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INDUSTRY INTERVIEWS/FEATURES COMMERCIAL VEHICLES Rs 1,000-crore fund proposed for auto component industry Motherson Sumi to buy German partners stake in JV | ALLIED INDUSTRIES Oil jumps above USD 73 on dollar fall, Nigeria attack INTERNATIONAL NEWS GM cuts ties with Toyota in US joint venture Porsche denied credit demand, Qatar eyes stake | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INDUSTRY Go To Top Manu P. Toms The Hindu Business Line (Web & Print Edition) Mumbai: Armed with their zero-emission claims, makers of electric vehicles are trying for carbon credits. Manufacturers of electric vehicles see considerable revenue potential as well as brand building prospects in attaining carbon credits, though the sector is at a nascent stage in India. At least three electric scooter makers including Hero Electric and Chennai-based Kabirdass Motor Company (makers of Xite) have appointed consultancies to assess their carbon credit potential. Bangalore-based electric carmaker Reva is also in the process of ascertaining its carbon credit potential. Joint effort The Society of Indian Electric Vehicle Manufacturers (SIEVM) is considering a proposal to collectively work for attaining carbon credits. The 29-member industry body discussed this at a recent meeting and a decision is expected soon. As every one of us is benefiting from this, we discussed the prospect of jointly working on this. Three of our members said they already initiated their carbon credit projects, said Mr Sohinder Gill, President SIEVM and CEO of Hero Electric. Hero has appointed a consultancy to assess its carbon credit potential and to facilitate clean development mechanism (CDM) registration under the United Nations Framework Convention on Climate Change. By any standards, an electric scooter will save 0.25-0.4 tonne of carbon per year. We have just initiated the process (of assessing carbon credit potential) and it will take at least two years to get the final approval, said Mr Gill. Mr Murali Kabirdass, Managing Director of Kabirdass Motor, said: We have entered into an agreement for CDM project with Asia Carbon Emission Management India Pvt Ltd. We expect up to 10 per cent of our revenues to come from carbon credit trading. Branding It is estimated that an annual production of 30,000 electric scooters will help save 18,000 tonnes of CO2, which would earn a credit of 18,000 Certified Emission Reductions. However, Hero Electric and Reva see carbon credit project more as a branding effort than a source of revenue. By a conservative estimate, in next 10 years we may get Rs 10 crore from carbon credit trade, which is not very attractive considering our scale of business. But it is a good statement to make that we are eligible for carbon credit, said Mr Gill. Hero Electric plans to trade in the international carbon credit market once it gets the approval. Green plant Mr R. Chandramouli, President, sales and marketing, Reva Electric Car Company, said: We are in the process of assessing our carbon credit potential. Our primary purpose is not to trade but to understand how much carbon we save. Not only our product, but our upcoming plant with its solar charging and green building also has very less carbon footprint. One challenge the electric-vehicle makers are facing is the very cautious approach adopted by UN in approving carbon credit. UN is wary of Indian and Chinese companies. What we heard is that there were some 500 spurious applicants for carbon credits from India, said Mr Gill. http://www.thehindubusinessline.com/2009/07/01/stories/2009070151190200.htm | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CARS, SUVs, MUVs Go To Top Swaraj Baggonkar Business Standard (Delhi Print Edition) Mumbai: The repercussion of last years excise duty hike on big cars has started to pinch sedan manufacturers, as demand plunged by more than 50 per cent in the first five months of this year. Manufacturers like Fiat Auto, Hyundai Motors, Maruti Suzuki, Honda Siel, Ford India and SkodaAuto are the most impacted. Most models in this segment were one of the top selling brands for their respective companies till very recently. As part of an effort to encourage consumers to prefer smaller cars over bigger ones, the government had, in June last year, slapped an additional Rs 15,000 excise duty on all cars with an capacity engine more than 1,500cc but less than 1,900cc and Rs 20,000 on all cars with an engine more than 1,900cc. As a result, consumers shifted their preference to compact cars in the price range of Rs 4.5 lakh and above, which offered power on par with sedans but delivered higher fuel efficiency. Demand for hatch backs like Hyundais i10 and i20, Maruti Suzukis Swift and Ritz, and Tata Motors Indica Vista went up accordingly. Therefore, sales of Hyundais Verna, Marutis SX4, Chevrolets Aveo, Fiats Linea and Fords Fiesta in the mid size segment and, Chevrolets Optra, Hondas Civic and Skodas Octavia in the executive segment slumped. Fiat Auto had set a target of selling 2,000 units of the Linea every month since its launch in January. However the count has been half of that so far. Last month it sold just 901. Subodh Marathe, country head Fiat Product Group, Tata Motors, said, the whole midsize segment, where we sell the Linea, is under pressure. Form the actual highs of 11,000 units a month, it has come down to 6,500-7,000 units a month. The additional excise duty is one of the reasons behind the fall. Similarly Honda Siels top selling executive sedan, Civic, which used to sell 1,200-1,500 units every month, now manages to sell only 520 units per month. Sandeep Singh, deputy managing director, (marketing), Toyota Kirloskar Motor, said: Although we have maintained our market share, the executive segment itself has contracted significantly from about 6,000-7,000 units a month to just 2,000 units a month. The Corolla Altis from Toyota is the only sedan in the segment to have marked a growth, albeit on a low base. In December last year, as part of its first economy stimulus package, the government brought down the primary excise duty on all cars through a cut in the Cenvat rate by 400 basic points. Hence, compact cars are now taxed at 8 per cent, from 12 per cent earlier, while sedans are taxed at 20 per cent, as compared to 24 percent earlier. However, manufactures are dissatisfied over the big gap between the two segments. Michael Boneham, managing director, Ford India said, We feel there is a huge pent up demand for sedans, but buyers are waiting for prices to come down. The differential between the 8 per cent and 20 per cent (excise duty) must be reduced, that is the higher rate on sedans must come down. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COMPONENTS Go To Top Aniruddha Basu/Reuters See this story in: mint Mumbai: Indias auto parts industry is hoping for duty concessions on raw materials and an increase in customs duty on imported products in the union budget in July, industry officials and analysts said. From an industry perspective everyone would like customs duties to be lowered as much as possible on the raw material side. That will help the industry to become more cost competitive, said Pankaj Mital, chief operating officer of auto parts maker Motherson Sumi Systems Ltd. Customs duty on most steel items as well as copper, key imports for auto parts industry, is currently around 5%. You have customs duty on the raw materials here, if that is lowered competitiveness of the manufacturing sector will improve, Mital said, adding the government needed to continue with its already-launched reforms for the sector. The government has already cut excise duties across the board to 8% in February in a move to protect vulnerable industries such as automobiles from the global economic crisis. Declining domestic market and lower profitability on exports led to falling sales for most auto component makers for much of 2008-09. The Automotive Component Manufacturers Association (ACMA) which had asked for a fund for modernization in the past year, as an incentive to boost investment, has not made public its budget wishlist for 2009. An industry source, who declined to be named, said the small and medium enterprises would require a technological upgradation fund of around Rs10 billion. Customs duties on imported auto component products should be raised to 10% from the existing 7.5% to boost local production, said Arvind Kapur, managing director of Rico Auto Industries Ltd. We hope the customs duties (on finished products) are bought up. Because of the recession China and other countries have started dumping components in India. They should take it up to 10 percent, Kapur added. However, analysts say, the upcoming budget will not carry any major sops for the industry. We are expecting a neutral budget for auto parts industry. We are not expecting any major benefits. Right now looking at the fiscal deficits they (the government) would look at priority sectors first, said Vaishali Jajoo, analyst at Angel Broking. The union budget will be presented on 6 July. http://www.livemint.com/2009/06/30131943/Auto-parts-sector-seeks-more-d.html?h=E RS 1,000-CRORE FUND PROPOSED FOR AUTO COMPONENT INDUSTRY New Delhi: The Department of Heavy Industry (DHI) has proposed the establishment of a Rs 1,000-crore Auto Component Development Fund (ACDF) to finance modernisation and tackle the slow-down hit auto component sector. SONA KOYO SAYS IT HAS STEERED OUT OF WORST Sindhu Bhattacharya Daily News & Analysis New Delhi: Sona Koyo Steering Systems (SKSSL) believes that the worst is over, at least for the company. Having achieved significant cost reduction through building in efficiencies and putting further capacity expansion on hold, India's largest steering systems maker is now looking forward to improved performance in the next few quarters. Managing director Sunjay Kapur acknowledged that the global meltdown coupled with Sona's own ambitious expansion plans had actually turned 2008-09 into "a bad year" for the company. "But we have already been able to build a more efficient business over the last two quarters through various measures and I think the worst is over for us," he said. Kapur pointed towards initiatives such as an across-the-board reduction in salaries by 30%, almost 40% reduction in manufacturing costs, hedging of foreign exchange and the simultaneous appreciation of the yen. In the last fiscal, the company had invested Rs 300 crore in capex, and large portion of this money had been raised as debt. According to Chirag Shah of Emkay Research, the company's debt:equity ratio has already improved to 1.4 due to lower capacity expansion requirements now. "In the last three years, SKSSL has invested around Rs 300 crore in creating capacity (directly as well as through subsidiaries) with a focus on export markets. As a result, currently SKSSL is operating at around 60% capacity. Further capex plans have been put on hold and the company expects a capex and investments of not more than Rs 20 crore," he said. While Shah pointed out that the company has enhanced focus on the domestic market, which now accounts for 90% of its revenues, against an export focus in recent past, Kapur said export revenues have been around 10% for quite some time. It's direct exports cater to off-highway vehicles such as golf carts etc, besides some components it supplies to the GM small car. Besides, export volume also accrues by virtue of exports by OEMs to which SKSSL supplies. Its domestic focus in evident from its client list: Maruti Suzuki India accounts for more than half of its sales, followed by Hyundai Motor India at 22% and the remaining distributed between Mahindra & Mahindra and Tata Motors. Kapur said the company is trying to further broadbase customer list and has already begun supplies to Sonalika tractors. He also pointed out that SKSSL has also started to reduce its import dependence - which has been up to 30% for specific components such as the electronic power steering - to better manage overall costs. Emkay's Shah said the that company currently has debt of Rs 240 crore in the form of term loans, for which the effective interest rate if around 11.5% linked to the prime lending rate. He also indicated that the company is eyeing "high single digit" sales growth in FY10, largely driven by local business. Net profit is expected to be at Rs 4-5 crore. But he threw in some caution too. Concerns include probable losses by subsidiary companies Jtek Sona Automotive India and Sona Fuji Kiko Automotive in initial operations, forex fluctuations, high interest and depreciation expenses. http://www.dnaindia.com/money/report_sona-koyo-says-it-has-steered-out-of-worst_1269894 MOTHERSON SUMI TO BUY GERMAN PARTNERS STAKE IN JV PTI See this story in: mint Mumbai: Auto component maker Motherson Sumi Systems on Tuesday said it will acquire the stake of its partner Wilhelm Pudenz and Wickmann Werke in the joint venture firm Motherson Pudenz Wickmann Ltd. The board has approved the purchase of shareholding held by the Germany-based Wilhelm Pudenz and Wickmann Werke in Motherson Pundenz Wickmann, the auto parts maker said in a filing to the Bombay Stock Exchange. Motherson Pudenz Wickmann (MPWL) is a JV between Germanys Wickmann Werke GmbH and Motherson Sumi Systems. After the deal, MPWL would become the wholly-owned subsidiary of Motherson Sumi Systems, it added. Shares of Motherson Sumi Systems were trading at Rs77.50 on BSE, up 2.92% over the previous close. http://www.livemint.com/2009/06/30124717/Motherson-Sumi-to-buy-German-p.html | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LUBRICANTS & ALTERNATIVE FUELS Go To Top The Times of India New Delhi: A decision on whether to raise motor fuel prices in view of rising international crude prices can be expected after the Budget session. Oil ministry bureaucrats and oil company executives favour raising prices by up to Rs 2 a litre if the Budget does not give any duty relief. The political leadership, however, favours treading cautiously in view of the impending Maharashtra polls in September-October. Copyright 2008, Bennett, Coleman & Co. Ltd. All Rights Reserved" OIL JUMPS ABOVE USD 73 ON DOLLAR FALL, NIGERIA ATTACK AP See this story in: Hindustan Times Benchmark crude for August delivery was up USD 1.05 to USD 72.54 a barrel by late afternoon Singapore time in electronic trading on the New York Mercantile Exchange after trading as high as USD 73.38. On Monday, it gained USD 2.33 to settle at USD 71.49. Oil has surged from below USD 35 in March in part on investor concern that massive US fiscal stimulus spending will eventually spark high inflation. Investors often buy commodities such as crude as a hedge against a weakening dollar and inflation. The euro gained to USD 1.4108 on Tuesday from USD 1.4078 on Monday. Prices were also bolstered by another round of attacks on Monday by Nigerian militants, who this time partly damaged and shut down a Royal Dutch Shell offshore oil platform. Nigeria is Africas largest oil producer. Crude trading volume was about three times more than normal in Asia, said Clarence Chu, a trader at market maker Hudson Capital Energy in Singapore. China boosted state-set gasoline and diesel prices to reflect rising global crude costs, days after indicating plans to increase its strategic crude oil reserves by 60 per cent over the next five years. http://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=BusinessSectionPage&id=a43fbc84-564b-4b9e-a92a-c82b1f5e1912&Headline=Oil+jumps+above+USD+73+on+dollar+fall%2c+Nigeria+attack | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INTERNATIONAL NEWS Go To Top Reuters See this story in: The Economic Times New York: General Motors is heading to bankruptcy court on Tuesday to seek approval to sell its assets to a New GM in a plan to reinvigorate the automaker under US government ownership. GM is seeking approval for the sale from US bankruptcy Judge Robert Gerber just 30 days after filing for Chapter 11. GM CUTS TIES WITH TOYOTA IN US JOINT VENTURE Reuters mint Detroit: General Motors Corp cut operational ties on Monday to a northern California auto plant it had operated in a joint-venture with Toyota Motor Corp for a quarter of a century. The move deepens uncertainty over the future of the plant that employs over 5,000 workers and was once seen as a ground-breaking experiment in bringing production efficiencies pioneered in Japan to a US workforce. GM, which has been operating in a US government-sponsored bankruptcy since the start of the month, said it was unable to reach an agreement with Toyota on a new production plan for the Fremont, California plant. After extensive analysis, GM and Toyota could not reach an agreement on a future product plan that made sense for all parties, GM said in a statement. GM and Toyota have been 50-50 partners in the joint-venture plant commonly known by its acronym NUMMI for the New United Motor Manufacturing Inc, since 1984. The Pontiac Vibe the only GM vehicle built at the plant will go out of production in August under a previously announced plan by GM. Toyota uses the plant to build the Corolla sedan and the Tacoma compact pickup truck. Toyota, which surpassed GM as the worlds top automaker in 2008, had said it wanted to keep the joint venture and expressed disappointment at GMs decision, and said it would consider whether to continue operating the plant on its own. While we respect this decision by GM, the economic and business environment surrounding Toyota is also extremely severe, and so this decision by GM makes the situation even more difficult for Toyota, Toyota said in a statement. We will consider alternatives by taking into account various factors, including the current distressed market conditions, our overall North American manufacturing capacity, and the viability of the facility as a stand-alone operation without GM production, the Japanese automaker said. Underused Japans Kyodo News quoted a senior Toyota executive as saying, however, that Toyota would not shut the plant. We have relations with the regional community so there will be no closure, the unnamed executive said, according to Kyodo. Analysts also said they expected NUMMI to stay given the political risk of a closure for Toyota. The United Auto Workers union represents hourly workers at the NUMMI plant, the only one of Toyotas 14 manufacturing facilities in North America with representation from the main US auto union. This will result in further overcapacity for Toyota, but were talking about very limited volumes for the Vibe anyway, said Okasan Securities auto analyst Yasuaki Iwamoto. This plant mainly builds small vehicles, so its not one that needs to go away. Besides, it might not be a bad thing for Toyota to have one UAW-represented plant, he added. During the first six months of this year, Toyota built 48,872 Corollas and 10,838 Tacomas, while the Vibe accounted for less than a quarter of the plants production, according to data from trade publication Automotive News. That would mean the plant is working at about 40% of its total capacity of around 400,000 vehicles a year. Toyotas shares held up despite the report, trading 2.5% higher at 3,660 in afternoon trade. The benchmark Nikkei average was up 1.8%. The door is open A GM spokeswoman said the automaker was open to future partnerships with Toyota, but declined to comment on what those might include. The Vibe is based on the Toyota Matrix. I can tell you that the door is open to future opportunities with Toyota, said GM spokeswoman Elaine Redd. A Toyota official in Tokyo denied a report that it was considering producing the Prius hybrid at NUMMI. GM and Toyota set up the joint venture 25 years ago when both sides had a clear stake in its success. The US automaker was hoping to learn from Toyotas lean manufacturing techniques, which minimizes waste and inventory to keep costs down. Toyota, meanwhile, needed a local production base at a time when Japans export boom was under scrutiny. Then chairman Eiji Toyoda said Toyota hoped to make the plant a model of economic cooperation between Japan and the United States. GM contributed the Fremont plant, which had been closed in 1982, to the joint venture. Toyota provided $100 million to retool the facility. http://www.livemint.com/2009/06/30095213/GM-cuts-ties-with-Toyota-in-US.html PORSCHE DENIED CREDIT DEMAND, QATAR EYES STAKE AP See this story in: The Times of India Stuttgart, Germany: Porsche said on Tuesday that a state-owned German development bank has rejected its application for euro1.75 billion ($2.46 billion) in credit, but that a Qatar investment fund has offered to buy a stake in the sports car maker. MAGNA-OPEL DEAL IN DOUBT See this story in: The Financial Express Brussels/Frankfurt: Efforts to save two leading European carmakers took a twist on Tuesday that could change the ownership of both crisis-hit General Motors Corps Opel and German sportscar maker Porsche. As GM readied for bankruptcy, the Financial Times reported Belgium-based holding company RHJ International, a former bidder for Opel, was back in the running and close to a deal that would strand Canadian-Austrian auto parts group Magna International. Elsewhere, Qatar made an offer to the Porsche and Piech families that control the Porsche SE automotive holding that could help cut its debt mountain. Porsche and Volkswagen have been in talks to create an integrated automotive group after Porsches 9 billion euro ($12.6 billion) debt burden forced it to drop plans for a full takeover of VW. But progress toward creating a combined company stalled after Porsche chief executive Wendelin Wiedeking sought investment from Qatars sovereign wealth fund. The FT reported GM was close to a deal with RHJ to sell a stake in Opel, and a memorandum of understanding could be signed within days. Talks on a stake in Opel between its parent, GM, and Magnagoing on since Magna clinched an agreement just before GMs bankruptcy filing in May, pipping Fiat to the post at the timehave hit snags, the paper said. RHJ was named as a potential Opel buyer in media reports but never confirmed or denied it had made an initial bid let alone a second, improved one. But according to the Financial Times, RHJ has improved an earlier bid and is being taken very seriously by GM and a memorandum of understanding could be signed in days. http://www.financialexpress.com/news/magnaopel-deal-in-doubt/483259/ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ECONOMY & FINANCE Go To Top The Hindu Business Line Mumbai: The countrys foreign exchange reserves fell by $57.738 billion in 2008-09, as against an increase of $110.544 billion in 2007-08. Of the total decrease in foreign exchange reserves in 2008-09, around 65.2 per cent of the decline was on account of the revaluation effect and the remaining on account of a change in foreign exchange reserves on BoP basis, according to the Sources of variation in foreign exchange reserves released by the Reserve Bank of Ind ia. Foreign currency assets expressed in US dollar terms include the effect of appreciation or depreciation of non-US currencies. The valuation loss of $37.658 billion was on account of the depreciation of major currencies against the US dollar. In 2007-08, there was a valuation gain of $18.380 billion, the report said. Current account deficit, outflows under portfolio investment, banking capital and short-term trade credit were the other reasons that led to a decline in foreign exchange reserves in 2008-09. http://www.thehindubusinessline.com/2009/07/01/stories/2009070151460600.htm SENSEX TUMBLES ON ACROSS-THE-BOARD SELL-OFF PTI See this story in: The Hindu Business Line Mumbai: The Bombay Stock Exchange 30-share bellwether on Tuesday plunged by 292 points on across-the-board selling, sparked by slowdown in infrastructure growth as well as fears of a liquidity crunch in the market. Analysts said the plans of fund raising by corporates through institutional placement induced fears that such share sales will suck liquidity out of the market. Touching the intra-day high of 14,907.48 at the outset, the BSE barometer gradually moved downwards and settled the day at 14,493.84, a net fall of 291.90 points or 12.97 per cent from its previous close. Many companies have announced plans to raise funds by way of share sales to institutional investors, taking advantage of a strong surge in stocks prices after the general elections. Bonanza Portfolio Assistant Vice-President, Mr Avinash Gupta said: The market got unnerved and widespread selling was evident. It is worried that many QIPs may not sail through. The selling was fairly widespread. The number of shares declining was more than four times that of the advancing shares. India's infrastructure sector grew by 2.8 per cent in May, slower than the revised 5.0 per cent growth in April. The growth rate was 3.1 per cent in the same month last year. Investors heavily sold shares of realty companies due to the sector's slower growth. As a result, the BSE realty index tumbled 256.88 points or 7.42 per cent. http://www.thehindubusinessline.com/blnus/05301901.htm Last Financial closing
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Tuesday, June 30, 2009
Indian Auto Industry Update July 01, 2009
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