| INDIAN AUTOMOBILE INDUSTRY | |
| INDUSTRY Maharashtra vehicle tax hike irks carmakers, dealers INTERVIEWS/FEATURES Hyundai looking at setting up diesel engine plant Bankrupt GM pins high hopes on India for turnaround Luxury cars at throwaway prices! COMMERCIAL VEHICLES Light commercial vehicles cushion falling CV market CONSTRUCTION & AGRI MACHINERY Cal-on Motors to launch 2 more eBikes COMPONENTS | ALLIED INDUSTRIES FINANCE & INSURANCE M&M Financial Services Fixed Deposit Interesting offer ICICI expects growth in car, corporate and home loans LUBRICANTS & ALTERNATIVE FUELS INTERNATIONAL NEWS Long road for Chrysler, smallest of US Big Three Fiat says still interested in Opel buyout Toyota to cut $1 bn in costs for small cars ECONOMY & FINANCE Industry on road to recovery; growth nearing last years high
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| INDUSTRY Go To Top PTI See this story in: The Hindu Business Line (Web Edition), The Pioneer (Web & Print Edition) (June 08) New Delhi: The Indian auto industry is working with the government on a project to mix hydrogen and CNG for a cleaner and more efficient fuel option for vehicles on the roads. The move is a part of industry efforts for introduction of eco-friendly vehicles and carrying out a slew of research activities to launch alternative fuel options on roads, Society of Indian Automobile Manufacturers (SIAM) Director General Mr Dilip Chenoy said. Led by SIAM, the country's major auto makers, including Tata Motors, Mahindra & Mahindra and Bajaj, are involved in the projects that are expected to make environment cleaner and increase energy consumption efficiency in the coming years. We are addressing the availability of energy for mobility covering a range of public and private vehicles with view for short, medium and long term, Mr Chenoy said. SIAM is working closely with the Ministry of New and Renewable Energy on the possibility of using hydrogen and CNG mixture as a fuel option. Public sector enterprise IOC and five auto makers - Tata Motors, Mahindra & Mahindra, Bajaj, Ashok Leyland and VE Commercial Vehicles - have also joined the project. http://www.thehindubusinessline.com/blnus/14071721.htm http://www.dailypioneer.com/181413/Govt-auto-industry-working-on-cleaner-fuel-project.html MAHARASHTRA VEHICLE TAX HIKE IRKS CARMAKERS, DEALERS Manu P. Toms The Hindu Business Line (Web & Print Edition) (June 08) Mumbai: The Maharashtra Governments move to hike motor vehicle tax has caught premium carmakers and dealers off guard. Quite unlike the past, when it was 7 per cent for all vehicles, it has now been revised as a three-tier tax structure in the recent State Budget. The 7 per cent will now be applicable to vehicles costing under Rs 10 lakh, going up to 8 per cent for those between Rs 10-20 lakh and 9 per cent for vehicles priced at over Rs 20 lakh. This takes away a substantial part of the benefits that came with the Centres stimulus package. We were just beginning to see the momentum set by the excise duty cut and are very disappointed by this move, said Mr Suhas Kadlaskar, Director (Corporate Affairs), Mercedes-Benz India. Making it dearer Maharashtra, largely led by Mumbai and Pune, accounts for 30 per cent of total sales of Mercedes cars. Prices, on an average, range from Rs 26 lakh to Rs 70 lakh, which means that they will now be dearer by Rs 52,000 to Rs 1.40 lakh thanks to the hike in motor vehicle tax. This is not a small amount and will impact our sales, added Mr Kadlaskar. Other luxury carmakers such as Audi and BMW also will see prices of their models increase. http://www.thehindubusinessline.com/2009/06/08/stories/2009060851081500.htm | |
| INTERVIEWS/FEATURES Go To Top | |
| CARS, SUVs, MUVs Go To Top New Delhi: Amid demand for servicing over 10 lakh cars in a month, Maruti Suzuki has said it has taken various initiatives, focusing on three critical aspects -- skilled manpower, system improvement and innovative practices -- to upgrade the area. HYUNDAI LOOKING AT SETTING UP DIESEL ENGINE PLANT K. Giriprakash The Hindu Business Line (Web & Print Edition) (June 08) Sriperumbudur: Hyundai Motor India is studying the feasibility of setting up a diesel engine plant close to its existing car manufacturing plant near Chennai. The second largest car maker in India also said that if the Government increases excise duty on cars during its Budget announcement in July, it could lead to an immediate drop in car sales in the country. The Hyundai Motor India Managing Director, Mr H.S. Lheem, said car sales were showing signs of recovery as May results had shown, but any increase in excise duty could neutralise the recent gains. Mr Lheem said he expects the Indian operations to post a 15 per cent increase in revenues this calendar year from $4 billion in 2008. We have initiated a feasibility study for setting up a diesel engine plant, Mr Lheem said. He did not give further details about the study. Hyundai Motor already has a petrol engine plant which makes Kappa engine at its Sriperumbudur plant near Chennai. The Kappa engine, which is fitted into the i10 car of Hyundai, was developed at a cost of over $400 million. Mr Lheem said the company expects to sell about 5.8 lakh cars during this calendar year, which is an increase of slightly over 18 per cent over the previous year. Exports Out of 5.8 lakh cars, about 3 lakh cars will be exported including to some European countries. Hyundais market share in India during 2008 was 20.4 per cent which it expects to maintain during the current year. Mr Lheem said Hyundai Motor has two plants at its Sriperumbudur site with a combined total capacity of 6 lakh cars but with three shifts, it can produce up to 6.3 lakh cars. We have been receiving more export orders of late which means our exports will outpace domestic sales at present, he said. Hyundai is the largest exporter of cars from India and it mostly exports i10 and i20 models. Since January, Hyundai has increased the shifts to two, consisting of nine hours each and from July, it will increase the number of shifts to three consisting of eight hours each at its first plant. Mr Lheem said the companys R&D centre in Hyderabad was performing well and the company plans to increase the headcount there to 800 from 200. Hyundai Motor India also plans to launch a new mini-car sometime in 2011 in the entry-level segment, though Mr Lheem ruled out the possibility of launching i30 model in the country for now. http://www.thehindubusinessline.com/2009/06/08/stories/2009060851510100.htm BANKRUPT GM PINS HIGH HOPES ON INDIA FOR TURNAROUND Agencies See this story in: The Economic Times (Web Edition) (June 08) New Delhi: Even as General Motors struggles to emerge from bankruptcy, the auto giant is rolling out new cars in India whose vast market it sees as key to fuelling future growth. http://economictimes.indiatimes.com/News/News-By-Industry/Auto/Automobiles/ LUXURY CARS AT THROWAWAY PRICES! John Sarkar (June 07)
, think again. At present, this broker who has more than 16 years of experience in this business, has a 2006 Bentley Flying Spur that has done only 10,000 km for Rs 1.2 cr, a 2009 BMW 730LD which has 3000 km on its odo for Rs 60 lakh, a 2006 Porsche Carrera which has done 15,000 km for Rs 65 lakh and a one year old Ferrari 430 for Rs 2 cr. According to these agents, at present, Mercs seem to be the flavour of the season. "Pre-owned car buyers look for a good discount," explained another Delhi-based broker on the condition of anonymity. "In December last year, Mercedes-Benz was offering a discount of around Rs 12 lakh on the E-Class. Around 1200 cars were sold in this region alone. So, when these cars come into the pre-owned market they do so at a much lower offer price." Copyright 2008, Bennett, Coleman & Co. Ltd. All Rights Reserved" Hindustan Times (Web & Print Edition) (June 08) Mumbai: India always forced global automakers to change their strategies to fit into its domestic market. Now, Skoda Auto is planning to upgrade the Octavia specifically for India. There are no plans currently to phase out the Octavia as it is still a performer in the 8th year of its life cycle, said the company in response to an email from Hindustan Times. Skoda Auto has said the group is considering the possibility of rolling out a new Octavia on a new platform from the Chakan plant in Pune sometime in the near future. Skoda sold more than 8,000 Octavia and Laura cars in 2008-09, second only to Hondas bestselling Civic in numbers in the A4 segment. However, Skoda is not prepared to share specifications, or how the new car would look like. With the India-made Octavia and the yet to be named small car, Skoda will have one model in each price segment. The development is contributing to an emerging trend among automakers that are retaining a different lineup of models for the Indian market. The Indian Express (Web & Print Edition) (June 07) For A murkily defined area, it is getting awfully crowded in the premium compact car segment. Hyundai has its i20, Maruti has launched the Ritz (or Splash, if you live in Europe), Honda will bring its Jazz in a few days, followed by Fiats Grande Punto and Volkswagen Polo, with Chevrolet also planning to get on board before the year end. Many would like to believe that the Jazz is the benchmark by which these technology-loaded sedans in little cars shells are judged, but just when you thought there could finally be a little clarity, Maruti has added a clever new twist with its seventh hatchback. Premium hatchbacks, as they have chosen to call themselves, justify their exorbitant price on a small car by suggesting that since theyve packed it full of sedan like gadgets and technology and all those airbags, the final product is aimed at the status seeker and the traditional sedan buyer. The message this has sent out to most traditional or prospective hatchback buyers is that this segment is out of their league. But Maruti has refused to buy this and therefore we have the Ritz. With the engine and technology of the i20, far from alienating the price sensitive buyer, the car is destined to introduce sedan-like technology to a whole new section of consumers given that it is priced like the Swift and not the i20. Therein Maruti have secured for itself a winning strategy that its Korean and Japanese competitors will have to compete with if they want to enjoy similar sales volumes (which they always do). But it becomes quickly apparent to the discerning eye where they have scrimped to secure their splendidly low price point and here also begin the issues that lower the cars appeal. The gear box has been fused with the dashboard that has a neatly designed, if fairly basic, central console with a built-in audio system which is both user friendly and produces excellent sound. In the traditional premium hatchback style, the steering wheel also comes equipped with an array of buttons to control the music system. However, unlike in the Jazz and i20, where these are spread on either side of the steering wheel, buttons here are all on the left side, making it necessary to look down until youve remembered the sequence. Moreover, the buttons are a bit tough and require some effort to operate. But what is shortsighted is that for a car built on the large platform of the Swift and given tall dimensions, the overall interior space has been extremely poorly used. The dashboard is gigantic to say the least and very poorly designed. It is impossible to place anything on top without it rolling off. You can only store things in a space carved just above the glove compartment which makes that unit far too small and places it so low that it never fails to bang into the knees of the person sitting in the front passenger seat, cannot store much and things that are stored are difficult to access. The dashboards only extravagance is the large white speedometer taken from the A-Star which could prove mildly amusing for some people for a while, but the novelty wears of as soon as you realise that this is no 10-second car and you are not on the Monte Carlo circuit. Equally challenging is the placement of the cup holdersone each inside the narrow magazine racks built into the front doors. It is not recommended to attempt to handle hot beverages while driving as even accessing small water bottles proved tough. There is no real storage space at the back. Long journeys involving children could be a problem especially since the tastefully upholstered seating, though good at the back with plenty of leg room, can get uncomfortable. But what is most difficult to love about the Ritz is the shape of its rear. Unless it somehow adds to the aero dynamism of the car, the acute angles that give the car its convex rear simply cannot be justified. This has also eaten into boot space which can at best fit a few small duffel bags. There has also been an attempt to angle the rear lights in a fashion the designers believe resembles a splash of water. It doesnt. While many may say its looks make the car stand out, it is highly debatable whether this is a good thing. The brand-new 1.2-litre K-series petrol engine is perhaps the best to emerge from Maruti till date and could even be seen to rival those made by the always excellent Hyundai and Honda with its reported mileage of 17.7km/l (likely to be lower for city driving). The Ritz also comes with the same 1.3 Multi-jet diesel engine that powers the Swift and both are compliant with BS IV emission norms, a first for an Indian passenger car. Though automatic transmission is offered in the European version, Maruti doesnt feel there is a large enough market here to justify this feature. So, Indian roads will only get a standard five-speed manual transmission. The light clutch is effortless to use, making gear shifts smooth. However, given that the gear has been shifted up and fused with the central console, this might take some getting used to. The car does take its time to get going and it immediately becomes clear that this is an engine that needs to be revved to life. The engine is pretty silent, if sluggish, between 0-60kmph until you hit a comfort zone once youre in the third gear. Acceleration from 0-100kmph is beautiful and touching 120kmph just needs a little more effort. However, even when travelling down a highway as excellent as the Noida-Greater Noida Expressway, the drive never gets near that airborne feeling. The engine quite audibly buzzes at higher speeds and the car keeps you aware of the exact nature and quality of the terrain youre driving on. At best you can do a maximum speed of 140kmph, but it takes work to get there. Manoeuvrability and the cars responses at high speeds, however, are most impressive, as is its breaking. Even while travelling beyond 100kmph, a quick press of the brake will immediately kill speed and the driver is not likely to lose control over the vehicle. Inside the city, the Ritz easily threads through traffic and its air conditioner never fails even under the punishing summer sun. Though there is a discernible body roll on hard cornering, it remains safe. The Ritz has all the makings of an excellent family car, though not ideal for long distances. Despite its shortcomings, the car, priced between Rs 3,90,000 and Rs 4,80,000 over three petrol and two diesel variants, is more than likely to do well on Indian roads and the domestic market. One does hope, however, that this promising young car, with its clever new vision and consumer understanding, doesnt develop a complex over its distorted body shape. http://www.indianexpress.com/news/a-clever-little-car/472523/0 The Hindu, Metro Plus The X6 possesses a fantastic blend of desirable SUV qualities high ground clearance, presence and a commanding driving position with the performance and handling of a sports coupe. It is this blend that forms the massive appeal of this sporty SUV. When put to the test, the BMW X6 xDrive 50i (yes, thats the ludicrous full model designation) can outpace a Porsche Boxster. To us, BMWs Sports Activity Coup is like the offspring of an SUV that mated with a sports car. This kind of vehicle will at best be a niche-within-a-niche but that doesnt stop it from being hugely desirable. Theres a lot more substance to the X6 than its unusual looks would suggest. It shares its platform with the X5, it is a more driver-focused version than the 5, and looks much sportier than a full-fledged SUV. In actuality, the X6, which is imported into India directly from BMWs Spartanburg plant in the U.S., shares a lot of its interiors, several of its dimensions and a few mechanical bits with the X5. The wheelbase at 2933mm is the same as the X5s as is the front track. The rear track, however, is far wider than the X5s partly because of the new rear differential and partly because of the humongous 315/35 R20 rear tyres. The X6 is just 55mm lower than the X5 at its highest point, but the combination of the sloping roofline and shallower side glazing makes the X6 look incredibly baronial. The steeply raked window line further accentuates the cars deep body sides and dramatically swollen wheel arches. On the visual front, the X6s head-turning design comes out ahead of the Porsche Cayenne. Under the hood, the X6 houses the same direct-injection, 4.4-litre twin-turbo petrol V8 that powers the 750Li, and this SUV that boasts 407bhp with a huge 61kgm of torque from 1750rpm is more than grunt-worthy. The car features BMWs excellent six-speed auto, which has the ability to lock-up and behave more like a manual transmission, eliminating the characteristic slushy feel of a conventional auto-box. Sending power to all four wheels via BMWs xDrive all-wheel-drive system, the X6 also debuts BMWs new rear differential the Dynamic Performance Control. At the heart of the X6s appeal is its engine. With a diesel-like bottom-end torque that feels more locomotive than automobile, the engine is never short on grunt. The engine musters tremendous thrust thats instantaneously addictive. 0-100kph is achieved in a hardly-believable six seconds flat and it will cross 200kph in under 25 seconds. The X6 accelerates to its 250kph (limited) top speed at a phenomenal pace. The gearbox is quick and very obedient, downshifting almost every time we asked it to. While the 4.4-litre V8 engine is restrained in the 750Li, the sporty X6 can afford to be more vocal. Though the SUV idles with a distant hint of an American V8, sounds like a chained beast at part-throttle, and hones in on a refined howl as it closes in on 6700rpm, the sound-effects from this car dont come close to making it a public-nuisance. From the inside, the engines soundtrack is completely endurable as the cabin is well insulated from unwanted noise, and considering the continental width of those tyres, theres surprisingly little wind and tyre noise. The X6s agility stands apart from other 4WD cars weighing as much as 2,190kg. The SUVs optional active steering (it increases assistance and speeds up the rack at low speeds, while reducing assistance and applied lock at higher speeds) is accurate and provides fantastic feel. In Sport mode, theres almost no body roll and the X6 remains stable through corners thanks to the adaptive drive system that swivels the anti-roll bars and adjusts damper rates. Once thrown through corners, the massive 315 rear tyres claw into the tarmac, and the xDrive and the new differential sort out any mid-corner traction issues that come your way. As for the ride experience, you expect the 20-inch wheels and the run-flat tyres to test your spines limits over anything less-than-perfect tarmac. But the ride is firm, thumps over sharp bumps, and doesnt get as uncomfortable as you would expect. For a car its size, you would expect a lot of space inside but youll be disappointed. The X6 is a pure four-seater and rear accommodation given the slope of the roofline is not impressive. But with plenty of shoulder room on offer, and the contoured cabin roof that allow as much headroom as possible, we feel that BMW has done what it can. Legroom is perfectly acceptable, but anyone of above-average height will probably feel cramped. Up front, space is fantastic though. Theres enough headroom, legroom and width to make finding a comfortable position on the snug seats easy. The cabin is a fine place to be in, thanks to its high-quality construction and well thought-out design and the entire dashboard, front centre console and door trims that are essentially the same as the X5. On looking at the rear windshield, if you think the rearward would be pathetic, youve hit the nail right on the head. Reversing and parking can be a nightmare in the confines of the city. Though the car has parking sensors, a reverse camera would do more than good in this SUV. As expected, for an SUV with a high kerb weight and a huge engine, the X6 is immune to fuel efficiency (despite the 85-litre fuel tank). For the record, we got 3.3kpl in the city and 5.1kpl on the highway. With the X6, the amount of fun you can have driving this car is unbelievable, but only if you have the pockets to pay the price. http://www.hindu.com/mp/2009/06/08/stories/2009060850100300.htm | |
| COMMERCIAL VEHICLES Go To Top Swaraj Baggonkar Business Standard (Web & Print Edition) (June 08) Mumbai: The central governments second stimulus package aimed at reviving demand for heavy commercial vehicles (CVs) has failed to produce the desired results. The package was announced more than four months earlier. Non-banking finance companies (NBFCs) were promised lines of credit, especially for the CV sector, through an arrangement with leading state-owned banks. They say they have struggled to gain from the package. A senior executive of the Society of Indian Automobile Manufacturers (Siam), the apex representative body of the auto sector, stated that although the announcement of the stimulus package for the CV segment was made in January, the government has failed to implement the plan. The situation relating to finance of commercial vehicles hasnt changed much. About 90 per cent of NBFCs in the country are small or medium-sized. Many such NBFCs are operating without adequate liquidity even, said the Siam executive. To address liquidity concerns, which had badly impacted sales of CVs by the third quarter of the last financial year, the Congress-led UPA government had announced some measures in January, including an accelerated depreciation scheme and finance packages for NBFCs. Although pent-up demand in the third quarter of the last financial year has resulted in improvement in sales since this January (December sales had fallen to 4,800 units), most CV manufacturers havent seen any significant spurt in demand. Ashok Leylands Chief Financial Officer K Sridharan said, Finance has only improved for larger NBFCs. However, most of the smaller NBFCs have failed to gain from the stimulus package. The smaller companies are finding it very difficult to source funds from banks. In India, NBFCs finance half the funding for CVs. Most banks are avoiding expanding their CV portfolio, due to rising cases of defaults. The rate of interest on CV funding is generally higher than that on passenger car finance. Shriram Transport Finance, Indias biggest non-banking lender to the CV industry, has complained of lack of demand for CVs, which has led to a static rate of disbursal of vehicle loans. R Sridhar, its managing director, said, Funding has resumed from banks and we have enough liquidity at the moment. But now the problem is demand. Demand for CVs is still not going up, despite various fiscal measures taken by the government. Heavily impacted by the slump in the heavy trucks segment, Tata Motors, Indias largest CV manufacturer, also believes the key for revival of demand is a check on interest rates. Ravi Pisharody, president (commercial vehicles), Tata Motors, said, The quantum of liquidity is not an issue with NBFCs; what is one is the rate at which it is made available. Interest rates are still in the high double-digits. http://www.business-standard.com/india/news/jan-stimulus-fails-to-revcv-sales/360379/ LIGHT COMMERCIAL VEHICLES CUSHION FALLING CV MARKET Shweta Bhanot The Financial Express (Web & Print Edition) (June 07) Mumbai: At a time when the commercial vehicle (CV) market is reeling under the slowdown, its the sub-3.5 tonne light commercial vehicle (LCVs) segment that is playing the messiah, cushioning the former from falling further. This is indicative from the performance of the LCV segment which has seen a fall of just 7%, compared to medium and heavy commercial vehicle (M&HCV) segment which saw a dip of 33% during April to March 2009. Overall, the CV market was down by 22% in the period. The industry is expected to growth at a rate of 6%-8% in FY10 over FY09. Stating that the LCV segment played the barrier in the further fall of the CV market, Sanjay Vasudevan, industry analyst Frost & Sullivan said, The share of LCVs in the total sales of CVs is expected to grow steadily due to changes in the freight movement system, such as hub-and-spoke model and improvement in road infrastructure. Currently, the share for the FY08 stands at around 52.2%. This is also due to the increase in the offerings in the segment by different players. Domestic companies, with a significant three wheeled goods carrier portfolio, are anticipated to rush into the sub-3.5 tonne four-wheeled commercial vehicles, to keep abreast with the market trend for instance Piaggio Ape Truk, said Vasudevan. Growth will be largely driven by the sub-one tonne category for last mile transport requirements due to increase in the retail and intra-city goods transportation needs. Typically, LCV segment comprises of products up to 7.5 tonne. However, it was the sub-3.5 tonne that saw maximum growth. Companies like Mahindra & Mahindra (M&M), Ashok Leyland with Nissan and Bajaj Auto have also shown interest in the sub-3.5 tonne segment. Tata Motors, who revolutionised the LCV segment with its sub-one tonne Ace, is working on more variants from the platform. Also, the CV market is expected to be polarised with the medium commercial vehicle (MCVs) segment loosing its charm with dwindling volumes over the years. We are witnessing a change in the profile of CV makers. It is LCV and HCV now, said Arindam Chakrabarti, practice head-automotive and engineering, Tata Strategic Management Group. The share of MCVs in the total volumes has come down from 38% in 2004-05 to 27.4% in 2008-09. The MCV segment comprises products in the range of 7.5 to 16.2 tonne. Mudit Gupta, project manager, industries - automotive, logistics and utilities, Datamonitor, said, The LCV segment is expected to grow at a compounded average growth rate of 20% in the next three years and see maximum action, as far as launches are concerned. He also added that the segment was growing at 41% pre-October 2008, when the economic slowdown struck. http://www.financialexpress.com/news/light-commercial-vehicles-cushion-falling-cv-market/472154/0 | |
| CONSTRUCTION & AGRI MACHINERY Go To Top | |
| 2/3 WHEELERS Go To Top S. Hamsini Amritha The Hindu Business Line (June 07)
Bajaj Auto is still at a discount to the BSE Auto basket (21 times PE) though it is almost on a par with the market leader, Hero Honda (trading at 17.8 times PE). After a poor show until the December quarter of 2008, Bajaj Auto has seen an improvement in sales numbers, driven by easier credit availability, particularly for the high-end models. The companys earnings over the next few quarters may also benefit from excise duty cuts and lower input costs. However, across segments, be it motorcycles, three-wheelers or scooters, planned launches will hold the key to the company regaining lost market share. In this backdrop, the sharp improvement in the stocks valuation limits the room for upside. Two wheelers Bajaj Auto offers eight models in the two-wheeler space, catering primarily to the executive and premium segments. In 2008, it reduced its focus on economy bikes to concentrate on executive and premium bikes, taking the view that these segments offer better long-term potential. But with the credit squeeze that affected higher value purchases, the strategy shift appears to have backfired as the bulk of growth in the two-wheeler sector over the past year came from sub-125 cc motorcycles, an area of strength for its rival - Hero Honda. With sales volumes declining for the year, Bajaj Autos market share in motorcycles also dropped from 54 per cent in FY-08 to 42 per cent in FY-09. An improvement is evident in the premium bike sales in recent months, with sales recovering by about 40 per cent from their low in December 2008. This has come from the XCD range, mainly the XCD 135 launched in January 2008 apart from the continued interest in its flagship model Pulsar, including the new variants launched in May. On a year-on-year basis, growth still remains muted. When compared to last years numbers, the year-to-date sales are down by 18 per cent, while volumes sold in May 2009 were 8 per cent below its last years numbers. Riding on launches Plans to strengthen the premium segment include the launch of another Pulsar. Pulsar enjoyed a 60 per cent market share in the total bikes sold in the above 150 cc segment until FY-08. Its share-to-sales has now fallen to 56 per cent. Given the intense competition from foreign players in terms of product offerings and pricing, it is crucial for the company to strengthen the Pulsar brand. The same is the case with its three-wheelers segment as well, which accounts for 15 per cent of the total volumes. The success of the launches will be vital to revive the market share that the company ceded to Piaggio and Mahindra & Mahindra last year. Bajaj Auto also plans to launch a scooter that is likely to rival Honda Motors Activa. Kristal (rolled out in 2007) is yet to capture significant share (its current market share even less than one per cent). The ambitious compact car project has its share of uncertainties. With an investment of Rs 1,000 crore, the car is expected to be launched by end-FY-10. However, the company has not yet signed MoU with its partners, Nissan and Renault, which will be providing technology apart from each of them holding 25 per cent stake in the JV. Competition in this segment is also intense, as Nano has already garnered sizeable bookings and Maruti Suzuki is aggressively adding to its line-up. Unfulfilled promises Bajaj Auto has increased its stake by another 25 per cent in KTM Sportmotorcycle, a significant player in high-end bikes. In early 2008, Bajaj Auto promised to roll out the KTMs bikes in India. These plans were deferred to May 2009 due to adverse market conditions. Kawasaki Ninja, another launch planned this year, is yet to materialise. The launch of Ninja and KTMs bikes may be significant for Bajaj Auto to hold up its image in the high-end bikes market. Financial Performance Notwithstanding a 20 per cent drop in sales volumes compared with last year and a 10 per cent decline in standalone net sales in the last quarter of FY-09, Bajaj Auto has managed to end the March quarter with an 8 per cent increase in net profits. A 16 per cent decline in raw material costs, primarily on account of lower prices of steel, aluminium and rubber aided the companys operating profits register a 9.2 per cent growth. But for the forex loss on account of hedge contracts and expenses incurred under a voluntary retirement scheme, the net profits would have seen a 14 per cent increase compared to the previous year. Exports have been the saving grace to Bajaj Autos sales numbers for 2008-09, expanding 25 per cent even as domestic sales shrank 10 per cent. The company has recently commenced operations in its plant in China to cater to exports. This may add to its cost competitiveness. Though the latest quarter of FY-09 ended on a slightly optimistic note, rough patches witnessed in the earlier quarter dented the annual performance. Bajaj Auto has the headroom to benefit from softening raw material costs and exports from the Chinese plant, but its business prospects hinge mainly on how the market accepts its launches. http://www.thehindubusinessline.com/iw/2009/06/07/stories/2009060750631100.htm CAL-ON MOTORS TO LAUNCH 2 MORE EBIKES The Hindu Business Line (June 08) Hyderabad: Cal-on Motors has announced plans to launch two new high speed electric bikes later this month priced at about Rs 35,000 each. These e-bikes will complement the already launched electric scooter, which has sold about 1,000 since its roll out in November 2008. The Chairman and Managing Director of Cal-On Motors, Mr A. Suresh Babu, said Most of the electric bikes launched are designed like the scooter, all of them resembling one another with some changes. We have innovated to develop a moped type bike and another motorcycle form bike. These new variants will help attract new segment buyers, he said. The company has a small manufacturing plant in Cherlapally, employing about 75 people. The company has also acquired land near Vijayawada to set up its second plant, which will take up the production capacity to 50,000 units a year, he said. Bike particulars The new electric bikes will have capacity to cruise at top speed of 60 km and can carry two persons with ease. Typically, one charge of six hours will ensure that the bike manages about 70 km. A battery lasts for about 18 months and costs about Rs 6,000, he said. The running cost works out to about 10 paise/km. We are keen that the State Government extends concessions like that offered by the Delhi and Tamil Nadu Government. This will help us reduce prices further and attract more buyers, Mr Babu said. The company is currently engaged in talks with some corporate entities for bulk sale of these bikes to be used in large campus environments. These include IT companies, and defence establishments, among others. http://www.thehindubusinessline.com/2009/06/08/stories/2009060850981500.htm | |
| COMPONENTS Go To Top Pankaj Doval The Economic Times See similar story in: The Times of India (June 08) New Delhi: Contraction in automobile sales across Europe and the US has put brakes on the growth of exports of auto components from India that have ended near flat in fiscal 2008-09 after witnessing an over 20% CAGR since 2003. Copyright 2009, Bennett, Coleman & Co. Ltd. All Rights Reserved" GERMAN MAJOR ROLLS OUT LOW COST AUTO FILTERS Mahesh Kulkarni Business Standard (June 08) Chennai/ Bangalore: Mann and Hummel Filter Private Limited (MHFPL), a 100 per cent subsidiary of Germanys Euro 1.83 billion (Rs 12,200 crore) Mann+Hummel group, a supplier of automotive and industrial filters, said it has developed low cost and light weight air filteration systems for the Indian automobile original equipment manufacturers (OEMs). The company recently co-developed a new air intake filter system for the new world truck launched by Tata Motors and Maruti Suzuki India Ltd for their new car A-Star. These two products are designed and developed jointly by Mann and Hummel with the in-house R&D teams of Tata Motors and Maruti Suzuki, Hans-Georg Hummel, managing director, MHFPL said. We have used a plastic component to develop an air intake filter system for commercial vehicles and passenger cars, which reduce the weight of the component by 50 per cent and save cost per component by around 25 per cent. It also enhances the mileage of the car, he told Business Standard. According to him, the new air filteration system developed for Tata Motors uses plastic components which is around 10 kg less than the conventional component made of sheet metal and claims to make a cost reduction of about 20-30 per cent. The companys future roadmap includes introduction of technologies in manufacturing automotive and industrial filters using light weight material like plastic. It is also planning to set up a blow moulding unit to make plastic components as per the customers requirements in India, Hummel said. Hummel said the company is currently working with various other automobile OEMs in India to introduce customised solutions. In an effort to deliver customised solutions in lesser time, the company has set up a new R&D centre in Bangalore, at an investment of Rs 10 crore. The centre will independently develop, validate and release products that meet customer specification in the Indian market, he said. The company, which has so far invested close to Euro 10 million (Rs 66.5 crore) in India, is looking to invest another Euro 15 million (about Rs 100 crore) in the next three years to expand its operations. MHFPL, which opened its first production unit in Tumkur, about 70 kms from Bangalore three years ago to manufacture industrial filters in a joint venture with Bosch, is setting up its second unit later this year at Nalagarh in Himachal Pradesh. The plant will have an installed capacity of 10 million filter elements per annum. Manfred Wolf, managing director, Mann+Hummel Group said, the company, which concentrated on supplying air filters to industrial and construction equipment makers in the first three years of its operations, has now entered the automobile air filters segment under the brand Mann Filter. It aims to achieve a turnover of Rs 310 crore by 2014-15 in India from the present Rs 40 crore, a growth of close to 8 times in next five years. http://www.business-standard.com/india/news/german-major-rolls-out-low-cost-auto-filters/360320/ ACMA SEEKS TECH UPGRADATION FUND FOR SMALL FIRMS The Hindu Business Line (June 07)
In its pre-budget meeting with Finance Ministry officials on Friday, ACMA expressed the challenges faced by component companies with dismal sales, on one hand, and cheap imports on the other. Government should create a Rs 1,000-crore Automotive Development Fund to modernise so as to meet the requirements of both domestic and overseas customers. This could be through a system of interest subsidy on loans on purchase of new plant and equipment, said ACMA. The apex body representing domestic component suppliers also said that while Indias customs duties were at par with ASEAN level, there was an anomaly in the domestic support. Indias closest competitor like Thailand offers a 7-8 years tax holiday to attract investments, customs duty exemption on import of capital goods and machinery and raw material imports by suppliers. ACMA has sought similar incentives to ensure investments flow into India rather than being diverted to competing destinations. It would also like to see a correction in the inverted duty structure under which the cost of raw material is higher than importing a finished good. One of its key suggestions in its pre-budget memorandum is also to offer a weighted deduction on income tax for the expenditure incurred in skill development. ACMA said that considering the shortage of skilled man power at the shop floor and the lack of adequate vocational training institutes, the industry should be offered incentives on the initiatives on their part. http://www.thehindubusinessline.com/2009/06/07/stories/2009060751120500.htm | |
| ALLIED INDUSTRY Go To Top K.R. Srivats The Hindu Business Line (June 07)
This follows an application by the Automotive Tyre Manufacturers Association (ATMA), which contended that increased imports of passenger car tyres from China have threatened to cause market disruption to domestic industry. As many as eight domestic producers of passenger car tyres, including Apollo Tyres, Ceat, Goodyear South Asia Tyres, MRF, JK Tyre and Bridgestone India, have supported the application. The Director-General (Safeguards) has, while initiating investigation, noted that prima facie increased imports of passenger car tyres have caused and are threatening to cause market disruption to the domestic producers. It was also noted that imports of passenger car tyres from China have shown an increasing trend http://www.thehindubusinessline.com/2009/06/07/stories/2009060751320300.htm | |
| FINANCE & INSURANCE Go To Top Anuradha Himatsingka The Economic Times (June 08) Kolkata: Magma Fincorp has decided to raise up to Rs 400 crore of fresh resources from the market to meet its long-term working capital requirements. The Magma Fincorp management intends to do so by issuing equity shares to qualified institutional buyers (QIB) and has informed the Bombay Stock Exchange about this. Copyright 2008, Bennett, Coleman & Co. Ltd. All Rights Reserved" M&M FINANCIAL SERVICES FIXED DEPOSIT INTERESTING OFFER M.V.S Santosh Kumar The Hindu Business Line (June 07) Investors with some risk appetite can consider investing in Mahindra and Mahindra Financial Services (MMFSL) three-year, 10 per cent cumulative fixed deposit scheme. A reasonably good credit rating, comfortable capital adequacy, possibility of financials improving on the revival in auto sector and good pedigree are the key arguments for taking the exposure. MMFSL, a subsidiary of Mahindra and Mahindra, is a deposit-taking, asset financing NBFC that provides financing for cars, tractors and commercial vehicles especially for M&M customers. The lending rates offered by MMFSL are higher than any bank-term deposits (rates for three-year maturity range between 7 per cent and 9 per cent). Among NBFCs, Shriram Transport Finance and Dewan Housing Finance offer better rates, but may carry higher risk profiles. CRISIL has rated MMFSLs scheme FAA-, an investment grade rating. Various products Various fixed deposit options and pre-tax interest rate are offered by MMFSL (see table). Senior citizens are given an additional rate of 25 basis points over the prescribed interest rate. For cumulative deposit, interest is paid at the end of maturity. In a non-cumulative deposit, the interest is payable half yearly (though interest is calculated annually). Tax is deducted on interest received depending on the tax bracket the investor falls into. For investors falling in 10 per cent, 20 per cent and 30 per cent tax brackets, the post-tax yield falls to 9.08 per cent, 8.15 per cent and 7.2 per cent respectively on the cumulative three-year deposit (10 per cent rate) on an accrued basis. Given the falling interest rate cycle, the cumulative deposit three-year deposit is recommended. This reduces reinvestment risk as the interest receipts at the end of the first and the second year are re-invested at the same rate (10 per cent). If the investor is looking for steady flow of income, a non-cumulative option can be considered, which offers 9.75 per cent interest for three years paid half-yearly. The two-year, 9.5 per cent cumulative deposit can also be considered for investors not wanting to be locked in for three years. MMFSL finances purchases of utility vehicles (38 per cent of total asset under management), tractors (25 per cent) and cars (24 per cent). The asset under management (AUM) of MMFSL grew by 14 per cent compounded annually during 2006-09. In the same period, the profits grew by 25 per cent. The company enjoys a spread of 4.65 per cent, but one cause for concern is the high proportion of NPAs (gross NPA ratio of 8.7 per cent and net NPA ratio of 2.6 per cent). According to the company, the rural lending portfolio (tractors) dragged the NPAs down. The proportion of written-off accounts stood at 1.8 per cent. While this does increase risks, the secured (asset-backed) nature of lending by the NBFC and signs of revival in the auto sector mitigate this risk to some extent. High levels of capital adequacy (19.5 per cent) and the requirement that 15 per cent of deposits be set aside in Government securities cushion depositors. While investing in an NBFC, the credit risk is certainly higher than in a bank deposit, as the DICGC doesnt insure the deposit, as in the case of banks (bank-term deposits to the extent of Rs 1 lakh are insured). But for MMFSL, deposits make up a small proportion of the total borrowing portfolio (1 per cent) and MMFSLs ability to raise short-term funds is high. http://www.thehindubusinessline.com/iw/2009/06/07/stories/2009060750871300.htm ICICI EXPECTS GROWTH IN CAR, CORPORATE AND HOME LOANS PTI See similar story in: mint, The Telegraph (June 08) Mumbai: Private sector lender ICICI Bank Ltd on Sunday said it will have a strong showing in car, home and corporate loans business in the current fiscal, but its relatively lower exposure to personal and other small-ticket loans could limit the overall balance sheet growth to below 20% in the year. Stating that the last fiscal was bad, when its profit fell by about 10% and it also faced rumours of a run on the bank, ICICI Banks chief executive and managing director Chanda Kochhar said that bad times were behind it. Anticipating a growth rate of 24-25% in focused business areas such as housing, corporate and car loans, Kochhar said that the overall growth in its balance sheet could, however, be below 20% in the current fiscal as the full impact of shift in focus areas would not be visible. Confident about a robust growth cycle ahead for the bank, Kochhar said, We clearly a see change of scenario. The pressures that were on us, specifically during October-November period, I think that period is behind us and we are seeing the confidence of depositors coming back. Deposits are growing, new customers are opening accounts, existing customers are putting back their deposits, she added. Asked by when ICICI Bank would regain the position of largest retail lender from State Bank of India, Kochhar said: I am not here really to run a race. I am here to stay on course that I have charted out in the beginning of the year. But, anyway, we have been a large lender and our book is very big. What we are looking at is how to optimize on the deposit structure and asset structure of our books first, rather than running a race... Im absolutely okay with strategy that we are following, Kochhar added. http://www.livemint.com/2009/06/07214022/ICICI-expects-growth-in-car-c.html?h=A2 http://www.telegraphindia.com/1090608/jsp/business/story_11078718.jsp | |
| LUBRICANTS & ALTERNATIVE FUELS Go To Top Ajay Modi Business Standard (June 08) New Delhi: Indraprastha Gas Ltd (IGL), the sole supplier of compressed natural gas (CNG) and piped natural gas (PNG) in Delhi, plans to invest Rs 1,600 crore to expand its retail outlets and PNG network in and around the metropolis. We have embarked on a plan to expand our retail outlets to 240 before the commencement of the Commonwealth Games in October 2010. We have been allotted land for 18 outlets and more are in the process of being allotted. The expansion would require an investment of around Rs 800 crore, said Rajesh Vedvyas, the managing director. Another Rs 800 cr would go towards expansion of the PNG network in Delhi and the national capital regions (NCR) of Noida and Greater Noida. The PNG network currently covers 140,000 households in Delhi and the NCR. The company plans to add 50,000 new PNG connections in the current financial year. IGL has already signed up for a gas requirement of 0.2 million metric standard cubic metres a day (mmscmd) with GAIL and BPCL. The company is also scheduled to get around 0.3 mmscmd of gas from Reliance Industries K-G basin. We expect to more than double the PNG connections to 300,000 by 2012, with an investment of Rs 800 cr. Currently, PNG connections account for around 8 per cent of revenues. This is expected to go up, he added. There has been a significant increase in CNG demand due to all-round conversion of vehicles and increased acceptability of PNG as a domestic fuel. http://www.business-standard.com/india/news/igl-to-invest-rs-1600-crore-in-expansion/360382/ | |
| INTERNATIONAL NEWS Go To Top Reuters See this story in: The Economic Times, The Pioneer, The Telegraph, Asian Age, Deccan Herald, The Times of India, mint (June 08) Washington: Indiana pension funds asked the US Supreme Court on Sunday to immediately delay the sale of bankrupt automaker Chrysler LLC to a group led by Italian carmaker Fiat SpA while they challenge the deal. http://www.dailypioneer.com/181411/US-apex-court-asked-to-block-Chrysler-sale-to-Fiat.html http://www.telegraphindia.com/1090608/jsp/business/story_11078718.jsp http://www.asianage.com/presentation/leftnavigation/news/business/chrysler-sale-may-hit-hurdle.aspx http://www.deccanherald.com/content/6873/investors-ask-supreme-court-delay.html http://www.livemint.com/2009/06/07131414/Investors-ask-US-top-court-to.html LONG ROAD FOR CHRYSLER, SMALLEST OF US BIG THREE AFP
The Detroit automaker, which has declared bankruptcy, has pleaded for extra government financing as it sealed a partnership with Italys Fiat. The company was founded in 1919 by Walter Chrysler who left General Motors and took over the former Maxwell Motor Corp, changing its name. At the end of 2008, Chrysler had 54,000 employees worldwide. It sold 1.45 million cars last year in the United States, its main market. It is planning to cut some 3,000 more jobs this year after 32,000 cuts in 2007 and 2008. In 1978, it sold its European operations to Peugeot-Citroen of France. But as it neared bankruptcy, it won a government bailout with federal loan guarantees of 1.5 billion dollars agreed on by president Jimmy Carter in 1980. Chrysler repaid the government in 1983, seven years ahead of schedule, after selling its defense division and revamping its lineup. The manufacturer introduced the minivan in 1984, a seven-passenger vehicle built on a car platform, a segment it still dominates. In 1985, Chrysler and Japans Mitsubishi announced a joint venture to produce small cars for the US market. Chrysler acquired American Motors in 1987, getting the Jeep nameplate. In 1998, Chrysler announced a merger with Germanys Daimler-Benz, with the US brands becoming a unit of the newly formed DaimlerChrysler. Chrysler claims to have sales in 125 countries, but its international operations were sharply reduced after its 2007 breakup, in which the Chrysler Group was spun off and acquired by private equity investors headed by Cerberus Capital. On Friday, a US appeals court cleared the way for Chrysler to exit bankruptcy under an alliance with Italys Fiat, dismissing a challenge from Indianas state pension funds. http://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=Business S. Venkitaramanan The Hindu Business Line (June 08) One of the most remarkable events in recent business history has been the decision of General Motors Corporation USA to file bankruptcy proceedings a decision forced on the company after it lost market share in the ongoing recession. Its assets were significantly lower than its liabilities. The 100-year-old company, which was at one time the worlds leading auto major, faced troubles mainly as a result of competition from more nimble and efficient Asian firms such as Toyota. The automaker, which in its heyday had upwards of 5.3 lakh employees globally, ended up seeking Federal aid. Demand for new GM The US President, Mr Barack Obama, was willing to bail it out considering its contribution to the nations economy and growth. The Treasury lent nearly $50 billion initially and took equity in the company, but it also insisted that the company restructure itself through bankruptcy proceedings to become a new, more competitive company. The Obama administration insisted that the new GM should have nothing to do with its existing group of fuel-inefficient automobiles and instead concentrate on fuel-efficient and attractive models to increase market share. In effect, the bankruptcy move of GM turns out to be a stage in the emergence of a new GM, which should have more efficient vehicles on offer, which can lead to greater market share. The old GM has been asked to find ways to sell the older, declining brands. Post-bankruptcy, the new GM is expected to be trimmer, efficient and profitable, and even go on to invite and accept open offers for its shares and pay off the US government. The government is simultaneously planning an exit from equity holding and management in the company. Government vehicle? GMs bankruptcy proceedings have excited considerable interest and one observer has pointed out that the new GM Corporation is more of a Government Motor Corporation than a private organisation. Rhetorical questions have been raised in BusinessWeek on whether anyone will buy a car from a government company. Such questions miss the obvious point that the world did, over decades, buy millions of Volkswagens produced by Germanys state-managed factory. The company itself was a legacy of the Nazi era. Nearer home, even when Maruti was fully government-owned, we had Maruti cars selling faster than they could be produced. In this context, one must recognise that in the US the Chapter 11 proceedings, as bankruptcy procedures are called, are not considered a mark of humiliation. Many companies are known to have revived from them. Further, Chapter 11 ensures the emergence of companies with sustainable debt levels and profitable working. US bankruptcy courts are presided by judicial officers with experience in such cases and without fear of political interference, a situation difficult to replicate in other nations. Auto future Any way you look at it, , GMs bankruptcy is a significant turn of event that raises a fundamental question about the future of Western or world automobile industry. While it is true that GM was becoming insensitive to issues of fuel efficiency and innovation, it is also true that the healthcare cost of its employees became unmanageable. In short, the GM was crushed not only by recession and its own inefficiency but also by the heavy burden of healthcare cost on employees, past and present. It used to be said that what was good for General Motors was good for America. The comment, in fact, came from a former Chairman of GM who later took over as the US Defence Secretary in the post-World War II years. Now, it turns out that what is good for GM may not be good for America as it implies bankruptcy. Many commentators have pointed out that the demise of GM is part of a creative destruction process that is typical of capitalist economies. Firms grow in size and then die, to be replaced by more nimble successors. Fallout in India The impact of GMs collapse on the rest of the world is now becoming apparent. GM India is making brave attempts to obtain funds to remain operational. There is also the likelihood of an unintended adverse impact on Indias outsourcing operations, as several IT companies are doing work for GM and its subsidiaries in the US. Elsewhere, the fall of the US giant, despite its prospective rise, may mean opportunity for Asian auto majors. Detroits loss may well be Shanghais gain. This, however, may provoke protectionist pressures in the US. Reforming Company law American bankruptcy procedures enable sick firms to restructure debt obligations even while remaining operational. In comparison, our attempts to substitute bankruptcy procedures by establishing BIFR (Bank for Industrial and Financial Reconstruction) have not been satisfactory. They led to more delays and sick firms never recovered in the process. It is time to restructure our company laws to provide for bankruptcy procedures on the lines of those in the US, to help restore sick companies to health expeditiously. This assumes greater importance in the current recessional climate. Hopefully, GMs troubles will trigger a healthy change in our corporate laws. http://www.thehindubusinessline.com/2009/06/08/stories/2009060850300900.htm FIAT SAYS STILL INTERESTED IN OPEL BUYOUT Reuters See this story in: Deccan Herald (June 07)
The interest is still there, it doesnt depend on us, he said. Berlin agreed on Saturday to provide 1.5 billion euros in bridge financing to Opel as part of a deal to shield the company from GMs Chapter 11 bankruptcy filing. http://www.deccanherald.com/content/6518/fiat-says-still-interested-opel.html TOYOTA TO CUT $1 BN IN COSTS FOR SMALL CARS Agencies See this story in: The Economic Times (June 08) Tokyo: Japans Toyota Motor aims to cut the cost of producing its compact cars by a billion dollars a year, as their demand is likely to grow amid the global recession, a report said on Sunday. http://economictimes.indiatimes.com/News/International-Business/Toyota-to-cut-1-bn-in-costs-for-small-cars/articleshow/4629135.cms | |
| ECONOMY & FINANCE Go To Top Swaminathan S Anklesaria Aiyar (June 07)
But the darkest hour is before dawn. After hitting rock bottom in March, global investors finally sensed that governments across the world had, by pouring trillions into rescues, ensured that the crisis would not get worse. The pall of fear lifted. And investors started moving out of US gilts earning virtually no interest into investments with higher returns. So, with fear lifting, global billions are moving out of safe havens into growth havens. Risk premiums on all financial asset were sky-high in March but have now fallen sharply. So, global billions are moving into junk bonds, corporate debt, commodities, and emerging markets too. Idle money waiting to be invested adds up to at least $2 trillion, maybe much more. If just $100 billion of this goes into emerging markets, that will fuel huge stock market booms. Copyright 2008, Bennett, Coleman & Co. Ltd. All Rights Reserved" INDUSTRY ON ROAD TO RECOVERY; GROWTH NEARING LAST YEARS HIGH Aarati Krishnan The Hindu Business Line (June 08) Green shoots of recovery have started to sprout on the landscape of Indias industrial output. It is now comfortably above the October 2008 low; though still marginally below the peak recorded in March 2008. The Index of Industrial Production (IIP), the official gauge for industrial output, is now nearly 14 per cent above its low point and just a whisker (2 per cent) away from last years record reading. Among individual sectors, cement, power and consumer durables may be the first to get back to growth, as their output has either already matched last years highs or is just 5 per cent short of it. In contrast, sectors such as utility vehicles, commercial vehicles and two-wheelers have a long way to go before they reclaim their earlier highs in output. But even they have rebounded substantially from their lows. Divergent trends Sectors differed widely in the severity of the slump and the time they took to recover, an analysis of the IIP and monthly sales/production numbers for key sectors shows. IIP data show that basic goods such as cement, coal and capital goods were among the earliest to recover, bottoming out in July/August 2008. Cement production for March and April 2009, for instance, had already surpassed the highs made last year. The basic goods index is also hovering above last years peak. But monthly sales numbers show that the automobile sector, be it passenger cars, two-wheelers, commercial vehicles or utility vehicles, reached its lowest point in December 2008, and has since delivered sequential growth. The April sales for utility vehicles had more than doubled from December levels. Consumer goods have followed an entirely different trajectory, showing signs of slowdown only towards the end of 2008, but recovering lost ground in recent months. In terms of the severity of the slowdown, commercial vehicles, utility vehicles and capital goods were worst hit. Medium and heavy CVs saw their sales plunge to 20 per cent of their peak levels by December and are even now at just a third of their peak output. The capital goods index contracted by 32 per cent, but has managed to climb back nearly to its peak level in 2009. In contrast, sectors such as refineries, power and steel were relatively unscathed by the slowdown, with output contracting by 5-15 per cent at the bottom of the cycle. Tracing the cycle While the year-on-year growth rates are distorted by last years high base effect, trends in the absolute indices and production/sales volumes throw up a clear picture of how the slowdown unfolded. After being on an upward trajectory for most of 2007-08, Indias industrial output peaked in March 2008, with the IIP as well as many of its constituents touching new highs that month. The month also marked a new high in the production/sales of passenger cars, commercial vehicles, cement, steel and coal. The buoyancy of March gave way to sharply lower production over the next few months, with the IIP reaching its low point in October 2008. By end of the year, quite a few sectors had clearly bottomed out and were showing sequential improvement in their monthly numbers. Prescient stock markets? One interesting footnote to all this is that the stock market has broadly anticipated trends in manufacturing activity, in terms of direction. After touching its peak of over 21000 in January 2008 (a little earlier than the IIP, which peaked in March), the bellwether fell to its lowest point in October 2008. That incidentally, coincided with the IIP low. It is another matter that the Sensex has since raced far ahead of the macro-economic indicators. http://www.thehindubusinessline.com/2009/06/08/stories/2009060851520100.htm | |
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