Hero Honda, Bajaj Auto , TVSM - Reports

Hero Honda, Bajaj Auto , TVSM - Reports

NANO LAUNCHES MONDAY, WAIT NOT OVER YET

Tata Motors will launch the much awaited Nano, slated to be the world's cheapest car at less than $2,000, on Monday but it may be the middle of the year before it is seen on Indian roads. The formal launch comes 15 months after the tiny, snub-nosed car debuted at a glittering world autoshow in Delhi, and is seen as an effort by the leading Indian vehicle maker to meet a deadline it had set to launch in the first quarter of 2009.

Bookings will only be taken from the second week of April, with delivery some time after that.

 

"It would take at least until July for the cars to be actually on the roads," a sales manager at Mumbai dealership Fortune Cars said. The car was initially set to go on sale last October, but the main production plant had to be moved to Gujarat on the west coast following land protests in the eastern state of West Bengal.

 

Only about 50,000 cars will be available in the first year, analysts say, until the 250,000-unit capacity in Gujarat comes on stream.  "We get a lot of enquiries, all wanting to know about the price, the variants available," said an official at Wasan Motors, another dealer.

Tata Motors has provided little details about the Nano to the dealers, but analysts say the cash-strapped company is likely to ask for a deposit of 70,000 rupees on booking.

"There has been a lot of hype created around the car," the manager at Fortune Cars said. "Some are genuine customers, others are just curious."

RS 1 LAKH POSER: WHO RIDES FIRST FEW NANOS?

With the launch of Nano just days away, speculation over how the eagerly-awaited car will be allotted is at a fever pitch. According to a senior bank executive, bookings for Nano could reach 5 lakh units, which will far exceed Tata Motors current production capacity.

Tata Motors is likely to charge a booking deposit of around Rs 70,000 along with Rs 500 as basic application fee for the worlds cheapest car. The auto major will take 60 days to decide the first batch of the few lucky customers who will be selected through a computerised random allotment, a person familiar with the development said. While the car is yet to be launched, the anticipated 5 lakh bookings for Nano seem realistic as every month more than 6 lakh two-wheelers and 1.2 lakh passenger vehicles are sold in the domestic market.

The company is currently making Nano from its facilities at Pantnagar and Pune. Since Tata Motors is constrained by capacity till its Sanand unit comes up, a customer will have to wait at least 2-3 months before he gets delivery of the car. Sanand will have a capacity of 2.5 lakh units per annum.

Sources indicate the company will not be able to produce more than 60,000-70,000 units in the first year. The company will produce less of the base variant (which it intends to price at Rs 1 lakh) and more of the upmarket versions. The company will take a sizeable booking amount as it wants genuine customers. A smaller booking amount would see customers making more than one booking, said a senior company official. The company had taken the full amount while taking bookings for Indica.

 

According to financiers in the automobile segment, who are working closely with Tata Motors to finalise Nanos mode of allotment, the finer details of the process are yet to be worked out. We have sent a query to Tata Motors on how to go about the bookings for Nano. We have also asked how much of the booking amount will be retained, how customers can deposit their money with us, and the rate of interest on the loan, said a person familiar with the development.

When contacted, the Tata Motors spokesperson said, Tata Motors has already stated that bookings will begin from the second week of April. Tata Motors will share all relevant information on March 23, 2009. Meanwhile, most of the prominent private banks, including HDFC Bank and ICICI Bank, will not be part of Nanos booking. Only Kotak Mahindra has confirmed its participation along with a clutch of PSU banks led by SBI.

HERO, ERGO CALL OFF LIFE INSURANCE JV

 The downturn has claimed another victim. The memorandum of understanding (MoU) between the Hero group and German insurer Ergo a part of the Munich Re group has been called off. Hero, the countrys largest two-wheeler maker, said it has decided to focus on its core business.

Meanwhile, Ergo said it remained committed to the Indian market and will look for a new partner. We will actively pursue opportunities the current market environment offers. We believe it is the right time to enter the Indian life market, having in mind that several players are dealing with difficulties, said Jochen Messemer, who is responsible for the international business on Ergos board of management. Both partners said it was a split by mutual consent and will continue to maintain amicable relationship.

In May 2008, Ergo Insurance Group and the Munjals, the promoters of the Hero group, had signed an agreement to form a life insurance JV which was scheduled to start operations in 2009.
 
In light of the current economic downturn and recessionary market conditions, both in India and globally, the Hero group has decided to maintain its focus and continue to grow its core business, said Sunil Kant Munjal, chairman of Hero Corporate Service. The decision also reflects significant capital outlays for the build-up of a life insurance business and the long gestation period.

The Munich Re group already has a presence in India through three JVs. Group company Ergo is a partner with HDFC in the non-life business. DKV, another group company and Europes largest health insurer, has a partnership with Apollo Hospitals in health insurance. The group is also a stakeholder in Paramount Healthcare a third-party administrator.

Of the 20 life insurance companies that have come up since the industry was liberalised in 1999, more than six have invested over Rs 1,000 crore in the business. The total capital invested in the life insurance business is over Rs 20,000 crore. Except for SBI Life Insurance
 
, none of the companies have managed to break-even. Promoters poured money into the life insurance business, which recorded among the fastest growth rates world-wide. However, following the downturn in equity markets, premium flowing into investment-related insurance schemes have slowed down. And growth, this year, is expected to be flat at best.

RUIA GROUP TO ACQUIRE EUROPEAN CO

 

After acquiring Schlegel Automotive Europe Ltd in 2008, Kolkata-based Ruia Group, which owns Dunlop and Jessop, is set to acquire another European company over the next few days.

 

Like Schlegel, this time also, the target company is a player in the elastomeric vehicle sealing systems for automotive OEMs (original equipment manufacturers).

Group chairman Pawan Kumar Ruia, who is currently abroad to complete the acquisition process has confirmed the developments, but refused to divulge the name of the target company.

 

"The acquisition will happen very soon. This is part of our overall strategy in consolidating in sealing system business," Mr Ruia said.

 

BHARAT FORGE: STILL IN A TROUGH

 Bharat Forges European subsidiaries could turn in operating losses next year, reckons brokerage Citigroup. That together with the fact that nearly half the companys exports from India are made to recession-hit economies overseas, could see consolidated profits fall by as much as 30 per cent in the current year followed by a fall of over 25 per cent in 2009-10.
 
Last year approximately 65 per cent of the firms revenues came from the European and American markets and the severe downturn in the truck industry in Europe, where sales are expected to fall by about 40 per cent in 2009, will continue to hurt the Rs 4,652 crore firm for some time to come.
 
Moreover, since a good 40-45 per cent of the parent companys sales come from the truck segment, the slowdown in the Indian heavy vehicles market will also hurt the auto parts maker. While the momentum in the home market is expected to pick up sometime towards the end of 2009, the markets overseas could take a little longer to recover.
 
A weaker rupee though will help boost export earnings. The companys operations in China, however, are understood to be operating at levels of around 25-30 per cent.
While revenues from non-auto components, which account for about a fifth of the Bharat Forges revenues, should grow at a reasonably good pace, scaling up the business quickly will be difficult at a time when expenditure in the oil and gas space is falling and spends in the engineering and marine sectors too could be under pressure.
 
While the stock has underperformed the market over the past year losing 62 per cent to the Sensexs 40 per cent, at Rs 93, it still commands a fairly high price to earnings multiple of around 14 times estimated 2009-10 earnings, which is somewhat surprising.

DELPHI SEES HUGE POTENTIAL FOR ENGINE MANAGEMENT SYSTEM

 : Auto component manufacturer Delphi Corporation is set to capitalise on the huge business opportunity in engine management system as emission norms become tougher in India, according to a senior executive of the company.
 
It also wants to expand its outsourcing base for auto components to meet the needs of the aftermarket segment in the country.
 
Speaking to newsmen after the inauguration of Delphi Product & Service Solutions (DPSS) authorised wholesale distributors outlet at Stanes Motors (South India) Ltd here, Mr Dominic Seto, Managing Director, DPSS Asia Pacific, and Vice-President, Delphi China, said his companys product range for aftermarket segment in India consisted of four lines-chassis, vehicle electronics, thermal and consumer accessories. It has been catering to Indian and global original equipment manufacturers in the country.
 
He said he saw the engine management system as a key product line to power the growth of Delphi in India and thermal product such as compressors, condensers, evaporators and radiators were extremely popular. The other area he was bullish on was consumer accessories like video and audio products.
 
Growth with Partner
Asked about the reason for joining hands with local distributors to market its products in the after-sales market, Mr Seto said the company had tried this concept in China to display Delphis product capability and to let the consumers and its targeted customers such as technicians and mechanics evaluate them. This was a successful formula in China and he was confident that it would work in India as well.
 
Mr Ramesh Rao, Director, Indian Subcontinent, DPSS, said the companys OEM customers included Tatas, Maruti and M&M. The car market was growing and by 2015 it was expected to be around 25 million and he saw huge scope. The aftermarket segment also offered huge potential.
 
Mr Seto said his company did not see the aftermarket sales potential based only on regional vehicle manufacturing. Apart from the OEM opportunity, the company aggressively wanted to expand the non-Delphi manufacture base.
 
One of the great opportunities in the aftermarket segment was that the company was aware of components available and Delphi would not be able to fulfil everything. With a partner, Delphi could overcome the issue. The company was looking for a strategic supply base.
 
On the impact of recession on the auto industry, he said based on the indications in China and India in the first quarter of CY 2009, there has been slight improvement, though in the fourth quarter of last year, the industry faced challenging times. But demand was there in the aftermarket. In the first two months of 2009, the sales were hitting the budget which was exceedingly encouraging for Delphi and its distributors and it reflected the consumer confidence. DPSS is also increasing the headcount in Asia Pacific region.
 
Mr Seto said globally, vehicle emission control norms were becoming stricter and this required a lot of electronic components. The tougher the controls become, the greater the opportunity Delphi sees in engine management system.

HAVING A FIELD DAY

 One bold and tactical decision taken by Mallika Srinivasan in May 2005, changed things forever at Tractors & Farm Equip-ment. Srinivasan decided she wanted to buy out the tractors, engine and gears businesses of Eicher Motors. She did, for about Rs 350 crore and since then, the Chennai-based firm has never looked back.
 
For several years before that TAFE, or Massey Ferguson (the brand) to farmers across the country, was seen as a strong, conservative player in the Rs 8,600-crore tractor market. Despite being in a cyclical business, the company always managed to post profits. And yet, it struggled to clock Rs 1,000 crore in sales although it had been in business for nearly 40 years. But with Eicher in its fold, TAFE became a stronger player, gaining market share. Srinivasans decision paid off as the business flourished and became more profitable. The company grew its consolidated sales to Rs 3,425 crore in 2007-08 and the profit before tax increased 30 per cent, over the previous year, to Rs 311 crore. This year, TAFE is likely to gross sales of Rs 3,700 crore even as the two brands have managed to sustain their combined market share of 22 per cent in a hugely competitive market, at a time when the industry is going through a rough patch.
 
The Eicher buy was complementary. It widened TAFEs product range and reach and brought scale and synergies to a highly-competitive business even as the tractor market was consolidating TAFE bought Eicher, M&M bought Punjab Tractors while smaller players like Escorts were fast losing market share.
 
Eicher was a strong player in the sub-25 HP horsepower segment while TAFEs strength lay in the bigger categories 35 HP & more which constituted the bigger segments of the market. Eicher also had better reach in key markets like Punjab, Haryana and central Uttar Pradesh, which complemented TAFEs presence in other regions. The Eicher deal also brought with it some key linkages engines and gears that added enormous value.
Eicher was a strong strategic fit in terms of product range, geography, product positioning and brand value. What we did was to back up the acquisition with a clear plan on how to add value to the business, says Srinivasan, who handled the buyout carefully, aware that more often than not, acquisitions fail or dont really add too much value.
 
What seems to have helped is Srinivasans decision not to merge Eicher with TAFE, but leave them as two separate companiesEicher is a fully-owned subsidiary of TAFE. The separate networks and brand positioning, were retained. This way we were able to leverage their strengths. We acquired Eicher for Rs 350 crore in 2005. In less than three years, the enterprise is valued at three times the original price, claims Srinivasan.
Indeed, it is to the credit of Srinivasan and her team at TAFE, that the company has never posted a loss. The secret: TAFE has always tried to time its investments in such a way that it is able to achieve break-even within an up-cycle that lasts for around 3-4 years. The industry is not short of big brands from companies such as Mahindra & Mahindra, Escorts and multinational players like John Deere and New Holland. But TAFE has found its place in the sun.

1, 500 NEW BUSES TO HIT ROAD: DELHI GOVT

Delhiites have a good reason to cheer, as the Delhi government on Wednesday informed the high court that bout 1, 500 more new low-floor DTC buses would ply on the city road by September this year to help ease public transport woes.
 
Appearing for the state government, counsel Mukta Gupta told a division bench
headed by Chief Justice A.P. Shah that the government has placed an order for 2, 500 low-floor buses. Out of which about 1, 500 would be supplied by the companies (875 from TATA and 625 from Shok Leyland) before September this year.

ASHOK LEYLAND CUTS CAPEX, PLANS TO SAVE RS 1,000CR

Ashok Leyland, India's second largest commercial vehicle maker has reduced its investment size and plans to save Rs 1,000 crore in the next three years, as part of a conscious effort to trim its capital expenditure.
 
Ashok Leyland, which has been one of the worst hit automotive companies due to dwindling demand recently, will cut its capital expenditure for the next three years to Rs 2,800 crore from Rs 4,200 crore planned earlier, a senior executive from the company said. It is also reducing production by almost 30 per cent at the Uttarakhand plant to 50,000 units per annum from 70,000 units per annum scheduled earlier. It, therefore expects to save Rs 700 crore from the cut.
 
Speaking to reporters on the sidelines of a CII event on International Financial Reporting Standards 2009 (IFRS), K Sridharan, Chief Financial Officer, Ashok Leyland, said, "We will spend about Rs 900 crore this year and Rs 1,200 crore in the next three years as part of the capital expenditure. We are looking to shave off at least Rs 600-800 crore in working capital during the same period." 
 
The company is looking to get rid of 2,000 vehicles in the by the end of this month, thereby reducing its inventory size to 6,000 units from 8,000 units.
 
In addition, to speed up sales in the rural and semi rural areas, Ashok Leyland will set up a captive vehicle financing arm by the middle of next financial year with an initial outlay of Rs 100-150 crore. This outlay will be raised at later stages, said the official.
This finance arm will operate mainly in areas where finance from conventional sources including banks and non-banking finance companies do not have the reach.
 
The finance arm will be a part of the Ashok Leyland group and would finance only company manufactured vehicles like trucks and buses.

 

CHINA, INDIA CAR MARKET RECOVERY FACES LONG ROAD AHEAD

Vehicle sales in India and China shot up last month by the kind of pace that made them the toast of the car industry early last year, but it might be too soon to break out the bubbly again just yet.
 
Monthly demand for automobiles in the worlds two most populous nations had been rising by double-digits in the first half of 2008 as a growing middle class enjoyed the fruits of a booming economy. Then the credit crisis hit, and demand evaporated.
Governments in both countries have since rolled out incentives to reverse that trend, helping year-over-year sales in February jump nearly 22% in India and by 25% in China. But few analysts expect those rates to last as credit remains tight and a convincing economic recovery appears far off.
 
We are not sure if the February numbers (in India) point to a revival or not, said Hitesh Kuvelkar, associate director of research at Mumbai-based First Global Securities. This performance has to be sustained over three to four months at least, before we can call it a revival or bounce-back. A solid recovery in both markets is crucial for global auto makers such as General Motors Corp., Toyota Motor Corp. and Volkswagen AG.
Sales are sinking alarmingly in the US and in most of Europe, where some governments are also trying with varying degrees of success to shore up demand through tax breaks and other incentives.
 
Expectations are especially high as sales in Brazil and Russiathe other components of the once-zooming Bric (Brazil, Russia, India, China) marketslag even further, with monthly vehicle sales recording falls so far this year.
 
Sustainable spike?
Analysts attributed the sales surge in India last month to the governments stimulus of cutting another 2% from excise duties after a 4% reduction in December, as well as the handout of higher wages to central government employees.
 
A reduction in interest ratesauto loan rates fell by about 2 percentage points last monthalso helped turn some of the pent-up demand into sales, they said.
In China, many expect this months sales to reverse the surge in February, which had five extra working days compared with the previous February, when the Lunar New Year holidays occurred.
 
A single month of data is no evidence of a sustainable recovery, said John Zeng, an analyst with IHS Global Insight, adding that March could show a decline from a record high for the same month last year. Car sales cannot be isolated from the broader macroeconomic environment, which has not shown signs of recovery so far. China has not been hit as badly as other (economies) in the current financial turmoil, but it certainly has felt the pain, he said.
 
Long road to recovery
Few carmakers are providing a forecast for 2009 sales, given the unpredictable outlook of the global economy. But with state-backed incentives pushing along much of the sales, analysts said future demand will depend largely on how long and how much more governments are willing to do.
 
Michael Boneham, head of Ford Motor Co.s Indian unit, said easing the credit crunch was critical to boosting sales in India, which he said was less vulnerable to the global recession than China since exports were not as big a driver of its economy.
 
The credit crunch...is causing a concern in the short term because we have customers who want to buy cars but have no source of credit, Boneham said. Its a long road to recovery, he said, noting that the consensus view seemed to point to a turnaround only in 2010. Arvind Saxena, senior vice-president of marketing and sales at Hyundai Motor Co.s Indian arm, noted that last months sales had been helped to some extent by an easy comparison from the year before, when many held off their purchases until March ahead of a budget announcement. The overall market situation continues to be challenging and not much should be read into the growth in February, he said.
 
China, meanwhile, may not grow at the breakneck pace seen in the past few years, but analysts expect sales to rise as the economy keeps growing, albeit at a slower pace.
IHS Global Insights Zeng expects full-year growth to be capped at 10% this year. Thats still a big improvement on the 20% fall JD Power sees for US light vehicle sales in 2009, and others think China may even do better.

M&M UPS STAKE IN S AFRICAN JV

Mahindra and Mahindra has increased its stake in the joint venture with its South African partner to 90% from 51%, and invested a further 30 million rands ($3 million) in the countrys automotive business.

Mahindra South Africa, which launched its new multipurpose vehicle Xylo here last week, also expressed confidence in the South African auto market.

Vijay Nakra, chief executive of Mahindra South Africa, said his group had hiked its stake in Africa Automotive Investment and would consider acquiring the remaining stake at an appropriate time. He, however, did not spell out how much money was involved in hiking the stake in the joint venture, while denying speculation that the South African joint venture, like other local motor firms, was reluctant to make further investment

AHEAD OF NANO LAUNCH, TATA MOTORS BEGINS CLEARING DUES

xIndias largest auto manufacturer, Tata Motors Ltd, has finally started making payments to component makers that had been delayed for months. The company started settling its dues with just days to go for the launch of the Rs1 lakh Tata Nano, billed as the worlds cheapest car.
 
Tata Motors has arranged with the Small Industries Development Bank of India (Sidbi) to help it pay the dues to small- and medium-scale suppliers, three parts makers said after getting calls from Tata Motors on Tuesday to collect cheques for the pending payments.
We will now be able to meet other financial obligations, said Srinivas Rathi, a partner at Platemasters, among the suppliers to Tata Motors.
 
A Tata Motors spokesman, in an emailed statement, only said the company was working with Sidbi. As part of its discussions with banks, Tata Motors and Small Industries Development Bank of India are in discussions for expanding the relationship between the two. Tata Motors, struggling because of a slump in demand for vehicles and weighed down by foreign exchange charges, reported its first loss in seven years in the December quarter, at Rs263 crore, against a profit of Rs500 crore a year ago. Its commercial vehicle sales fell 40% to 49,546 units during the quarter, while sales of its cars and utility vehicles declined 14% to 42,187 units. Sales have improved since because of fiscal incentives offered by the government and destocking of inventory.
 
A Sidbi official confirmed the firm has an arrangement with Tata Motors to settle the dues by way of receivable management, similar to schemes it runs for other companies.
 
We make payments to small and medium enterprises (SMEs) and corporates pay us later after a period of three or four months, as per the agreement, this official said, asking not to be named as hes not authorized to speak with the media. He declined to specify the size of the payments to be made under this arrangement.
 
The Sidbi official also said the firm had agreed in principle and is in talks with Tata Motors to finance some SMEs to set up facilities in Sanand, Gujarat, the companys new base for manufacturing the Tata Nano, which launches on 23 March.
 
S. Ramnath, an analyst with IDFC-SSKI Securities Ltd, said with most of the manufacturers ramping up production in March, the support of suppliers is crucial and Tata Motors had no choice, but to pay the dues. I think its more technical in nature and (I) would not read too much into it. I would not view this as a sign of revival, but something the company had to do to have the vendor support, he said.
 
In January, Mint had reported that Tata Motors had set up a so-called suppliers council to address several issues, including delayed payments, that were causing friction between the auto maker and its parts suppliers. Rathis firm is not part of this council, but is one of the more severely affected group of about 200 small- to medium-size suppliers to Tata Motors. These firms typically have Rs5-10 crore worth of machinery and other investments and depend on regular payments, especially in a tight credit market, to meet their working capital requirements.
 
For bigger parts suppliers, Tata Motors has a so-called bill marketing scheme to ensure regular payments. The scheme is a three-way arrangement involving the company, a commercial bank and a supplier. The bank pays the suppliers on behalf of the company soon after the parts are delivered.
 
Suppliers who are part of the scheme offer Tata Motors a discount of 1.9% on the total bill to ensure payments in two-three days. Tata Motors is now considering lowering this discount to 1.5% in the next couple of months, some suppliers said. Mint could not independently confirm this development.
 
Ravi Kant, managing director of Tata Motors, had told reporters in February that three-fourths of about 1,000 suppliers to the company were part of this scheme, so only the remaining 25% would be facing delayed payments.
 
Its not feasible for smaller suppliers to be part of such an arrangement as it would eat into their margins. If the discount is brought down, many more vendors may opt for it, said V.M. Jagtap, managing director of Fairfield Castings Pvt. Ltd, which recently applied to be part of the scheme following the delayed payments.

UTTARAKHAND EYES RS 200 CR FROM NANO SALE

With just less than a week left for the launch of Nano, expectations are growing in Uttarakhand that Tata Motors may sell majority of its small cars from the hill state only.

 

This follows a letter from the Uttarakhand government asking the auto major to sell majority of the Nano cars through its new subsidiary Tata Motors Distribution Co Limited, which was recently floated at Pantnagar.

 

Through the sale of Nano cars and other commercial vehicles which are being manufactured at Pantnagar, the state government is hoping to earn additional tax collections of Rs 100 crore to 200 crore through 12 percent VAT.

 

Top industry officials here are interpreting opening of the new subsidiary of Tata Motors in the state as a gesture of goodwill by the auto giant, which was given more than 1,000 acre of prime agriculture land at Pantnagar for setting up a manufacturing facility.

Last year, Tata Motors received 20 acre from the state government for setting up its distribution company and an additional 45 acre for expansion in Pantnagar, official sources said here. Tata Motors is manufacturing Nano cars from its Pantnagar facility as an interim arrangement following the Singur episode.

 

Meanwhile, the state government has also urged Tata Motors to convert its interim Nano arrangement into a permanent one at Pantnagar stating that the company must reap benefits of the heavy sops available in Uttarakhand under the special Central Industrial Package (CIP) 2003. However, Tata Motors officials were not available for comment.

 

LITTLE NANO CARRIES A BIG BURDEN FOR TATA

What a difference a year makes. In early 2008, Tata Motors unveiled its Nano to a rapturous media reception as the snub-nosed, 4-seater with a Rs 100,000 ($1,945) price tag created a new category of super-cheap cars for the masses.

Just weeks later, Tata Motors acquired the Jaguar and Land Rover brands for $2.3 billion from Ford Motor Co in a blaze of glory, and the company revelled in the global spotlight.

But Tata, India's top vehicle maker, next week rolls out the Nano six months behind schedule, amid worries that an economic downturn and production constraints may spoil the success of the world's cheapest car.

Since the Nano was first shown, the main production plant had to be moved following land protests, Tata Motors posted a first loss in seven years as sales slumped, and its shares have dropped 75 percent. On top of that, Tata Motors' credit rating was downgraded as its debt-fuelled expansion binge left it exposed to the financial crisis.

"In the last 12 months, Tata has been hit by a perfect storm," said Ashvin Chotai, managing director at consultancy Intelligence Automotive

 

Asia in London.

"At the time, it was unimaginable that the venerable Tata would have difficulty tapping credit markets. But its resources became stretched from venturing out on so many fronts, and the slump in sales and tighter credit worsened the situation."

 

A bridge loan of $2 billion is due in June, with Standard & Poors warning of another ratings downgrade because of the "extremely adverse" operating environment for Jaguar /Land Rover, Tata's ambitious capex plans and deteriorating cash flow.

The high fuel and commodity costs that made the Nano imperative a year ago have faded somewhat, but its place in the history books is still secure, with a popular following that could rival the Beetle, Mini and Fiat 500, analysts say.

"The Nano will still create a new segment, bridging the gap between motorbikes and entry-level cars, and it will still be the first of its kind," said Mohit Arora, a director at JD Power Asia-Pacific in Singapore. "Those fundamentals haven't changed."

Patchy Record
The Nano goes on sale in April, the start of the new fiscal year. Only about 50,000 cars will be available in the first year from Tata's facilities in Pune and Pantnagar, analysts say, until the 250,000-unit capacity in Gujarat comes onstream.

The delays added to the $350 million Tata had already invested in the project, and also meant the company, best known for its buses and trucks, has squandered some of its first-mover advantage in what looks to be a fiercely competitive segment.

 

"Tata has lost some momentum because of the delays, and competition may have put it to use," said Deepesh Rathore, managing director, India of UK-based consultancy Global Insight.

"But, on the positive side, interest rates on vehicle loans have come down a bit and material costs have also come down, so that's two things they don't have to worry about."

Oil is below $45 a barrel, after having topped $100 at the time of Nano's unveiling, while steel prices have more than halved since mid-2008. Combined with lower interest rates, vehicle sales in India had their best month in four months in February.

But consumer sentiment remains muted.

Tata has tied up with several state-run banks for easy terms, including loans of up to 85 percent of the price, but even that may not bolster sentiment, said Pradeep Saxena, senior vice president at TNS Automotive.

"Consumers are postponing purchases, and this segment of first-time buyers is very sensitive to finance terms," he said.

Analysts say Tata will most likely raise the price soon, particularly on deluxe models, but the slim margins, the initial capacity constraints and the depressed market sentiment mean that breakeven on the Nano project will take 5-6 years.

Meanwhile, the venture of Renault/Nissan Motor with Bajaj said their $2,500 car is on track to launch in 2011, while Maruti Suzuki and Hyundai Motor, the No.1 and No.2 carmakers in India, are unlikely to cede ground to the Nano without a fight.

Volkswagen, Toyota Motor, Honda and Fiat have also said they were keen to build low-cost cars, although the slowdown may temper their investment plans.

The slowdown makes it harder for Tata to boost commercial vehicle sales, its mainstay, and to refinance the $2 billion bridge loan. But the gloomy economic scenario may also suit Tata Motors to some degree.

"Given how everyone's talking about being frugal, it may be considered cool to be seen in a Nano," said Hormazd Sorabjee, editor of Autocar magazine.

Thousands of supporters on Facebook clearly think so, with groups that want the car in Denmark, Chile, South Africa, Argentina, Italy, France and the United States. The website (www.tatanano.com) has received more than 40 million hits.

"I heard there's a big rush for applications for the car. I just hope we can get one. I've waited for so long," said Shweta Kumari, who wants a car so she doesn't have to share one.

 

SHARE OF GOVT BANKS IN AUTO FINANCE ON THE RISE

 The share of government banks in auto finance has increased significantly in the last few months. In some cases, it has nearly doubled. The reason: these banks are offering cheaper loans than their private sector counterparts.
 
State Bank of India (SBI), the countrys largest lender, froze interest rates for car loans at 10 per cent for a year last month from over 11 per cent earlier.
 
Hyundai Motors India, the second-largest car manufacturer, said the share of public sector banks in its finance portfolio increased to 30 per cent from 20 per cent around six months ago. Besides lower interest rates, another important factor that prompted customers to switch was the reach of the public sector banks. SBI has over 11,000 branches across the country.
 
While Tata Motors, the third-largest car manufacturer, declined to comment, saying that it did not keep track of the finance portfolio, a leading Kolkata-based dealer said that the proportion of PSU bank loans had doubled to around 10 per cent from the earlier 5 per cent, and it is likely to go up further. Even premium car maker Honda Siel Cars India said that PSBs had increased their share to 20 per cent from 12 per cent six months ago. We are exploring further tie-ups with nationalised banks, said a spokesperson of the Gurgaon-based company.
 
Lower interest rates offered by PSBs had hit private car financiers too, particularly for cars priced below Rs 5 lakh. There is a gap of at least two-two and a half per cent between non banking financial company (NBFC) and PSBs. This has substantially impacted our business. Car loan disbursals have been down by at least 20-25 per cent in the last two months. In such a scenario, we have to realign our policies and target the income group not covered by banks, which is definitely little riskier investment for us, said an official of a Kolkata-based NBFC, prominent in car financing.
 
On the other hand, PSBs have seen a pick up in car financing. On a year-on-year basis, car loan disbursals have increased by 30 per cent at Kolkata-based United Bank of India, which has a tie-up with market leader Maruti Suzuki for car financing. There has been a pick up the car loan on a year-on year basis, and the disbursals are in the range of Rs 7-8 crore every month, said UBI ED T M Bhasin.

VEHICLE PARTS MAKERS SEE UPTICK IN DEMAND

 Auto parts makers expect to close this fiscal on a brighter note, with domestic sales showing signs of recovery. However, they are not celebrating just yet as the growth of this quarter may be difficult to sustain.
 
Sunil Kaul, senior vice president and chief operating officer of Behr India, which has clients such as Tata Motors, Mahindra & Mahindra and General Motors, said, "We are seeing a 30% quarter-on-quarter increase in orders. The market sentiment is slowly improving with the stimulus packages and the softening of interest rates on loans."
 
After cutting inventories in the December quarter, automakers had to increase their component purchases this quarter to meet the increase in demand for vehicles.
Indian automobile manufacturers sold 1.04 million vehicles in February, up 10.61% from 942,955 units sold in the same period last year.
 
Insiders say the depreciation benefit of 50% for vehicles purchased this quarter also boosted sales. MK Khera, managing director, Kinetic Engineering Ltd, said, "A lot of sales, particularly in the commercial vehicles (CV) segment, are happening as people look to avail tax benefits before the fiscal end." The company services CV makers such as Tata Motors, Force Motors and Carraro. Parts makers say their inventory levels have eased as well. Kinetic Engineering, for instance, keeps inventory levels at 6-7% compared with near 15% levels in December.
 
Though there is no particular automobile segment driving sales, some companies are doing well and are looking to push up sales before the fiscal ends. "Firms like Hero Honda and Maruti Suzuki are boosting demand.The fiscal is coming to a close and these companies are gunning for sales, which is helping our sales indirectly," said Anmol Jain, director, Lumax Auto Technologies Ltd.

The company has seen a topline growth of 20% since October and expects to end this fiscal at a flat growth of Rs 500 crore in revenues. The order book of part makers is also getting healthier with automakers looking to increase their capacity utilisation and their working days. Ashok Leyland Ltd, for example, has increased the number of production days at its factories to five a week from three after its sales, at 3,245 units, jumped 33% in February compared with January.
 
RN Rao, special director (sales and marketing), Ashok Leyland, said, "Auto component companies will also benefit in the next few months thanks to the bus procurement package announced by the government. Tenders are already out and about 15,000 buses will be procured by the 60-odd city corporations."
 
Analysts,are wondering if the January- March pick-up is an aberration.
"The auto industry will take at least two years to see the kind of growth it did until recently and this will indirectly hit parts makers. Also with rupee depreciating, input costs are impacted and margins strained. Export markets like the US and Europe will not recover anytime soon and therefore, parts makers must not read too much into this quarter's small boost," said an analyst, requesting anonymity.

CATERPILLAR LAYS OFF 2,454 WORKERS IN THREE STATES

Caterpillar Inc. announced a fresh round of job cuts on Tuesday, laying off more than 2,400 employees at five plants in Illinois, Indiana and Georgia as the heavy equipment maker continues to cut costs amid global economic downturn.

SWARAJ MAZDA UP ON RIGHTS ISSUE

 

Swaraj Mazda shares increased 16.2 per cent to close the day at Rs 122.3 on the announcement that the company would issue rights to its shareholders. The board will be meeting on March 19, 2009 to consider the issue of equity shares on rights basis.

 

The stock made an intraday high of Rs 123.3 and a low of Rs 110 with trading volumes of 4,094 shares. The scrip made a 52-week high of Rs 360 (April 17, 2008) and a low of Rs 102 (March 02, 2009). However, the stock lost 12.64 per cent in the last one month

TATA MOTORS, ASHOK LEYLAND CLASH OVER JV

 Strong differences have arisen between Tata Motors and Ashok Leyland, the countrys two largest commercial vehicle makers, over a joint venture involving construction equipment and tractor manufacturer John Deere.
 
Tata Motors subsidiary Telco Construction Equipment Company Ltd (Telcon) has opposed a proposal to the Foreign Investment Promotion Board (FIPB) from John Deere for a joint venture with Ashok Leyland to distribute and market its construction equipment in India.
 
Telcon, a 60:40 joint venture between Tata Motors and Japans Hitachi Construction Machinery, held a technology licence agreement with John Deere to manufacture loaders. It has refused to give the US company the no-objection certificate it requires under Indias foreign direct investment guidelines (called Press Note 1) to allow it to set up a joint venture with Ashok Leyland, on grounds that the new company is in the same or allied field.
 
The proposal was discussed late last month and the FIPB recommended that the hearing be deferred to March 20. A committee has been set up to hear all the parties concerned and advise the board. The committee comprises officials from the departments of industrial policy and planning, heavy industries and economic affairs and FIPB directors.
In a strongly-worded letter to the FIPB, Telcon said the company had signed a licence agreement with John Deere to manufacture backhoe loaders in India in October 1996. The agreement was to expire in July 2006, so, in November 2005, Telcons management wrote to the US major to continue the association and to allow Telcon to use the John Deere trademark.
 
Telcon said it received no reply from the company, so a reminder was written in December 2007, which also went unanswered. On March 2008, however, John Deere wrote a letter, charging Telcon with violating its trademark and threatening legal action if Telcon did not stop using it. Telcon said it immediately stopped doing so and wrote to John Deere in March and August 2008, seeking to continue the relationship. It said it had no information on John Deeres intention for forging an alliance with Ashok Leyland.
In its submission to the FIPB, Telcon stated that it was now manufacturing similar products in India using its own technology and technology legally acquired. So, any threat in the form of organised and improved technology in the same product or product lines would certainly affect the companys business adversely.
 
The proposed joint venture between Deere and Ashok Leyland in construction equipment, the letter said, could further dampen business spirits within the country and damage its economy on a large scale. When asked about the issue, Ashok Leyland Managing Director R Seshasayee said: It will be inappropriate for me to make a comment on this issue because it is a case for John Deere. Tata Motors did not reply to an email.
 
John Deere, in its submission to FIPB has stated that the licence agreement with Telcon expired in July 2006 and was not in existence on the date it sought approval for the joint venture with Ashok Leyland, so the new proposal would not, in any way, jeopardise the interests of any existing joint venture.
 
The US company also has a joint venture with Larsen & Toubro (L&T) to make agricultural equipment. Initially a 50-50 venture, John Deere now holds a majority stake and L&T 2 per cent. Deere has clarified that since this joint venture is not in the same field as its proposed alliance with Ashok Leyland, the Press Note 1 stipulations will not be triggered.

USED CAR SALES FALL

 

Call it the Nano effect. The demand for used cars in the country has fallen by as much as 25-30 per cent after Tata Motors announcement of the launch date of the Peoples Car. The car will debut on Monday.

 

According to automobile dealers here, there has been an average fall of 15-20 per cent in prices of used cars, mainly compact ones like Maruti 800, Maruti Alto and Hyundai Santro, among others, following the announcement. Dealers in the unorganised market fear a further price dip of 10 per cent when delivery starts and Nano is seen prominently on roads.

 

Arif Fazulbhoy, director, Fazulbhoy Motors, one of Mumbais largest used-car dealers, said, We started to feel the impact of Nano since the announcement of the launch date. People are postponing purchases and there has been a lull in the market ever since.

The Nano, expected to sport an on-road price of Rs 1.25-1.3 lakh for the no-frills, base version, will compete with the compact cars of Hyundai Motor, Maruti Suzuki, Tata Motors and General Motors. Its high-end version, complete with air-conditioning, central locking, power windows and power steering, will cost approximately Rs 1.7 lakh.

 

Nano has pulled down prices of several models. For instance, a 2006-make Hyundai Santro is currently being offered at Rs 2,30,000 as against its regular price of Rs 2,60,000. Similarly, Maruti Suzukis Zen Estilo is Rs 40,000 cheaper at Rs 260,000 as against the usual price of Rs 300,000. (see table).

 

Due to steady fall in prices of compact cars, prices of entry-level, mid-sized sedans like Ford Ikon, Maruti Esteem, Hyundai Accent, Tata Indigo and Fiat Petra have also dipped by at least 10 per cent in the used-car market. Sellers are being forced to cut rates as the demand is expected to fall further. The more the time a car spends with the seller, the more its resale value falls, said a dealer.

 

The impact on used-car prices, however, seems restricted only to the unorganised market. Prices in the relatively smaller organised market are still holding. Indias used-car market is largely unorganised. The organised players account for just 20 per cent of the used-car market. Shubhabrata Saha, chief executive, Mahindra First Choice Wheels, said, The launch of Nano will largely impact the unorganised sector, where cars are sold without any warranty or proper service record. The organised sector has continued to grow despite the hype created around the car. We have healthy demand for well-kept cars that are bigger than Nano but come with a price tag similar to Nano and carry a warranty. Although the organised players offer warranty and benefits like service back-up, they charge Rs 30,000-60,000 more than the unorganised players on an average.

 

HYUNDAI, TOYOTA, HM SET TO JOIN THE TAXI QUEUE

 

Following a legislative mandate to phase out cabs more than 25-years-old, one saw Mumbai's traditional taxi fleet of Fiat's Premium Padminis being gradually replaced by modern, swanky cars like Maruti Suzuki Ltd's Omni, Wagon R and Alto.
 

Now, willing to join the taxi brigade are other auto companies such as Hyundai Motor India, Toyota Kirloskar Motors and Hindustan Motors Ltd.

 

According to A L Quadros, taximen union leader, Mumbai's total taxi fleet is 55, 000, out of which only 7,000 were asked by the state transport authority to exit. However, till now only 3,500 old cabs have been replaced and the rest are to be replaced in three months. This leaves a huge market to be captured by automakers.

 

Arvind Saxena, vice-president (sales and marketing), Hyundai Motor India, said, "We have already started getting orders for Santros and the delivery will begin in two weeks. So far, all the Santros that were sold as taxis were through unorganised dealers. But now we will sell the black-yellow metered taxis through an organised channel to capture the large taxi base." Saxena added that they will also tap the luxury cab segment and fleet operators with their Hyundai Accent (CNG).

 

The company has not yet decided on the pricing of Santro taxis as it is subject to modifications and additions sought by the taximen. Also, Toyota Kirloskar Motors is targeting the segment with its sports utility vehicle (SUV) Innova.

 

Sandeep Singh, deputy managing director, TKM, said though demand for small cars is high in the taxi space, Innova will do well as a radio taxi. "The government will soon issue permits in Delhi, National Capital Region and Mumbai for radio taxis. Initially, we don't expect to sell large numbers, but the Common Wealth Games in Delhi and phasing out of old taxis in Mumbai will give a boost to our sales." Singh added that the company's other target segment was fleet operation, which accounted for around 25% of their business till the downturn.  Following the slowdown in the hotel/tourism and IT industries, the business from this segment has gone down to around 15%. TKM will not enter into luxury cabs and corporate taxi segment.

 

Meanwhile, Maruti said it was confident of retaining its leadership position with an 80% market share despite other players entering the taxi segment.

 

Mayank Pareek, executive officer (marketing and sales), Maruti Suzuki India, said Omni is the ideal choice for taximen as it is priced at Rs 2 lakh only and has low maintenance costs, yet is spacious.  "We have been receiving repeat orders for Omni from Mumbai. Besides, we have made a breakthrough in Andhra Pradesh taxi market and are going strong in Delhi with Omni and Wagon R."

 

For Maruti, not only new cars are selling as taxis, but the used car division is also showing good taxi sales. Parvez Ansari, senior sales executive, Maruti True Value, said in February the firm sold 400 cars as taxis, of which nearly 200 were Omnis. "In March, we have already sold around 250 Omnis for taxis."

 

Hindustan Motors is not far behind either. Ambassador will ply on the Mumbai roads as a cool cab and will also tap the corporate taxi scheme with its Lancer and Cedia.

Soni Shrivastav, GM, said the company wants to replicate its fleet operation success in Mumbai, too.

 

ADVERTORIAL: THE ICONIC SCORPIO NOW HAS EVEN MORE STING!

 Launched on the 6th of March 2009, the new Scorpio from Mahindra is truly the New, Mighty Muscular Scorpio. With a fresh look that enhances its sporty and adventurous image, it has set out to give other cars a tough time once again.

The new Scorpio features the technologically advanced mHawk engine across LX, SLE & VLX variants and also incorporates Mahindra's revolutionary Micro Hybrid technology. It is also the first product in India to offer a BS-IV compliant version. And while these technological advancements make the new Scorpio mighty powerful, it owes its muscles to the changed Signature Front Grille, Provocative Bonnet Scoop, Sporty New Fog Lamps, Road Armour Bumpers, Embossed Side Cladding, Multi-Focal Reflector 'Sunrays' Headlights, Chunky Door Handles and more.

Its powerful engine and muscular looks seem ready to cause enough damage to the competition, but what might make the new Scorpio invincible is its price. It is now available at unbeatable prices with the mHawk range starting from Rs. 7.21 lakh(LX) going up to Rs. 9.2 lakh (VLX) ex-showroom Delhi.

Talking about it Dr. Pawan Goenka, President, Automotive Sector, Mahindra & Mahindra Ltd., said: "The Scorpio's strong value proposition lies in its versatility, its ability to morph and mould itself according to the changing template of customer needs. The new Scorpio remains a true blue Mahindra vehicle at heart and with its macho, stylish looks and amazing go-anywhere capability, it will further enhance our domination of the UV market."

M&M TO GO SLOW WITH XYLO IN NEW EXPORT MARKETS

 Mahindra & Mahindra plans to keep exports for Xylo confined primarily to South Africa for at least the next six months due to the subdued export market.
This is despite the company unveiling its newly launched multipurpose vehicle in the African market this week.
 
Domestic demand
M&M expects robust domestic demand mainly from the rural areas to boost sales.
Export market is subdued. Demand will be mainly from the domestic market. I believe there will be a strong showing in March by all auto makers. Lower interest rates, more liquidity and raw material prices are falling. But after a slow April, May will be very crucial, Mr Anand Mahindra, Vice-Chairman and Managing Director, M&M, told Business Line.
 
He said that though the company had not made any changes in its export plans, the company did not intend to export Xylo to new markets over the next few months.
While a series of measures have been taken to boost demand (in the domestic market), a major concern that still remains was the possibility of a bad monsoon affecting sales, he said.  On acquisitions, he said, We will not go for acquisitions just because the valuations are currently low. If it makes sense technologically, we will go for it.

M&M COULD DEVELOP 'THE DEVIL' IN INDIA

 

Auto major Mahindra and Mahindra said it could develop a vehicle on the lines of US President Barack Obama's official car  nicknamed The Devil for the country's political leadership if the necessary facilities existed here.

"I saw the diagram (of the car) and it had complete details of President Obama's Cadillac limousine. If this facility exists then we would be proud to make such vehicle not just for the Prime Minister but for any VIP," Mahindra Group Vice Chairman and Managing Director Anand Mahindra told reporters after inaugurating the Special Military Vehicles (SMV) plant in Faridabad near here.

Mahindra Defence Systems Chief Executive Brigadier (retd) Khutub Hai said the company had manufactured armoured Scorpios for VVIPs.

"Eight Chief Ministers in this country travel in armoured Scorpios. These armoured Scorpios are vehicles of choice as far as VVIPs are concerned," Hai said.

He added that the company has exported five armoured Scorpios to Sri Lanka as part of the Presidential fleet there.

On the possibility of opening similar facilities in friendly neighbouring countries, Hai said: "We are reaching out to friendly neighbours. We will be looking at them. In 8-10 years, we can set up similar facilities there."

"We are already looking at setting up similar facilities in some parts of Africa," he added.

NANO EFFECT LIKELY TO BE FELT ACROSS USER SEGMENTS

Even the fiercest rivals of the Tata Nano are hoping that the car does well as it will give the much needed boost to market sentiment, which is low despite all the talk about the Centres fiscal stimulus having worked wonders.
 
Currently, the only carmaker that is keeping its ancillary suppliers and dealers happy is Maruti Suzuki. It is tipped to end March with sales of nearly 85,000 cars, which will be its highest recorded in a single month, surpassing the levels in February. Maruti is now set to launch its Ritz (Splash in other markets), which could replace the Wagon R next month. But even this may not be enough to grab the spotlight from the Nano.
 
Likely Demand
Indications are that this peoples car from Tata Motors, being launched next week, could end up with over three lakh bookings despite the possibility of a hefty down payment of Rs 70,000. This is a considerable sum for a car whose basic version will cost barely Rs 1.3 lakh (on-road Mumbai). As sources say, it is a clear reflection of its manufacturers faith in the Nano whose demand in smaller cities and towns is going to be completely overwhelming.
 
There have been talks of competitors, like Maruti, going in for stripped-down versions of its base models, but even that will not be adequate to take on the Nano in terms of price.
The only other car that caught the publics fancy (and this was way back in 1995-96) was the Fiat Uno, which garnered over 2.9 lakh bookings.
 
Touted as the challenger to the Zen, it was poised to create history in the compact segment but lost its way thanks to a lockout at the plant that threw production schedules out of gear, prompting customers to cancel their bookings en masse. The Uno promised plenty but failed to deliver.
 
Riding on Brand
Sources say the Nano will face similar challenges in terms of supplies coping with the order book. After all, production is going to be confined to 4,000 units a month at the Pantnagar plant and it is only towards end-January 2010 that the Sanand facility in Gujarat will be ready to roll out big numbers. Despite this, dealers are confident that customers will grin and bear it. The Tata brand is special to most of them and in a sense, waiting for a product only enhances its value in their minds, they say.
 
So, what is the likely profile of the Nano buyer? Is he/she a two-wheeler user keen on graduating to a car or a first-time car customer who can only afford to cough up Rs 1 lakh?
 
It could end up being a mix of the two. Someone who owns a premium bike like the Yamaha RZ 15 or the Pulsar would not be inclined to give this up for a basic car. However, the commuter of a Rs 35,000-plus, entry-level motorcycle would quite comfortably upgrade himself to the Nano, sources say.
 
Covering all segments
According to them, the cars biggest plus is that it will be relevant to families in both big cities and small towns. To the affluent, it will be the best bet in terms of picking up kids from school or going to the grocer. In towns, families with monthly income of Rs 20,000-25,000 would clearly prefer the Nano for reasons of space and safety in addition to the status factor that a two-wheeler cannot confer. This also explains why tractor makers are focusing on customisation of their vehicles so that the end-user in villages finds it handy for uses beyond the farm.
 
It finally boils down to finding value at the bottom of the pyramid. Hence, be it a Rs 1-lakh-car or a tractor, the key is application while even doubling up as a status statement in small towns or villages, says a source.
 
From the Nano point of view, this buyer segment is critical because the members are not afflicted by the credit card syndrome, like their city counterparts. Neither has the economic slowdown impacted their businesses or lifestyles. Little wonder, therefore, why Maruti, Hyundai and two-wheeler players like Hero Honda are focusing on semi-urban India to bolster business.

JD POWER PUTS NANO DEMAND AT 35,000 UNITS

If you thought the impending launch of Tata Nano will lead to expansion in the overall passenger car market, think again.  According to JD Power Asia Pacific, the demand for this car would remain modest at just about 35,000 units in 2009 and even next year - when Tata Motors' Sanand plant is expected to come on stream - demand would not breach the one lakh unit mark!
 
John Bonnell, J D Power's director of forecasting (Asia Pacific) says that though this forecast may well be proved wrong and many more Nanos may be sold, "but in that case competition will move in swiftly with new products to protect market share".
Already, auto companies such as Hyundai, Honda, Ford and General Motors and Nissan-Renault combine have announced plans to develop and launch low-cost cars in India over the next two-three years. These may not come as cheap as the Nano, but could well eat into the segment which Nano hopes to create thanks to its pricing.
 
Bonnell justifies the conservative forecast of demand for Nano by pointing out that the ability of a large number of two-wheeler owners to afford a car, which cost three-four times more to acquire and significantly more to operate, remains in doubt.
 
He also lists out concerns such as the ability of Tata Motors to keep the pricing at Rs one lakh levels. In fact, JD Power's latest full year India forecast for 2009 predicts a decline of about 7% in overall light passenger vehicle demand at just 1.37 million units against 1.47 million in calendar 2008. (Light passenger vehicles include cars, SUVs and MPVs). Bonnell says the Nano numbers are embedded in this forecast.
 
For 2016, the agency has forecast total light vehicle demand to touch 3.3 million units.
But unlike earlier predictions by the Society of Indian Automobile Manufacturers (SIAM) and others, the passenger car market looks set to miss the two million unit mark and may arrive at this figure only in 2011.
 
The conservative forecast for Nano is surprising since this car has generated global interest and was widely expected to bring back excitement in the somnolent passenger car market. The Nano is being launched on March 23 and initially, only limited numbers would be dispatched to dealers since full production would be possible only next year.
According to industry estimates, Tata Motors may be able to make only half of the projected demand of one lakh units this year.

Nano production is behind schedule by a few months because of relocation of the manufacturing plant to Gujarat.  This car would be the world's cheapest yet and the base version is priced at Rs one lakh only (plus taxes).

NANO LAUNCH: TECHNICAL, SALES TRAINING IN TOP GEAR

 

As Tata Motors Ltd readies for Mondays launch of the Nano, the worlds cheapest car, the companys employees and its distributors are busy tying the loose ends for a smooth roll-out.

 

Heading the effort is the chairman of the company, Ratan Tata, who drives a Nano whenever hes at the companys plant at Pune. By doing that, he is putting himself in the place of the buyers of the car, his reasoning being that when he drives it around, he is likely to identify trouble spots or glitches much before the car gets into the market..., said a parts supplier for the Nano who claims to have heard this story from employees at the factory. He didnt want to be identified.

 

Tata Motors is also finishing critical training for its dealers, said two people familiar with the matter who did not want to be identified. Groups of technical staff from dealerships across cities have undergone training at the companys training centre in Pune the past few weeks, they said.

 

The Tata firms engineers and trainers have been stripping the Nano and explaining the technology and machinery to the technical staff from the dealerships. The staff is then asked to put the car together again so they know the car inside-out, one of these persons said. Sales staff at dealerships, too, is being coached in using appropriate marketing communication for the car, he added.

 

While the Nano has contemporary styling and technology, meets the latest emission norms and has cleared European crash test standards, the same features that have helped keep the price for the car ultra inexpensive could raise concerns among buyers, some parts suppliers for the car said.

 

One of the tough issues to sell could be high use of plastic in the car, some say.

People could, for instance, worry about the fact that the car uses a lot more plastic than is usually found in conventional cars, an executive at a Tata supplier said, asking not to be identified. And the sales person at the dealership has to be able to explain to customers that plastic is not just as tough or tougher than steel, but also helps the performance of the car by making it significantly lighter.

 

The Nano uses plastic for parts such as engine and cylinder covers as well as fuels rails, instead of the conventional aluminium or steel. The hard sell at the dealerships will have to cover potential concerns on the power delivered by the car, especially in stop-go, city driving conditions, another vendor said. A lot of people will have doubts about the 623cc engine to perform in conditions such as climbing a steep incline, etc. The car salesman has to be able to explain that this is a car designed to be used on city roads, this executive added.

 

The staff at the dealerships will eventually drive sales and it is critical that they know how to explain every vital detail about the car to the consumer.

These efforts aside, certain other concerns remain. It is still not clear how Tata Motors will handle servicing of the Nano, dubbed the peoples car, in rural and semi-urban areas, typically dominated by small garages that service all cars under one roof.

Tata Motors did not reply to an email query sent early Tuesday. Late evening spokesman said he had not been able to look at the mail until then and said he would reply if he could.

 

NANO LOANS TO COME AT HEFTY PREMIUM

 Tata Motors is putting the final touches to a finance scheme for the Nano car through a tie-up with the State Bank of India (SBI), Indias largest bank, under which the bank will finance 70 per cent of the price of the car at an interest rate of 14 to 14.75 per cent for a tenure of up to five years.

General managers of SBI branches across the country had a meeting with senior Tata
Motors executives last week to finalise the branches and the method of rolling out the
loan scheme across the country, especially in rural locations and small towns.

The terms for the Nano finance scheme are stiffer than those offered by both government-owned and private sector banks for comparable tenures. Government-owned banks currently charge between 11.5 and 12 per cent, although SBI is charging a concessional 10 per cent for car loans before May 31 for the first year as part of a special scheme.
Private banks like HDFC Bank charge interest of 12 to 12.5 per cent and ICICI Bank 14.5 per cent. Most banks finance up to 85 per cent of the price of the car.

According to sources, the company has already received over 40 million queries on the Nano on its websites. The entry-level model will cost Rs 1 lakh (excluding freight and value-added tax ) and consumers are expected to pay Rs 25,000 to Rs 30,000 more for the air-conditioned model, according to dealers who have still not been given the final pricing. Asked about the finance scheme, a Tata Motors spokesperson said: The booking process and other details will be announced on March 23, 2009. In any case, we have said on February 26, 2009, that Tata Motors is making arrangements for the widest possible network to book the car, so that prospective customers can conveniently avail of booking facilities at their locations, across the length and breadth of India. Your information on interest rates etc is purely speculative. An email query to SBI spokesperson did not elicit a reply.

Those in the know say that the company will be constrained by the number of cars it can roll out from assembly lines in Pune (Maharashtra) and Pant Nagar (Uttarakhand), a makeshift arrangement till the main plant in Gujarat starts operations in October. In the first 12 months, the aim is to roll out around 100,000 cars.

The chances of selling the car at a premium on the black market, however, could be minimised because of the allotment system. A Tata Motors dealer based in Kolkata, said: Cars will be allotted to buyers by random computer sampling, which the company will do, and cars will be delivered in the name of the buyer to us. The chances of black marketing are not possible in such a case.

LIC HIKES STAKE IN CUMMINS INDIA TO 7.60%

 Life Insurance Corp of India said it has hiked its stake in engine manufacturer Cummins India to 7.60 per cent after buying additional shares worth Rs 72.22 crore through an open-market transaction. The country's biggest insurance service provider, LIC, purchased 43.22 lakh shares representing 2.18 per cent stake in engine manufacturer, Cummins India said in a filing to the Bombay Stock Exchange.

Prior to the transaction, LIC held 5.42 per cent stake in the company, while now it holds over 1.50 crore shares representing 7.60 per cent stake in Cummins India. Shares of Cummins India were trading at Rs 158.40, up 4.14 per cent on the BSE

MOTHERSON HOPES TO TURN AROUND VISIOCORP IN A YEAR

 Motherson Sumi group, the $1.6-billion auto component group, expects to turn around the recently acquired Visiocorp, the worlds largest automotive mirror maker, in a year.

It will invest 80 million in a year for restructuring Visiocorp, which it acquired earlier this month for Rs 175 crore. The Delhi-based component maker stated that it will raise 50 million through debt and the remaining 30 million through capital infusion.
With the acquisition of Visiocorp, which has about 24 per cent of the global market share, Motherson Sumi now holds 300 patents of the European company.

We will raise 50 million to meet the capital expenditure over the next one year. About 20 million would be invested in tooling costs and the remaining towards restructuring of the plants, said Mr Laksh Vaaman Sehgal, Chief Executive Officer of Samvardhana Motherson Finance Ltd, the group company that bought Visiocorp along with the listed entity, Motherson Sumi Systems Ltd.

As a joint venture company, we have always been constrained by not competing in the markets where our partners have a presence. With this acquisition, we own a technology and a product line that gives us a global presence, said Mr Vivek Chaand Sehgal, Group Chairman. Post the acquisition, the company expects to expand its presence in the bigger auto markets such as the US and China.

Visiocorp has two production facilities in China. So we could look at making it a base for global sourcing, said Mr Sehgal. Visiocorp, which has a turnover of 660 million, has 16 plants worldwide and a workforce of 4,000. With the acquisition, Motherson Sumi groups workforce will now be over 20,000.

GOVT URGED TO EXEMPT AUTO PART MAKERS FROM ENTRY TAX

 The Confederation of Indian Industry has urged the Madhya Pradesh government to exempt motor vehicle parts manufacturers from entry tax.
The state government had brought in an Act - Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam 1976 - and imposed a 1 per cent tax on entry of goods into the local area, their consumption or sale.

However, the automobile sector was given exemption on April 2002 for a period of five years. It had not been extended from April 2007 and auto parts manufacturers are facing a tough competition during this time of recession from those of neighbouring states, BS Khargonekar, CII, chairman MP chapter, said. The CII is likely to meet senior government officials soon in this regard.

The cost of manufacture of automobile or parts has gone up 0.7 per cent or more depending upon model, value and type of motor vehicles due to this. With entry of multinational companies in the segment, the worst sufferers are small scale and medium scale industries in Madhya Pradesh. Uttarakhand has granted special exemptions to automobile manufacturers," the CII said.

At present, automobile attracts 4 per cent value added tax and one percent entry tax. MP has big auto companies like Eicher, Man-Force, Avtec, Mahindra and over 50 auto ancillaries.

HERO HONDA BEATS RIVALS BY A MILE, SALES UP 12%

 Aphorisms linking crises and opportunities abound, but examples of entities that find opportunities in crisis situations are rare. Indias largest two-wheeler maker is a case in point.

At a time when the Indian automobile company has had to battle its worst crisis in a decade that has seen demand dwindle and sales tumble, Hero Honda has posted the best-ever performance in its 25-year history.

The company, the worlds largest two-wheeler maker for the past eight years on the trot, has posted a 12% sales growth to 33 lakh units in the first 11 months of this fiscal year, almost single-handedly keeping its sector in positive sales territory despite rivals like Bajaj Auto and TVS Motors reporting negative sales.

It is also the only listed two-wheeler maker in India to grow profits and margins in fact, its profit margins for the December 2008 quarter were the highest ever in the past three years. Its net profit rose 9.24% to Rs 300.42 crore for the quarter while its total turnover rose 5% to Rs 2,881.27 crore.

The companys share price hit a 52-week high at Rs 985 on March 13 this year, a stark contrast to the stock markets benchmark index, which has tumbled to less than half its record high in the past year or so. As on February 27, its market value stood behind just Tata Motors and Maruti Suzuki in the Indian automobile sector.

How has Hero Honda managed this? What makes the company tick? The answer, according to the companys managing director Pawan Munjal, is simple: We make products that customer wants and that is driving sales.

As an explanation, this may sound pedestrian, but it forms the core of the companys strategy. When rivals, including Bajaj Auto, decided to move up the value chain to focus on the more profitable 125-cc segment in motorcycles, Hero Honda decided to consolidate its position in what it did best.

It kept on launching new bikes in the largest segment of the entire two-wheeler industry the 100-cc category.

As the economic slowdown forced customers to maintain their preference for the 100-cc economy
segment instead of scaling up their purchasing dreams, Hero Hondas top-selling 100-cc bike Splendour was out there sporting a price tag cheaper than its rivals.

Sales grew and the company soon found itself with a 48% market share in the 7-million-units-a-year Indian two-wheeler market.

Its a single-minded focus to drive volumes which automatically leads to higher profits, said Munjal, whose family founded the Hero Group that started making bicycle parts. The Hero group tied hands with Japans Honda Motors in 1984 to manufacture motorcycles.

MAHINDRA & MAHINDRA, ASHOK LEYLAND GEAR UP FOR AFGHAN RIDE

 Commercial vehicle makers Ashok Leyland Ltd and Mahindra and Mahindra Ltd could soon access an Indian line of credit to sell their products in strife-torn Afghanistan.For cultivation, we need tractors. Mahindra and Mahindra are in talks with us, said A. Munir Khan, commercial counsellor at the Afghan embassy. They have offered to study the conditions of Afghanistan and supply us tractors suited for our environment.

Buses are the main form of transportation in Afghanistan and Ashok Leyland is very interested in supplying buses to us, Khan added. It has also offered to train Afghan automobile engineers at its manufacturing facilities in India.

Both the offers are under consideration of the Afghanistan government. India has provided a $400 million (Rs2,064 crore) line of credit (till August 2008) to Afghanistan, which Indian companies can use to do business in Afghanistan, Khan said.A line of credit is an agreement by a lender to provide a client with loans up to an approved limit, without a formal application. If Afghanistan agrees to import tractors and buses from these companies, which are looking at newer markets to battle a downturn at home, the cost of transaction would be deducted from the line of credit.

An Ashok Leyland spokesperson said he is not aware of the development. A Mahindra and Mahindra spokesperson refused to comment because top company officials were travelling. If the companies are getting line of credit to sell vehicles in Afghanistan, it augurs well for them as there is an untapped potential in countries like these where a lot of rebuilding needs to be done, said Abdul Majeed, partner at audit firm Price Waterhouse.

Currently, only 6% of the land in Afghanistan is under cultivation though 15% of it is suitable for farming. Wheat and cotton are the most important crops; the country also grows barley, corn, and rice. Fruit and nuts are among Afghanistans most important exports. Afghanistan has 3,500 km of asphalt roads and 10,000 km of partially constructed roads. In comparison, India has a road network of 3.3 million km.
India recently completed the 218km road link connecting the town of Delaram on the Kandahar-Herat highway to Zaranj in Afghanistan. The project is expected to transform Afghanistans economic landscape, by connecting its far-flung areas.

YEAR POSES BIG CHALLENGES FOR US: MERCEDES INDIA CEO

 Luxury carmaker, Mercedes Benz, which sold 3,625 cars in India in 2008, seems to be having a bumpy ride this year. For one, the worlds largest luxury carmaker BMW has dislodged Mercedes Benz from the No. 1 slot of the Indian luxury car market in the first two months of 2009. Wilfred G Aulbur, managing director and CEO of Mercedes Benz India, says, The current year is quite challenging for us. We sold 20-30 units in the first two months of the current year. Economic slowdown coupled with liquidity crunch will remain the main issues of concern.

To attract more customers the company plans to pump in Rs 150 crore in 2009-10 to upgrade its existing facilities in Delhi, Chandigarh, and Hyderabad.  The automaker will also keep on offering attractive deals and schemes to woo new customers.

We hope the things will start looking up in the second half of this year, said Dr Aulbur. The general elections will be over by that time. We are quite optimistic to achieve the target set for the year 2009. However, he declined to divulge the sales target of 2009.
The year 2008 proved quite fruitful for the luxury carmaker as the companys national sales grew 47% over the previous year. The market of Punjab contributed significantly to the sales of the companywhen it grew 48%.

The company sold 276 cars in this region (Chandigarh and part of Haryana) last year (Jan-December) as compared to 175 units it sold the previous year.

Aulbur was in Ludhiana to launch its popular SUV the M-Class in the city.
The new M-Class is available in two engine choicesthe ML 320 CDI (featuring a high-torque diesel engine) and the ML 350 (powered by a high output gasoline engine).

MERCEDES-BENZ LAUNCHES ITS M-CLASS MODEL IN HYDERABAD

 Mercedes-Benz India on Monday launched its popular SUV the M-Class Model in the city. The new M-Class is available in two engine choices: the ML 320 CDI (featuring a high-torque diesel engine) and the ML 350 (powered by a high output gaso line engine).

Talking to media persons here Mr Suhas Kadlaskar, Director, Corporate Affairs of Mercedes-Benz India, said that "The new M-Class offers best of both the worlds the highest levels of luxury, comfort and on-road refinement combined with excellent off-road capabilities and best-in-class safety standards''.

We have maintained the same price for this product despite significant enhancements of equipment, features and performance, thus making the best value for money offering in this segment,'' he added. The new car ML 350 is priced at Rs 53.77 lakhs, ex-show room Mumbai and ML 320 CDI is priced at Rs 54 lakhs, ex-showroom Mumbai.

The New M-Class offers a high-level of on road refinement. It presents a state-of-the art 7-speed automatic transmission (7G-TRONIC), a height adjustable air suspension (AIRMATIC), an Exterior Sports Package featuring 19 inch alloy wheels, and available luxurious leather interior with burr walnut accents. The M-Class offers excellent off-road capabilities. It features the famous 4MATIC permanent all-wheel drive system with a start-off assist & a Downhill Speed Regulation (DSR), Mr Kadlaskar said.

NISSAN SHUFFLES BRASS AS PROJECTS FACE DELAYS

 The global economic downturn and realities of the Indian automobile market appear to be forcing Nissan Motor to change its strategy. Till last year, the company was viewing India as a "frugal engineering" opportunity, with ambitious manufacturing plans and a detailed product rollout calendar. Though product rollouts are still largely on track, the pace of development on several fronts has slowed down.

Nissan operates a wholly owned subsidiary, Nissan Motor India, a manufacturing joint venture with sister company Renault called Renault Nissan Automotive India and another JV with Ashok Leyland for light commercial vehicles. Besides, it is working with Renault and Bajaj Auto to develop an ultra low cost (ULC) car.

Patrick Pelata, the COO of Renault SA, has already conceded the likelihood of a "slight delay" in the ULC project due to Bajaj's objections on the positioning of the vehicle.
Going by sources, though several prototypes of the vehicle have been prepared, none has been finalised so far. Thus, though both Renault and Nissan appear committed to this ambitious project, Bajaj Auto may well go it alone in the end.

On its part, the LCV JV with Leyland is also suffering. Land acquisition for the project, near Chennai, has been delayed and the partners appear to be looking at scaling down the venture.

A Nissan spokesperson told DNA Money, "Nissan is studying the optimisation of its investments for its LCV business unit. Studies are ongoing and at this stage, we have no comment to make on the timing or outcomes."

Meanwhile, the attempts of Hover, the Indian company which handles marketing, distribution and sales of the X-Trail and Teana cars for Nissan within India, to expand dealership network remain unsuccessful.

Some months ago, Hover had roped in Nitish Tipnis from Reliance Retail for the top job. However, going by sources, the limited sales numbers of the two cars have ensured that the total number of dealerships remain at five.

In a far reaching organisational shake up late last week, Nissan announced the appointment of two separate heads for the manufacturing operations at Chennai and the marketing, sales and distribution function (outsourced to Hover Automotive but based out of Mumbai). Till now, both these functions were being looked after by Shohei Kimura.
But from April 1, Kiminobu Tokuyama has been promoted to the post of MD & CEO of Nissan Motor India even as Neeraj Garg, director and well-known Indian face at the company, has put in his papers.

Tokuyama would look after exports and domestic business for Nissan, the spokesperson said. Sources say he would also be the headquarters' key operative in dealing with the Leyland JV and the ULC projects.

Akira Sakurai, the current general manager of vehicle production engineering division at Renault Nissan Automotive India has been appointed the MD and CEO. Sakurai would be based in Chennai, looking after the production function. The company insists that production of next generation car 'Micra' remains in track from next year.

FORD TO ROLL OUT SMALL CAR IN 2010

 Ford India said troubles with its parent in US will not affect its planned $500 million investments for India, and added that the companys small car would hit the market by early 2010 with localisation as high as 85% to keep the price competitive.

Michael Boneham, MD and president of Ford India, told TOI that the company's expansion plans were going ahead "as scheduled". The US auto major that posted a record $14.7 billion net loss in 2008 globally had announced the half-a-billion dollar investment for India last year to double annual production capacity to 2 lakh units and make 2.5 lakh petrol and diesel engines.

"The last six months have been tough for the auto industry... and we maintain a cautious outlook for the rest of 2009," Boneham said, adding that he expected a turnaround only by 2010. "And this will be the time when we bring in our small car. Thus, we are confident it will get a good response," he added.

The company is making efforts to ensure that its new small car, that is being designed and engineered for the Indian market, is attractively priced considering it faces tough competition from players like Maruti Suzuki, Hyundai and Tata. "It will the first offering from Ford in the mass-market segment and we are making efforts to keep it cost-competitive while making it a great value proposition," he said.

Ford currently sells sedans like Ikon and Fiesta in India apart from the SUV Endeavour and has seen sales shrinking 19% in April-February'09 period at 24849 units (year-on-year). Boneham said he expected numbers to turn positive once the small car hits the market.

Ford's car would come with petrol and diesel engines, both falling within the small car definition of the government to avail lower excise benefits i.e. petrol engine under 1200cc and diesel under 1500cc with overall length below four metres.

Asked whether the company had plans to export the model, Boneham said it would certainly be sold abroad, though the initial focus would be on the domestic market. "Yes, we would look at markets beyond India and these would be countries in the Asian region, South Africa as well as Asia-Pacific area," he said. And in the run-up to the car's launch, the company is beefing up sales and service network in Tier-2 and Tier-3 cities while also working on relationships with banks for broadening retail finance options.