its ugly face. Honda is set to hike car prices across models by Rs 10,000 to Rs 1.5 lakh from January next year to factor in increased production cost due to depreciation of the rupee and expensive raw materials. The highest impact would be on the sports-utility vehicle CR-V, which is imported to India as a completely-built unit (CBU). While price of the luxury sedan Accord will go up by Rs 30,000-50 ,000, Civic will likely to be dearer by Rs 10,000-20 ,000. Honda’s price hike comes at a time when the car industry in India is in the grip of a slowdown due to record-high interest rates and tight retail financing by banks. Sales of Honda in the April-October 2008 period fell 28% at 24,952 units against 34,578 units in the corresponding period last year. Two WheelersSuzuki to buy out Indian partner in 2-wheeler JV Japanese auto major Suzuki Motor (SMC) is set to buy out the stake of its Indian partner in two-wheeler venture Suzuki Motorcycle India (SMIPL), which could happen this fiscal. The Japanese firm is looking to make the Indian subsidiary a wholly-owned venture, a process that started with it holding a 74% stake and the remaining 26% by the family of company MD Satya Sheel. Industry sources, however, said both partners are in advanced stages of negotiations, which would see Sheel’s stake in the company bought by the Japanese firm. SMIPL has so far invested Rs 400 crore and will make an additional investment of Rs 150 crore by 2010 for expanding its production capacity and also for new models it planned to bring to the market. Suzuki, which re-entered India in 2006 with the launch of two bikes after breaking off with a JV with TVS Motor in 2000, is looking to launch at least two models every year. Suzuki launches hyper sports bike in India Japanese two-wheeler major Suzuki on Wednesday launched its two hyper sports bikes, Hayabusa and Intruder M1800R, in India, both priced at Rs 12.5 lakh (ex-showroom Delhi). Hayabusa would be powered with a 1,340 cc engine, while Intruder would be available with a 1,783 cc V-twin engine. The bikes will be available in Delhi, Bangalore, Hyderabad, Chennai, Pune, Mumbai and Ahmedabad. OthersNIC sees dip in auto insurance business The recession-hit automobile industry is impacting the business of insurance companies especially the ones for whom auto insurance constitutes a bulk of the business portfolio. However, there may be a rush by corporates to take terrorist coverage in the wake of India’s worst terrorist attack. Personal insurance coverage for such attacks are covered under the personal accident policy. The financial meltdown had not affected his company although auto insurance premium, which constitutes 51 per cent of NIC’s business portfolio might take a hit. Between April and October, NIC clocked a growth of 10.9 per cent with business touching Rs. 2,510 crore. The public sector insurer is confident of touching its target of Rs. 4,500 crore this fiscal which will represent a 11 per cent growth over 2007-08 when business stood at Rs. 4,024 crore. Segments such as health had contributed handsomely to the business with a growth of 30 per cent and an income of Rs. 900 crore. Medical insurance had a 17 per cent share in NIC’s business. Goa auto parts maker cuts work The impact of the global economic meltdown has crept into Goa’s production sector. The Automobile Corporation of Goa Limited (ACG), a supplier to Tata Motors and a leading producer of sheet metal components, assemblies and bus coaches, has rescheduled its work week from six to five days with immediate effect, on account of reduction in demand of sheet metal pressings and bus bodies. Moody’s downgrades Tata Motors’ corporate family rating Moody’s Investors Service on Friday downgraded the corporate family rating of Tata Motors (TML) to B1 from Ba2. The rating change reflects the slowdown in demand seen in both TML’s domestic and overseas markets. This translates into pressure on profitability and happens at a time when the company has increased its leverage. TML’s financial flexibility is, therefore, significantly weakened. The key European and US markets of Jaguar Land Rover (JLR), a TML subsidiary, have deteriorated materially in recent months, and conditions are expected to remain weak for at least the next 12 months. With this, JLR’s performance has become uncertain and could have a significant impact on TML’s consolidated performance. At the same time, TML’s Indian business has been affected, particularly in the last two months, as the availability of financing for vehicle purchases declined rapidly. Truck makers feel slowdown pinch After homes and cars, it’s now the turn of trucks. A sharp increase in discounts by manufacturers to boost slowing sales hasn’t translated into higher sales for truck makers. According to sources, subventions — which are discounts offered by manufacturer to the financier and who in turn passes it to the customer — in some of the heavy commercial vehicles, have risen sharply to around Rs 50,000-1,00,000 per vehicle, from the earlier discount of Rs 15,000-30,000, in the past month alone. Interest rates, which have fallen sharply to about 9.5%-10.5%, post subventions, haven’t fuelled sales. In fact, in recent months, there has been an increase in the sale of used trucks, say dealers. Operators are finding it difficult to service existing loans. Rising diesel costs and vehicle prices have inflated operating expenses of fleet operators by more than 20-25% in the past few months. Delinquency level in the industry has shot up from around 0.5% to around 1-1.1%. This has also led financiers to increase the margin amounts. Old vehicle financing is now down to Rs 600 crore from Rs 800 crore, while new truck loans have fallen from Rs 300 crore to around Rs 100 crore; loans through franchisees are now at Rs 50 crore from Rs 100-150 crore earlier. Most financiers have seen disbursements fall by around 30-50%. HDFC Bank and ICICI Bank last month disbursed HCV and LCV loans of around Rs 150 crore each last month. The worst affected are the M&HCV sales. Sales are down by 50% , while LCV sales are down by 27% for October 2008. Industry watchers do not expect situation to improve for another six months. Sound of luxury cars attracts women most: Study A new study in the UK has proved that the sound of a luxury car engine appeals to our primal instincts, surprisingly more so for women, even if they claim to have no interest in cars. The study by luxury motor insurers Hiscox, conducted some time back, found that the roar of a Maserati turned women's heads the most. November 26, 2008 |
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