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Stay abreast of the fast moving economic super-power — India!
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India Reports: Auto sales continue to declineIt was the Diwali week but car sales did not zoom as always. Car prices are likely to increase with rise in steel prices. Most auto majors saw a dip in sales though the second hand car market seems to be doing well. The “800” maybe on its last leg while Toyota Daihatsu plans a $5000 car for India! Two wheeler sales are also expected to drop in the near future. -Chillibreeze Business Research Team
Trends TrendsAuto sales dive south in October This was exactly what the doctor did not order and the industry was silently afraid of. Despite three major festivals — Dussehra, Eid and Diwali —falling in the same month, the downturn in the automotive industry only got worse in October. With November and December traditionally being lean months, any hope of a revival in sales in the rest of the fiscal is now all but over.All auto companies that have released their sales figures for the month, have recorded either a decline or much lower growth in October compared to rest of the year. This indicated that rather than pulling the industry out of the slump, October has pushed it deeper. Market leader Maruti Suzuki’s decline is the big surprise and caps a below par fiscal for them and the industry so far. Its sales declined by over 8 per cent during the month and the company now has only marginal growth in the first seven months of the fiscal.It’s the same story for the rest as well. Contrary to logging the expected double digit growth in the month, Hyundai grew by only 9.9 per cent as opposed to 26.6 per cent for the fiscal while Bajaj saw a 33.8 per cent dip against the marginal Surging steel sets pace for fresh hike in vehicle prices Taking a cue from passenger car market leader Maruti Suzuki India (MSI), a host of automobile majors like Mahindra & Mahindra (M&M), Honda Siel, Eicher and Hero Honda are mulling a price hike. According to auto industry sources, the reason this time too is rising steel prices. Auto companies say the recent softening of commodity prices has done little to margins. Indeed, the sharply fluctuating commodity prices has added to their problems—vehicle makers who signed annual contracts now find their top suppliers demanding higher prices. Also, while value-added steel prices have continued to harden, rupee depreciation has made sourcing the metal costlier. The trouble is steel comprises the largest chunk of the commodity needs of a vehicle maker. Maruti’s input cost rose 13 % to Rs 7,045 crore in the first half of the fiscal over last year. According to the Society of Indian Automobile Manufacturers, the rise in per tonnage of steel prices could be in the range of Rs 4,750 to Rs 10,000. That impact would be worked into the fresh contracts that have been signed in the first half of this fiscal. Major suppliers for high-grade auto steel are Korea’s Posco, Nippon of Japan, Arcelor Mittal and domestic manufacturers like Tata Steel, Ispat, Bhushan Steel and Essar. Industry sources say the problem lies in value-added steel refusing to turn affordable. Industry sources say auto companies that have entered long-term contracts are now finding their price flexibility clipped. Automakers consume higher grade HR steel, CR steel, low carbon steel and chrome-moly steel for their manufacturing operations, for which suppliers are charging higher prices. Most of these suppliers have quoted higher prices for auto grade steel, claiming an increase in input costs at their end and currency fluctuations; the latter likely to impact the landed prices as some of the metal’s supplies are met through imports. The rise in steel prices is likely to impact the already sluggish auto industry as sales in the first half of the fiscal grew a mere 5% to 6 lakh units from 5.69 lakh units last year. Besides slowing sales, the rise in input costs has impacted the profit margins of all major players in the industry. Diwali fails to light up car sales, new models do better This Diwali was keenly awaited as a cure for all ills plaguing the automobile industry this year. It has been anything but that, if sales are any indication. Barring a few companies like Hyundai Motors, Hero Honda and Maruti Suzuki, almost all manufacturers have had a below-par festive sales during both Navratri and Diwali. Most are sitting on inventories. Prominent dealers in Delhi and Mumbai witnessed lower sales than last year with Tata Motors, GM, Ford and Bajaj Auto emerging as the biggest losers. But the numbers are not serious. Maruti and Hyundai’s schemes for government employees who have received arrears from the 6th pay commission has helped only to a limited extent. Cracker of a time for fancy wheels Motown may be battling a crisis of sentiment both at home and globally but in India, the creamy-layer super premium cars seem to be immune to the meltdown mania. At least so far, banks haven't turned iffy about loans to this segment. And although corporate buying has slowed down in the lower end (Rs 18-25 lac), for the seriously loaded this is also the time to bargain hunt as the market turns buyer driven. Take bespoke marques like Bentley and supercar brands like Lamborghini. Both do small numbers in India, though growth has been top-gear, and both remain firmly on course in the current calendar. And the customers are high networth individuals with high credit rating. So it's a zero risk game for the financiers. Unsurprisingly, neither brands have suffered very much, so far. Meltdown or no meltdown, people still want fancy wheels. The creamy layer cars have been doing so well that newbie BMW is actually bringing its expansion plans forward. Arch rival Mercedes Benz has also had a good run this year though top dealer, Delhi-based T&T Motors, feels next year could be a bit bumpy. Most premium car dealerships agree 2009 may be a tough ride. Already sources say near-new pre-used super premium cars, offloaded by out-of-job or bonusless Wall Street investment bankers, are finding their way to the Indian market and a some car cognoscenti are looking to pick bargains from that job lot. Also, at the bottom end of the premium market (Rs 18-25 lakh) corporate buying is slow. Radio taxis speed up drive for ad revenue While you were driving, a Nokia advertisement might have zipped you by on a radio cab. Leading brands such as Airtel, Nokia, Kotak Mahindra, Tata Indicom and Macau Tourism are hopping on to this innovative and cost-effective option of outdoor advertising. And radio cab operators such as Easycabs, Mega Cabs and Meru are raking in additional revenues through this route. The radio cab advertising industry is estimated to be worth Rs 10 crore this fiscal and is expected to touch Rs 30 crore by 2010, say industry experts. With the growing numbers of radio taxis and the visibility they offer, operators are looking at selling available space on their taxis. The benefits offered by this medium are also unique. Reliance Capital Finance hired 1,500 Meru cabs during July and August this year while Radio City has taken 200 cabs in Delhi where cab drivers are required to play the station on the cab’s music system to promote the brand. There are new opportunities on the anvil as well. “We will be launching in car entertainment system in the next three months,” says PR Pasnoor, managing director of Mega Cube, the agency handling advertising for Easycabs. The firm is planning to tie up with Network 18, Big 92.7 FM and other providers for content sharing. Dhanteras delivers this year too, over 15,000 cars sold When all else fails, Motown can fall back on the goddess of wealth to bail it out. Meltdown or no meltdown, Dhanteras sales have sparked a sparkling Diwali for car companies. Dhanteras – the most auspicious day for buying metal in North India – saw the industry clock three times its usual daily sales. Initial reports suggest that more than 15,000 vehicles (cars and SUVs) were sold on Sunday across the country. That’s a big leap from what the industry usually clocks, around 3,000-3 ,500 cars per day. But this Dhanteras still couldn’t match the sparkle of the same day last year when around 17,000 vehicles were sold. The liquidity crisis and prevailing high interest rates as well as strict lending norms played spoil sport this time round, dampening demand. However, compared to the trend this year, Dhanteras has lived up to its promise. Car sales have not been encouraging this fiscal with customers postponing purchases. As a result, carmakers were pinning all hopes on Dhanteras. Thankfully for car companies, despite the cash crunch and the high interest rate regime, Dhanteras turned out to be a bonanza. Most mass market companies checked their moving inventory and took hourly stock updates. For Maruti Suzuki India (MSI), which controls more than 50% of the Indian car market, Sunday sales added some healthy numbers to its tally. While Diwali revellers looked for Dhanteras bargains, most car marketing executives worked late on Sunday night to track the last minute sales numbers. Some dealers were even offering special discounts to lure undecided customers. That roster included some names not known to play the discount game. Take Honda Siel Cars India, whose dealers are offering discounts to customers for the first time. Second-hand car sales move north The intense liquidity crunch appears to have come as a blessing in disguise for the pre-owned car business. With auto-financiers shying away from giving loans for new cars, buyers are now going in for second-hand purchases. Cars, which are typically one-to-two-years-old, are available at attractive prices.Small cars like Santro, Alto, Zen, WagonR, Indica, Maruti 800 have lately become the choicest picks in the pre-owned car category. Maruti Suzuki’s second-hand car business, in fact, has jumped 27% during the first half of the current fiscal. It has received 22,000 serious queries through its website during the same time. CarsMaruti's October domestic sales down by 8% Despite October recording two major festival days like Dhanteras and Diwali, country's largest car manufacturer by domestic sales - Maurti Suzuki sold just 59,127 units of cars and utility vehicles which is a drop of about 8 percent compared to the 64, 258 units sold for the same month last year. While sales in the mid size sedan category grew by 30%, and those in the MUV segment grew by 47%, the car major witnessed negative growth in all other pasenger vehicle categories. Exports of the company, however grew by 4 %. 800 Goodbye? This was the car that taught India to drive. With stricter emission norms coming into force in April 2010, the Maruti 800 that drove us to New India for the last 25 years may now drive into the sunset. Euro IV emission norms that come into effect in 13 cities in 2010 will force major changes in the 800, including fitting a new engine. But this will push the price of the car up. Alongside, there has been a steady decline in sales that has led to talks of a ‘phase-out’. Maruti, however, denied any plans of a phase-out. The company said the 800 will be in production as long as sales are robust. The company recently launched a new KB series engine that is Euro IV and V compliant and will be fitted in the upcoming ‘A star’ model. This engine will subsequently be fitted in all existing small cars like the Alto, Wagon R and Estilo. The 800, however, may not get it. GM India sales up 5.31 pc in October Car maker General Motors India on Saturday reported a 5.31 per cent rise in its domestic sales at 6,465 units in October, against 6,139 units in the same month a year ago. The sales comprised 855 units of multi-utility vehicle Chevrolet Tavera, 934 units of sedan and hatchback Chevrolet Aveo and Aveo U-VA, 153 units of the luxury sedan Chevrolet Optra, 4,390 units of its small car Chevrolet Spark and 133 units of Chevrolet Captiva, GM said in a statement. Sustaining the marginal growth in the depressing market is the result of the growing popularity of Chevrolet brand and the success of its new introductions like the Spark, U-VA and Captiva. Mahindra to launch new multi-use vehicle this year Auto major Mahindra and Mahindra (M&M) said it would launch a multi-utility vehicle (MUV) within the next two months. The new MUV, Mahindra Xylo, was codenamed Ingenio in the development stage. The vehicle has been tested in India and overseas in different terrain conditions. The car, which is speculated to be priced in the range of Rs.650,000-700,000 (about $14,500-$15,500) is expected to compete with Toyota's Innova and Chevrolet's Tavera in the Indian market. M&M recently posted a year-on-year fall in its quarterly profit by over 35 percent to $41.2 million. GM India eyeing a market share of 10 per cent by 2010 General Motors India is aiming to more than double its market share to 10 per cent by 2010. GMTC-I, which has a core centre of engineering and design for areas of requirement - product engineering, powertrain engineering, manufacturing engineering and design, has now expanded its expertise to include embedded software development and controls "into which GM is going to invest heavily now. The GMTC-I has seen an investment of USD 61 million till 2006 with subsequent investment being met by internal accruals. By the end of 2008, GM will have around 195 sales points and service outlets each from the present 145 sales points and 148 service outlets. M&M consolidated Q2 net down 5% India's largest utility vehicle maker, Mahindra and Mahindra (M&M) posted a drop of 4.9% in its consolidated net profit at Rs 373 cr for the second quarter ended September 30, 2008 as compared Rs 392 cr posted in the same quarter a year ago. The company's net sales grew 19 per cent during the same period to Rs 7,741.42 cr as against Rs 6,502.55 cr recorded in the corresponding quarter of the previous year. Toyota, Daihatsu eye $5,000 car for India Toyota Motor Corp and its minivehicle unit Daihatsu Motor Co are developing a new car for India that will likely sell for around $5,000. Toyota, the world's biggest automaker, has lagged rivals in the race to win over India's cost-conscious consumers - a battle that promises to heat up in earnest with Tata Motors Ltd scheduled to launch its $2,500 Nano car soon. Toyota plans to roll out the $5,000 vehicle in the early part of the 2010s under a new brand separate from Toyota, high-end Lexus, and Scion, which targets younger consumers in the United States. Toyota and Daihatsu declined to comment on the report. Toyota has so far only disclosed plans for what it calls an "entry family car", which is scheduled to be produced in India and Brazil from 2010 and 2011, respectively. That car is expected to cost around $8,000, although Toyota has not officially mentioned a price. Toyota will likely build the $5,000 car in India, with sales also possible in Brazil. Toyota executives have so far denied any interest in developing an ultra-low-cost car, arguing that selling such a car under the Toyota badge could hurt its brand image Porsche to burn some more rubber in India Iconic sportscar manufacturer Porsche is betting big in India. The company, famous for being the most profitable carmaker in the world, is ramping up its dealer network while targeting a four fold increase in sales in the next 2-3 years. "From 2 dealerships currently we will first expand to 5 by next year and ultimately we will have 11 dealers by 2010," said Wallace. "We will soon be represented in all major cities like Hyderabad, Bangalore, Chennai, Ludhiana besides Delhi and Mumbai. We target sales to also grow simultaneously to 250 next year and 450-500 by 2012." Currently the company sells just 100 cars in the country, not surprising considering its entry price of Rs 50 lakh. Wallace expects the next round of growth to come after the launch of its sedan Panamera which would also be company's first global Two WheelersTwo wheeler sales may dip 10 percent next year The Indian two-wheeler industry is likely to witness a 10 per cent reduction in sales volume next year, given the tight market conditions a nd the slowdown in the economy. The cumulative sales of September and October 2008 show a growth of four percent when compared to the same period of the previous year. TVS Motor sold 117,101 units in October 2008 against 129,614 units in the corresponding period of the previous year. Last month the company exported 17,013 units as against 13,042 units in the corresponding period of the previous year. Even Bajaj Auto Limited logged a 34 percent reduction in two-wheeler sales in October as compared to the corresponding period of the previous year. Bajaj Auto sold 250,175 two wheelers in October 2007 while last month the sales were 165,477 units. OthersApollo Tyres to tap EU market with Greenfield unit in E Europe Tyre maker Apollo Tyres will kick-start its plan to begin its operations in Europe by opening its first sales, marketing and technical office in Germany in January, besides giving final touches to its seven-million-tyre greenfield unit project in East Europe. The company, which has at present one plant each in India and South Africa, exports around 1.5 million tyres for four-wheeler and passenger car segments to around 70 countries, specially in the Middle East, South and Central America and Africa. The company's only presence in Europe so far has been limited to the Britain-governed territory of Northern Ireland where Apollo last year sold around 7,000-odd tyres in partnership with local player Philip White Tyres. The company is now planning to gain a major footprint in the multi-billion-dollar European market with partnership of local auto majors including Volkswagen AG.Its branch office in Germany would be its second international one after the existing office at South Africa. Fall in truck sales sparks output cut Lack of finance and a large inventory stockpile have forced truck majors to sharply cut production of medium and heavy commercial vehicles ( M&HCVs) since September. In addition, the move also reflects subdued customer sentiment, which has resulted in purchases being deferred. Sales of trucks — especially lorries which haul large goods and consignments — are expected to be hit by 25-40% this month, according to sources in the logistics and transport sectors. Ashok Leyland, which is owned by the London-based Hinduja brothers, has reduced production of M&HCVs at varying levels across its plants and is expected to undertake a review for a further cut in December. Tata Motors, the country’s largest truck manufacturer, has also trimmed its medium and heavy commercial vehicle output. The company wants to ensure that there is no inventory with itself nor its dealers with this exercise. Currently, heavy trucks account for about 52% of the total industry sales, while the balance is accounted for by light commercial vehicles. Till recently, heavy trucks accounted for more than 60% of total sales. With the movement of goods slowing, freight rates are also expected to plunge in the coming days, the sources said. As a consequence of the production cut, not many new vehicles have been despatched to dealers this month. Several dealers said that they continue to hold huge inventories. Industry experts do not expect the situation to improve for the next couple of months. Finance companies, too, have drastically curbed funding. Sources pointed out that NBFCs have pruned lending to 25-30% of their usual monthly credit. In the case of banks, lending is down by at least 30%. The only segment that seems to do well and showing some growth is the light commercial vehicle (LCV) segment, which consists of mainly the Tata Ace, Winger and the Magic. During April-September 2008, LCV sales increased by 10.31%, while M&HCV sales were down 2%, according to figures released by the Society of Indian Automobile Manufacturers (Siam). M&M shareholders approve merger with PTL Tractor major Mahindra & Mahindra said that its shareholders have approved the amalgamation of Punjab Tractors with itself. Mahindra Group acquired 64.64 per cent stake in PTL for over Rs 1,400 crore last year. In July this year, the Board of Directors of M&M and PTL had approved the scheme of amalgamation of Punjab Tractors Limited (PTL) with Mahindra & Mahindra Limited. October 30, 2008 |
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