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| This Update also carries stories featured on Sunday, February 07, 2010 | ||||
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| INDUSTRY Excise worries put Jan car sales in top gear INTERVIEWS/FEATURES Customers will only need to deal with a single entity': CEO, DHL India COMPONENTS Advik to foray into four-wheeler components segment ALLIED INDUSTRIES Commercial vehicle makers skid on tyre shortage FINANCE & INSURANCE Shriram to float Automall subsidiary OIL, LUBRICANTS & ALTERNATIVE FUELS Price deregulation of auto fuel to pave way for pvt retailers re-entry | CARS, SUVs, MUVs Maruti, Hyundai sales zip Lost January to Mercedes, but 2010 will be ours: BMW COMMERCIAL VEHICLESToyota sees doubling of sales powered by Etios in India Tata Motors, M&M, Reva eye electric compact truck segment | |||
 INDUSTRYLijee Philip The Economic Times (Web & Print Edition) (Feb 08) Mumbai: Ravi Mehra, a 37 year-old senior sales executive from Mumbais central suburb, has hurriedly bought a Honda City car for Rs 10.3 lakh last week. Reason, he believes that finance minister Pranab Mukherjee will walk the talk on turning towards fiscal discipline by raising taxes even as some experts bet he wont, in order to avoid slipping back to lower growth. I preponed my purchase, fearing a massive price hike in March, especially for mid-size cars, said Mr Mehra. Consumer mindset had transformed in the past two decades of economic reform, from stocking up to avoid higher prices, to deferring purchases in February hoping for lower prices in March. That is showing signs of reversal, at least for this year. They are lining up to beat a likely 4 percentage point raise in excise duty on cars. Sale of Maruti Swift, Honda City, Fiats Grande Punto, and Toyota Innova are brisk in an otherwise slow month. We see a lot of advancing of purchases this month, both among individuals and corporates, said Mohan Mariwala, who runs Honda and Mercedes dealerships. This time, customers fear that the excise duties will go up leading to price hikes, he said. Companies and consumers, when they buy in March, benefit from lower prices and depreciation benefits after tax rates are cut on the customary February 28 Budget. This is unlike the 70s and 80s when people used to hoard before the budget fearing higher tax rates when then the nation was still in the grips of Nehruvian socialism where taxes were raised year-after-year. Serpentine queues in front of petrol pumps on February 27 to beat a hike and signs of no stock were the norm. This year, it may be back to bad old days, as Mr Mukherjee may raise tax rates on February 26 after cutting them to lowest last year to save industry from credit crisis. In the past few years, excise duties were cut from a peak of 40% to 16% and to 8% now due to the demand slump following credit crisis. Excise duty for cars may go up to 12%, but on small cars, such as Nano and Alto, it may remain at 8%, industry experts said. Maruti-Suzuki, makers of Alto and WagonR, Tata Motors, Honda SIEL, Mahindra & Mahindra, Toyota and General Motors have increased production to meet the increased demand, said Abdul Majeed, auto practice leader, PricewaterhouseCoopers. The pent up demand from consumers, who were waiting for new models, is also boosting sales. The new launches in January have also increased the enquiry levels which is getting converted to sales. Many customers are booking and taking delivery next month to avail of depreciation benefits, said Rishabh Sheth, owner of Volkswagen, Honda and Mercedes dealerships. Some of the new launches last month were General Motors Beat, Toyota Etios, Ford Figo and Volkswagens Polo. January 2010 has ended with an estimated 35% growth for the industry. The growth momentum is likely to be sustained in February, albeit at a lower growth than January, said Rajiv Dube, president, passenger cars, Tata Motors. Passenger vehicles sales touched 1.83 lakh units in January 2010, compared with 1.35 lakh units in January 2009. Rakesh Batra, partner and national director-auto practice at consulting firm Ernst & Young said: The growth momentum, with double-digit sales growth, is likely to continue this month, too. However, it may not be sustainable in the long run. We expect a compounded growth rate of 10-15% and passenger vehicle volumes to touch 3.5 million units in 2015. Copyright 2010, Bennett, Coleman & Co. Ltd. All Rights Reserved" Mint (Web & Print Edition) (Feb 08) The performance of automobile sector in the third quarter of FY10 was in line with our expectations. Strong volume growth coupled with lower input costs led to a healthy earnings before interest, tax, depreciation and amortization (Ebitda) margin expansion during the quarter. Our automobile coverage universe posted a revenue growth of 67.2% year-on-year (y-o-y), led by 61.8% y-o-y growth in volumes. On a sequential basis, revenue grew by 6.1%, mainly led by a 4.7% growth in volumes. On a sequential basis, Hero Honda Motors Ltd was the only company which reported a decline of 5.7% in revenue on account of a 6.1% decline in its volumes sequentially. Indications by various managements after the results were declared suggest that the volume momentum is likely to continue at least till the fourth quarter. There could be an effect on volumes, especially in the commercial vehicle (CV) and passenger car space in case of an excise duty rollback in the coming Budget. Two-wheeler sales are showing consistent improvement in volume numbers for the past couple of quarters on the back of improvement in macroeconomic conditions, new launches by companies and less reliance on financing. Bajaj Auto Ltd has been gaining market share at the cost of Hero Honda with Bajaj Autos market share at 24.7% as of December, a gain of 480 basis points (bps). The gain for Bajaj Auto in the market share has come on account of the newly launched 100cc Discover. New launches coupled with improvement in the availability of finance and lower interest rate led to a robust demand for cars in the last few months. MarutiSuzuki India Ltd reported a 15.5% growth over the previous month in domestic volumes in January. New launches by European car makers are likely to drive a double-digit growth for this segment in FY11. The CV sector has witnessed consistent improvement in volume numbers on account of improvement in the availability of freight, a pick-up in the movement of commodities such as steel and iron ore and road/highway development activities gaining momentum. Thew need for last-mile transportation (hub and spoke model) is likely to drive the growth in the light commercial vehicle (LCV) segment with new launches by existing automobile manufacturers. On a quarter-on-quarter (q-o-q) basis, raw material costs increased by 70 bps, thereby affecting Ebitda margins of all the companies with the exception of Maruti Suzuki. On a q-o-q basis, other expenses declined by 90 bps compensating for the 70 bps increase in the input cost for our coverage universe, thereby leading to constant Ebitda margins q-o-q at 15.2%. Maruti Suzuki was the only company in our coverage universe which reported a sequential decline of 124 bps in raw material cost on account of benefits of lower input cost negotiated during the second quarter of FY10 being reflected in the third quarter. The companies indicated that raw material prices are likely to dent their margins. Two-wheelers profit numbers were in line with our expectations. On the one hand, Maruti Suzuki beat expectations by a wide margin on account of the highest-ever Ebitda margins at 15.1%. On the other hand, Mahindra and Mahindra Ltd was below our expectation due to low other income and low operating margins compared with the expectations. Tight cost control coupled with better operating leverage negated the effect of higher raw material cost for the quarter. On a q-o-q basis, other expenses declined by 90 bps, thereby compensating for the 70-bps increase in input cost for our coverage universe. Hence, Ebitda margins for the quarter were maintained at 15.2%, flat, sequentially. Murali Gopalan The Hindu Business Line (Web & Print Edition) (Feb 08) Mumbai: The diesel version of the Nano, scheduled to debut in the second half of 2010-11, could be the worst hit if the Centre accepts the Kirit Parikh panel's recommendation of imposing a flat Rs 80,000 excise levy on all diesel cars. Though there is still no official word on the possible price tag of the car, the top-end could cost around Rs 2.7 lakh (on-road, Mumbai) given that its petrol sibling is nearly Rs 2 lakh. Should the Rs 80,000 levy be imposed, the 800cc Nano diesel will be closer to Rs 3.5 lakh which will put it on a par with the basic Hyundai Santro (petrol) or the present Indica V2 (diesel). And to think that Tata Motors wanted to position the Nano as the people's car. Current levy structure The present excise duty for small cars (those under four metres with maximum engine capacities of 1.2 litres for petrol and 1.5 litres for diesel) is 8 per cent. However, the imposition of the additional Rs 80,000 would mean a net excise levy of nearly 35 per cent for the diesel Nano which experts say borders on the absurd. This would be equally true for all compact diesels though, in terms of percentage, the levy would be gradually lower with higher price tags. Simply put, the Rs 80,000 excise levy would make a mockery of the present eight and 20 per cent classifications on small and large cars, sources said. Typically, diesel cars such as the Indica, Logan, Indigo and the Innova multipurpose vehicle are used as taxis, but this user segment is reimbursed the excise levy which means it would not be passed on to the end-user. It is also strange why cars are always the ones to bear the cross for any muddle concerning fuel prices. Last fiscal saw the worst crisis in recent times when crude prices went out of control and the Centre promptly slapped an additional Rs 15,000-20,000 levy on all cars with engine capacities of 1,500cc-2,000cc. The move, intended to penalise fuel guzzlers, largely impacted diesel utility vehicles. Naturally, there was a lot of heartburn because the Centre was not being seen as too proactive in taking hard decisions on raising prices instead. Subject of controversy In fact, diesel vehicles have always been the subject of controversy for years now. In the early nineties, multi-utility vehicles, with a certain seating capacity, were given sops on excise duty which effectively sealed the fate of the petrol-driven Maruti Gypsy. The Centre then introduced another norm in 1994-95 where only those MUVs weighing over 2,700 kg could be eligible for the lower duty. It did not take too long for manufacturers to add a whole lot of steel in their vehicles so that they paid less, sources recalled. Sanity in the excise duty structure soon prevailed, but the reluctance to hike auto fuel prices resulted in the automobile sector taking the rap instead, the latest being the Kirit Parikh panel's salvo on the Rs 80,000 levy. There is no question that the subsidy on diesel is the root cause of this problem. It is unlikely that the Centre will tamper with its price because its fall-out on freight rates would stoke inflation levels which are already hurting consumers. Ideally, the automobile sector would rather that this recommendation be junked. In the event Cabinet seconds the proposal, experts believe the best way forward is to go in for duty gradation where small cars are imposed an additional 8 per cent while other diesels 12-16 per cent. Flat tax move too little, too late: environmentalists The Hindu (Web & Print Edition) Swaraj Baggonkar Business Standard (Web & Print Edition) (Feb 07) Mumbai: Customers who missed the Nano bus in 2009 will have something to cheer later this year, when Tata Motors reopens bookings for the worlds cheapest car, perhaps before December. The company had got 100,000 bookings in the first phase. Production of the mini-car at the hitherto sole manufacturing unit at Pantnagar, Uttarakhand, is being raised, while the mother plant at Sanand, Gujarat, is being readied for operations. Even as the deadline for delivering all the bookings is the last quarter of the current calendar year, the company is expected to complete this well before December. Asked about reopening of bookings, Prakash M Telang, managing director (India operations) of Tata Motors, said, We will open bookings when we come closer to completion of delivery. However, we will have some surprises this time. Since mid-July last year, when the first customer got his Nano, the company has delivered 17,537 units. From producing 70 units a day from the excise-free zone of Pantnagar, the company now produces almost 150 units a day. This is expected to become 200 units per day in the next few months. The installed annual capacity of 50,000 units created in Uttarakhand will, therefore, be raised to 72,000 units. Sources say production can be stretched further to 90,000 units a year. The plant in Gujarat will add significant volumes once commercial production begins in March. A gradual rise to 20,000 units a month at Sanand will help the company meet the delivery target well before December, say market experts. The price will be an issue, considering the significant rise in key raw material prices lately. The company had frozen the price of the first lot of 100,000 units but stated that the next batch might come with revised prices. Prices of key materials such as steel, aluminium, copper and rubber, among other things, have moved north over the past six months. Tata Motors, like other vehicle manufacturers, raised prices of its cars, SUVs and MUVs by Rs 1,500-3,500 per unit this month. This, however, did not cover the entire increase in input costs, said officials. Deccan Chronicle (Web Edition) (Feb 08) Mumbai: In spite of the sharp increases in stock prices since April, auto majors Maruti and Mahindra & Mahindra remain favourites in the broker and analyst community. Several major brokers including UBS, Nomura, Morgan Stanley, JP Morgan and Citi have both the stocks in their buy lists in the auto pack. Since the beginning of this fiscal, Maruti has seen its price shoot up 75 per cent while the M&M stock has soared 139 per cent. Markets expect sales to remain strong for some more weeks because of anticipated price hikes. There is an expectation that the Centre may roll back during Budget the two per cent cut in auto excise duties. M&M gets a big chunk of its sales from the tractor business tractor sales added up to just under 17,000 of the total 47,000 vehicles the company sold in January. Citi says that apart from stable prices, the tractor segment is unlikely to see any of the duty/tax hikes that may hit cars. Another factor in favour of M&M is the comparatively lower competition in the tractor segment. The buying thesis for Maruti hinges around the fact that it dominates the Indian car market. Strong growth in the overall car market also means strong growth for Maruti. The recent launch of Eeco is also expected to help growth. The one problem for the company could be the entry of foreign firms, which will result in some erosion of market share. Automobile companies, especially Maruti and M&M, have registered an impressive growth in sales. Maruti Jan 09 71,779 Dec 09 84,804 Jan 10 95,649 M&M Jan 09 24,542 Dec 09 36,440 Jan 10 47,028 - Markets expect sales to remain strong because of anticipated price hikes. - Low competition in tractor segment will favour M&M. Strong growth in the car market also means strong growth for Maruti. Maruti, M&M top brokers list Asian Age (Delhi Print Edition) The Hindu Business Line (Web Edition) (Feb 08) Hyderabad: The Andhra Pradesh Government has enhanced the life tax on three and four-wheelers from nine per cent to 12 and 14 per cent, depending upon the cost of the vehicle. The ordinance, issued on February 2, spares two-wheelers from the tax hike. As per new imposts, vehicles priced at Rs 10 lakh and above will have to pay 14 per cent tax, and vehicles priced below Rs 10 lakh, will be levied 12 per cent. | ||||
| Manu P. Toms The Hindu Business Line (Web & Print Edition) (Feb 08) Growth in the automotive sector has boosted business opportunities in allied sectors. One such allied business which is fast growing is automotive logistics. Mr Christoph Remund, CEO, DHL India said the company expects over 20 per cent growth in automotive transport business this year. In an interview to Business Line, Mr Remund spoke about the role of a logistics player in the automotive business. Excerpts from the interview: What is the role of a logistic player like DHL in the automotive business? Our business focuses on inbound (transport) for Indian as well as multinational manufacturers that have established automobile factories in India. The other area is sourcing of components, as India has become a source for global manufacturers. Multinationals (such as BMW, VW and GM) that want to expand their business here have been bringing in plant equipment. We help them in importing such equipment. They also bring in several completely built cars. Once the plant is running, we help them with import of their supplies. We are here to help them set up local distribution networks; I think this is the biggest challenge for the multinationals. If you look at Maruti and Tata they have set up strong distribution networks over many years. The new players don't have that reach and we assist them through our network, warehouses and supply chain. We help them through the network of Bluedart (the group company of DHL in India) too. During the economic downturn, inbound transport of automotives, plant equipment and spare parts might have been affected. What is the situation now? The automotive sector is a prime example of how this whole crisis worked and also of a V-shaped recovery. It is V-shaped because the reaction to the crisis was a knee-jerk reaction. When people realised they have overdone it, the recovery is much faster. We saw that in the last months of 2008 and the early months of 2009, when foreign direct investments of about $40 million were pulled out from India. All that money has come back and, more than that, people have realised that India is a safe place to put their money. Automotive manufacturers who delayed their plans are now investing. So, we have seen our volumes shooting up from June-July onwards. What is the growth you are seeing now in automotive logistics? We record every year the movement of about 12,000 tonnes of airfreight and 60,000 TEUs of ocean freight. The growth we have seen in our automotive business (movement of cars, materials, parts and plant equipment) from June is well above 20 per cent. It keeps growing. I don't see any reason for it to stop in 2010. I hope this will continue like this, at least for the first six months of this year. About 15 per cent of our total business is from automotive sector and it is growing very fast. What about the outbound transport of automotives and auto components? A big part of this, obviously, is the export of built-up cars. And we see production shifting to countries like India. Our customers have direct contract with the car carriers. Still they need somebody to oversee this entire chain. Shipping from one port to other is just part of the whole thing. You need to transport the goods from the factory, you need to take them to the destination. This is where we, with our global network, can come in; basically to link various players in the supply chain business. The customers, instead of dealing with ten different players, can deal with just one single entity. Europe has, of late, become an important export destination for Indian automobiles and components. Do you see new opportunities here? When MNCs come to India, their task is to set up vast distribution networks. This also applies to Asian carmakers operating in Europe. This is where we come in. With our network in Europe we can provide logistics solutions to Tata, Mahindra and Maruti across the continent. We have seen more and more business from these customers. Earlier, we did more inbound business with these customers. Now they ask us can you help us in Germany? Can you help us UK?, and mainly in the case of spare parts. India has become a major centre for component sourcing. What does this mean for you? Spare parts export is a business with huge potential. One of the key issues is, of course, quality. It takes a long time for a manufacturer's product to get accepted. Spare parts exports declined in the beginning of the year. They are stabilising now. Component manufacturers are small and medium size companies and they don't have huge networks in Europe. Here, our trade line concept helps them we can be their extended arm in Europe. | ||||
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| Manu P. Toms The Hindu Business Line (Web & Print Edition) (Feb 07) Mumbai: Tata Motors, Mahindra & Mahindra, and Reva Electric Car Company are planning to launch electric trucks and passenger carriers in the sub-one-tonne segment. The development in electric power-train technology triggers open a niche segment in commercial vehicles with at least three manufacturers foraying into the battery-run light truck/van market. Tata Motors has developed an electric version of the Ace which could debut soon. M&M, likewise, is working on a variant for the recently launched 0.9-tonne Maxximo. We will come out with an electric version in 8-10 months, both in the cargo and passenger carrier space, said Mr Rajan Wadhera, Chief of Engineering and Development, M&M. Mr Chetan Maini, Deputy Chairman and Chief Technology Officer, Reva, has said the company was ready with its commercial vehicle platforms and was in talks with local and global players. With growing awareness on the harmful effects of air and noise pollution, the stage is set for electric vehicles even for short hauls. Huge shopping and residential complexes as well as airports need such vehicles. We know this is going to be very competitive and we are preparing for it, said Mr Wadhera. It will be interesting to see if these electric options will grow the sub-one-tonne market, which does numbers of one lakh units annually. It could also get a share of 3.5 lakh-strong three-wheeler segment. We believe there is a market especially in the intra-city transport segment. The electric power-train can be expensive but the running cost is just a tenth of diesel vehicles, said Mr R. Chandramauli, President, Sales and Marketing, Reva. However, he said that electric commercial vehicles will be sold at a premium to diesel variants. Sindhu Bhattacharya Daily News & Analysis (Web Edition) (Feb 08) New Delhi: VE Commercial Vehicles (VECV), the joint venture promoted by Eicher Motors and Volvo, has lined up four new product launches this year as it prepares to take advantage of the surge in commercial vehicle market. On the horizon are a 6x4 tipper and a semi low floor city bus under the Eicher brand, besides a new tipper and tractor trailer under the Volvo brand. The JVs plans to pump in Rs 500 crore by 2012 remain on track. This investment would be used to ramp up production beyond the 4,000 units per month capacity available at Pithampur at present, enlarge the components and engineering solutions business and capture significant market share in heavy duty trucks and city buses. Siddhartha Lal, MD & CEO told DNA Money the company has set itself ambitious market share targets by 2015. We are looking at a 15% share in the heavy-duty truck segment against only 2% now; 30% in light and medium duty from 27% now and 20-25% in city buses. We also want to retain our 70% share in the high value CKD truck market with the Volvo brand. Lal said the overall CV sector sales have improved drastically because the rolling population of primary-usage CVs came down last year after most transporters stopped buying trucks. Rolling population, according to industry estimates, stands a 3.5 million trucks and buses in the above 5-tonne category. This has to be replenished. We see an encouraging buying trend heret here is a strong sentiment. Transporters are saying Is saal hum kharidenge. To a question on whether VECV had been asked by Volvo for permission to manufacture and export trucks other than the Volvo brand trucks from its Pithampur facility (on payment of a fee), Lal replied in negative. VECV has the right to manufacture all Volvo group trucks in future. But exports will be only under Eicher brand for trucks and buses. Volvo group trucks are already being produced and exported from Pithampur. He acknowledged that the company was sitting on a huge chunk of cash but said no acquisitions were on the horizon just yet. Business Standard (Delhi Print Edition) (Feb 08) | ||||
| Business Standard (Feb 08) Mumbai/ Ahmedabad: Electrotherm India Ltd (EIL), India's largest manufacturer of electric battery operated two-wheelers, is now looking at exporting its Yobykes to developed countries like the US and in Europe. Back home in India, it is trying to push its case with the Centre and the state governments for abolishing taxes on electric vehicles(EVs) and offering subsidy on buying EVs. Electrotherm as a group targets to touch revenues worth $1 billion within the next two years from around Rs 2,000 crore now. The Yobykes division currently contributes around 5-6 per cent of the net turnover. The company has been so far exporting small numbers of its bikes to neighbouring countries like Bangladesh and Sri Lanka. It now has set an eye on tapping the market in developed countries that also offer incentives to buy electric vehicles. Electrotherm's managing director Shailesh Bhandari said that "We plan to develop vehicles that will meet the regulatory norms in these countries, and we will sell the same vehicles here in India as well." He, however, pointed out that things are still in a preliminary stage and it is too early to talk about the export volumes or a timeline. Meanwhile, the company is busy pursuing state governments to waive off the excise duty on electric scooters, as this impacts sales considerably. As for example, the same scooter that costs around Rs 33,000 in Delhi that offers a 29.5 per cent subsidy on EVs costs around Rs 48,000 in Gujarat where it attracts a 14 per cent duty as well as the state offers is no subsidy on such vehicles as well. "The state governments tend to assume, that subsidy is a thing for the Centre to decide, and take no initiatives.", retorted Bhandari adding that the Centre has already taken steps like issuing notifications like road taxes are not applicable on EVs. When asked whether the company is taking up the issue on tax before the Union Budget due this month, Bhandari said that talks were on with several state governments as well as the Centre. One actually ends up saving on petrol import and petroleum subsidy, he felt , adding that back of the envelope calculations show that in four years 75,000 Yobykes riding in the country have saved more than Rs 165 crore on petrol import and over Rs 12 crore on petrol subsidy. He added that China has seen a healthy clip in the sales of electric vehicles thanks to subsidies. Around 30 million electric two wheelers sell every year in China while in India the number is much lower at just 100,000 units. The market is growing at the rate of 10-15 per cent per year. The total population of electric two wheelers in the country now would be around 3 lakh vehicles. EIL is, however,confident of doubling its sales to around 45,000 units in 2010-11 on the back of new launches this year and the 'alpha weaver' technology-based batteries it has developed for its scooters. Garima Singh Neogy The Telegraph (Feb 08) New Delhi: Superbike manufacturers are lobbying the Indian government for a reduction in import duties before they look at assembling in the country. Foreign giants such as Americas Harley-Davidson and Japans Suzuki Motorcycle are fretting over the high duties, which are now 105 per cent. Harley has recently announced its plans to bring 12 models later this year, while Suzuki has introduced two superbikes last year. The high prices have affected sales, and manufacturers will not look at the assembly option with such small volumes. Honda Motorcycle & Scooters India, has sold just 60 units of its CBR1000RR Fireblades and the CB1000R that were launched last year. The bikes are made in Hondas Kumamoto factory in Japan. We feel that lack of good roads and testing facilities, small market size and restriction in the production facility of high precision bikes, too, play their role in adversely impacting the sales, said N.K Rattan, head of sales and marketing, Honda Motorcycles. A feasibility study done by Suzuki Motorcycle India suggests that assembling bikes in India will reduce retail prices by 50 per cent and push sales volume up 30 per cent. We sell two superbikes 1300cc Hayabusa and the 1700cc Intruder priced upwards of Rs 12.5 lakhs. In the last one year, the company has sold 140 units, about 16-17 bikes a month. Unless volumes go up to at least 150 bikes a month, it will not make sense for the company to assemble here. Import duties need to be reduced, Atul Gupta, vice-president of sales and marketing, Suzuki Motorcycle India, told The Telegraph. Gupta, however, said 140 units were well above the companys expectation. Harley plans Harley-Davidson India, which will start selling its models in June, will have the first lot shipped to dealers from April as completely built units. Harley officials refused to say whether they had plans for facilities in India. Focus at the moment is on bringing bikes on Indian roads in June. Our plans for the market are to import a line-up of 12 Harley-Davidson motorcycle models for sale this summer, when our five dealerships open throughout the country, Anoop Prakash, managing director of Harley-Davidson India, said. The companys bikes have been competitively priced to meet market demand. The starting range of Harleys, including the 883 Sportster, is priced at Rs 6.95 lakh (ex-showroom), while the current crop of imports of its rivals costs over Rs 10 lakh. Analysts, too, feel small volumes prevent superbike manufacturers from looking at assembling. The volumes are just too small. It will take a long time before any company decides on getting their products through a completely knocked down route. For the minimal units they sell, it will make no economic sense to invest in an assembly line-up, said auto analyst Hormazd Sorabji. The iconic US bike makers line-up includes the Sportster, Dyna, VRSC, Softail, and Touring. Harleys have engine capacities from 883cc to 1,803cc. | ||||
| PTI See this story in: The Economic Times (Feb 08) New Delhi: Auto components maker Advik said it will set up a new plant in Maharashtra at an investment of Rs 35 crore as part of the companys plans to foray into the four-wheeler products segment. "Our facility for four-wheeler components will come up at Chakan (Maharashtra) with an investment of Rs 35 crore and it will have an annual installed capacity of five lakh units of oil pumps and tensioners," Advik Group of Companies Managing Director Aditya Bhartia told. The auto parts maker is operational in the two-wheeler segment and now wants to focus on India''s booming car market. "We already have a fair presence in the two-wheeler market and our foray into the four-wheeler segment is intended to tap the growing car market and its demands," Bhartia said. The work on the facility will start by April this year and the project will be completed within 12 months, he said. The company is also investing Rs 15 crore in capacity expansion for two-wheeler components, including setting up of a new plant and upgrading its two existing facilities. Its two facilities at Chakan and Pantnagar (Uttarakhand) have an annual installed capacity of 1.3 crore units. "Work has started on a new Rs 10 crore plant at Pantnagar which will cater to our two-wheeler clients in the North India. Besides, we are also planning to invest Rs 5 crore for upgrading our two existing facilities," Bhartia said. Advik to enter four-wheeler components sector The Hindu Business Line N. Ramakrishnan The Hindu Business Line (Feb 08) Chennai: Alkraft Thermotechnologies Pvt Ltd, a Chennai-based manufacturer of heat exchangers and engine cooling systems, will open a plant in Uttarakhand in March. The Uttarakhand plant will produce radiators and charge air cooler modules and will cater to Ashok Leyland's requirements at its plant there. Some of the components for these products will go from Alkraft's main plant at the Ambattur industrial estate, a western suburb of Chennai. According to Mr Basil Mohamed Siddeeqi, Director, Alkraft, the investment in the Uttarakhand will be about Rs 2 crore. Alkraft has a smaller operation in Jamshedpur, from where it supplies to Tata Motors. Orders picking up A majority of Alkraft's customers are in the commercial vehicles segment Tata Motors, Ashok Leyland and Force Motors which is just recovering from a steep drop in sales. Mr Siddeeqi, whose father Mr M.A. Siddeeqi founded Alkraft 15 years back, says the company's fortunes too swung with that of the commercial vehicles industry. Orders are picking up and Alkraft hopes to end this year with about Rs 50 crore in sales, close to what it earned before the slowdown, according to Mr Siddeeqi. Better fuel efficiency Alkraft, he says, has been working with commercial vehicle makers to improve the design of the heat exchangers (like a radiator in a vehicle) and charge air coolers to improve fuel efficiency. For instance, he said, Ashok Leyland wanted Alkraft to design a heat exchanger that would improve fuel efficiency. The company came up with the module in a single stack, without major changes in overall dimension. The design changes would have resulted in an at least 5-per-cent fuel saving. This product would be part of Ashok Leyland's new Unitruck range of vehicles. Alkraft hoped to tap some niche segments such as high performance intercoolers in the passenger vehicle space. Thanks to the recession, the company has identified new areas where it can sell its products power generation, tractors, cars and utility vehicles, and grow its export business. Alkraft exports to industrial original equipment manufacturers, particularly in the US, and planned to build this business over the years, Mr Siddeeqi said. GERMAN PARTS MAKER TO INVEST RS 100 CR PTI See this story in: Hindustan Times (Feb 08) Mumbai: German auto components maker Mann Hummel on Sunday said it will invest about Rs 100 crore in India over the next three years and plants to foray into the water treatment business within a couple of months. | ||||
| ALLIED INDUSTRIES COMMERCIAL VEHICLE MAKERS SKID ON TYRE SHORTAGE Roudra Bhattacharya The Hindu Business Line (Feb 07) New Delhi: After posting robust sales for the last few months, the commercial vehicle (CV) industry's production is decelerating due to low supply of tyres, especially radials. According to industry sources, OEMs (original equipment manufacturers) such as Ashok Leyland and Tata Motors, which sell the bulk of heavy CVs in the country, are facing a major shortage of tyres. This comes at a time when vehicle production is at an all time high due to the economic recovery. Officials of the Society of Indian Automobile Manufacturers (SIAM) say the problem is largely with the supply of radial tyres. Ashok Leyland said it has cut down its production by about 20 per cent, due to the tyre shortage for the last 3-4 months. "It is a combination of the auto industry doing well and the tyre manufacturers not keeping up with our requirements. There is also the fact that the Government is cutting off the Chinese supply by imposing anti-dumping duty. Earlier, the Chinese supply met the shortfall in domestic tyre supply," Mr Vinod Dasri, Chief Operating Officer, Ashok Leyland, told Business Line, adding that the supply is short both in radial or non-radial tyres. An official from the same company added, "It is simply because they're shifting supply to the after-market where they get better rates." Tyre-makers, however, blame the lack of prior intimation and improper planning by the CV makers for the problem. "There is actually no shortage. They (the CV makers) should have given us a plan to increase production at least 1-2 years in advance. It takes time to create the capacity. The import restriction from China has also not happened yet, as the Government has only just recommended it," said Mr A. S. Mehta, Director, Marketing, JK Tyre. He said it was the sudden push on radial tyres by the CV makers that is creating the shortfall. "Currently, 80 per cent of the industry is on nonradial tyres, of which there is adequate supply. The shortage is mostly of radials," he said. Mr Mehta felt that with the tyre industry investing heavily in building capacity, the shortfall in supply should be met in the next 2-3 months. http://www.thehindubusinessline.com/2010/02/07/stories/2010020752910102.htm R Ravichandran The Financial Express (Feb 08) Chennai: Driven by a strong demand for vehicles across all segments, an overall recovery in macro economic factors and underlying structural demands are expected to propel tyre industry growth. The industry is expected to register a 9% to 10% compounded annual growth rate (CAGR) in volume during FY 2010-12. Supported by industrys 90% operating capacity utilisation levels, the tyre industry growth will be primarily driven by 9% CAGR in replacement market, followed by 10% CAGR in original equipment manufacturer and around 12% CAGR in exports during the said period, said an Angel Securities analysis. Consequently, the installed capacity of the industry is expected to grow from an estimated 3,948 tonne per day to 5,113 tonne per day by 2012. The overall expected investment by the industry will be around Rs 6,000 crore during this period, said the analysis. Tyre majors such as MRF, Apollo, JK Tyres and Ceat have already drawn ambitious plans with the total investment of over 5,000 crore. Barring temporary fluctuations in FY 2009, the auto industry has been witnessing a healthy growth in the last few years. Though the demand growth has now largely stabilised on a higher base, vehicle offtake momentum is likely to persist. Riding on the upstick on the auto sales, the tyre offtake from the OEMs has started picking up which will augur well for the tyre industry. Moreover, the rising levels of industrial and agricultural production, infrastructure and road development, growing income levels and increasing propensity to consume are expected to keep the domestic vehicle as well as tyre momentum buoyant, the analysis pointed out. The replacement segment, which constitutes 60% of the industry and a key focus area for the manufacturers due to higher margins, would continue to grow faster owing to the high growth in vehicle sales seen over the last few years. The high capacity utilisation levels of around 90% over the last three to four years typically show the strong demand and constraints on the supply side. The greenfield and brownfield projects announced by the tyre majors would materialise in the next two years and major portion of the investments will be on radial tyre capacity expansions. Amidst the continuous surge in natural rubber prices in the last five years, tyre companies have been maintaining their pricing discipline and managed to clock better margins at hike prices. Given the surging demand, higher utilisation levels and pricing discipline will enable tyre companies to pass on the input cost inflation going forward. Though the sharp movement in average price of raw material, especially rubber, continues to maintain an inverse relationship with operating margins and can have an impact on the near-term profitability of the tyre companies, but on long-term the operating margins will improve with the increase in prices by around 8% to 10% during the same period. The margins will improve also due to the increased focus on radial tyre manufacturing by the companies. The selling prices of radial tyres are about 20% higher than cross-ply ones. Roudra Bhattacharya The Hindu Business Line (Feb 07) New Delhi: Metro Tyres Ltd, makers of the Continental brand of two-wheeler tyres in the domestic market, has said it is tripling its production capacity to 1.5 lakh units a month by March. According to Mr Rummy Chhabra, Group Managing Director, with an investment of Rs 50 crore at its Ludhiana plant, the company is aiming to match its supply with the exponential growth in motorcycle demand. We had a capacity of 50,000 tyres a month, which should reach 1 lakh a month in February and 1.5 lakh by March. With the motorcycle market growing at 10-15 per cent, we aim to capture a 10 per cent market share in the next two-three years and will also plan further expansions after analysing the market situation. We're financing the investment through internal accruals and with the help of financial institutions, he said. The motorcycle tyre market is estimated at 40 lakh tyres a month, of which Metro has a 2-3 per cent share as it is a new entrant. The company, which has seven plants in the country, manufactures tyres for German tyre maker Continental AG and sells them domestically under the brand Continental Two Wheeler Tyres made by Metro. Supply It has an installed capacity of three crore tyres annually and exports to South America, West Asia and Africa, as well as to its partner Continental. Mr Chhabra said the company would prefer concentrating on the replacement market, as it has comparatively higher margins. We supply to nearly all OEMs, but would focus on the replacement market as it is more profitable. Supplying to OEMs is a volume game, but with very low margins. Ideally, 70 per cent of our sales should be in the replacement market, he said. Metro Tyres also said that it is looking to increase tyre prices by the end of the month or in early March. According to Mr Chhabra, this is mainly due to the rising prices of rubber, which has touched a high of around Rs 150 a kg this month. However, he did not quantify the price increase, saying that the revision will be done according to the competition. Metro Tyres, which also manufactures bicycle, scooter and three-wheeler tyres, is expecting a turnover of Rs 600 crore in 2009-10 and a further 10-15 per cent growth in 2010-11. It expects exports to touch Rs 100 crore in 2009-10, up from Rs 90 crore in 2008-09. | ||||
| The Financial Express (Feb 08) Chennai: After announcing its intention to enter into earth equipment business through a dedicated subsidiary recently, Shriram Transport Finance Company Ltd (STFC) said it would set up a wholly owned subsidiary under Shriram Automall India Ltd headquartered in Chennai. Shriram Automall will engage in the business of creating infrastructure for trading in pre-owned commercial vehicles. The new subsidiary will set up 'auto malls' in different parts of the country, refurbish and sell pro-owned commercial vehicles under the name 'New Look', provide web-based computerised touch screen kiosks in all the branches across the country under the name 'One Stop', and will also provide a host of other business services to the trucking community in the courtly under one roof. The subsidiary will be earning fee income for these services rendered. With an asset base of close to Rs 30,000 crore under its belt with a widespread network, the move is aimed at enrolling more truck owners under its belt apart from increasing its asset size aggressively. The move also reflects the company's strategy to become a one-stop-shop solution for commercial vehicles in India. A senior official of the company said, the company is yet to finalise the details and would soon announce the same, the roll-out plans and revenue generation target among others. | ||||
| Sajan C Kumar The Financial Express (Feb 08) Chennai: The proposed price-deregulation of auto fuels in the just-released Kirit Parikh panel report on petroleum product pricing is likely to pave way for re-entry of private players into auto-fuel dispensing. Reliance Industries (RIL) and Essar Oil (EOL) that had closed retail operations due to lack of level-playing field are likely to benefit from the proposed de-regulation, say analysts. While EOL has already started to ramp up its entire retail outlet network, RIL has kick started the process of opening its retail outlets. Especially, RIL would be able to ramp up its retail operations at a much faster pace as it ramped up its share in the diesel segment to 14% in three to four years, says Angel Securities in its special report. Giving an in-depth analysis of the report, Angel Securities said the recommendations of the committee are positive for OMCs, upstream segment and private retailers. At current levels of global gasoline and diesel prices, the proposals would result in hike of the petrol and diesel prices by around Rs 3.9/litre and Rs 3.2/litre, respectively. The move would lead to nil under-recoveries on auto fuels as the entire burden would shift to the consumers. Deregulation of auto fuel prices means the upstream companies would not have to bear any subsidy burden and hence the crude oil price realisation would increase substantially from the current level said Sharekhan in its report. During the first nine months of the current financial year, the government-owned upstream companies bore 100% of under-recoveries on auto fuels and none on cooking fuels. The increase in the crude oil price realisation would definitely have a positive impact on the earnings of the government-owned upstream companies. We feel, the de-regulation of auto fuel would benefit only the government-owned upstream companies like the Oil and Natural Gas Commission (ONGC), Oil India Ltd (OIL) and Gas Authority of India Ltd (GAIL) as they bear the entire under-recoveries on auto fuels as per the current subsidy-sharing mechanism, says the report. Angel Securites, however, said this was not the first attempt by the government to de-regulate petroleum product prices. In an attempt to phase out subsidy on petroleum products in April 2002, the government dismantled the administered pricing mechanism paving way for free pricing mechanism for petrol and diesel, while prices of kerosene and LPG were still kept under the regulators purview. It may be noted that the Kirit Parikh committee recommendations are almost on similar lines of the Chaturvedi Committee Report submitted two years back. The key difference between the reports is the timeline for the implementation of proposals. While the Chaturvedi Committee had emphasised on phased removal of subsidy on the domestic LPG by reducing the number of subsidised refills, the Kirit panel does not mention any timeline for implementation of the reforms. adds Angels report. Sharekhan report said de-regulation of auto fuel prices was very much possible and was a practical recommendation made by Kirit Parikh committee, taking into account the prices of the international crude. It has been estimated that the under-recoveries would be to the tune of Rs 2.3/litre and Rs 4.3 litre on diesel and petrol, respectively. | ||||
| Agencies See this story in: The Economic Times (Feb 07) Detroit: Toyota has told dealers it's preparing a plan to repair the brakes on thousands of hybrid Prius cars in the US. In a message sent Friday night to dealers, a Toyota group vice president, Bob Carter, said the company is working on a plan and will disclose more details early next week. More than 100 drivers of 2010 Prius cars have complained that their brakes seemed to fail momentarily when they were driving on bumpy roads. The US government says the problem is suspected in four crashes and two minor injuries. Public awareness of the problem "has prompted considerable customer concern, speculation, and media attention due to the significance of the Prius image," Carter said in the e-mail. "We want to assure our dealers that we are moving rapidly to provide a solution for your existing customers." Toyota blames a software glitch and says it has already fixed vehicles in production. But it's still deciding how to handle repairs on 270,000 Priuses that were sold in the U.S. and Japan starting last year. The company could announce a full-fledged safety recall or simply ask owners to bring their vehicles in for repairs, since the brakes aren't failing completely. The problem isn't related to separate recalls involving millions of Toyotas with defective gas pedals and floor mats that could cause unintended acceleration. AP See this story in: The Indian Express (Feb 07) Tokyo: Damage to Toyota's image is growing by the day with the automaker now considering a US and Japanese recall of Prius hybrids - the vehicle that's a symbol of its technological prowess and green car ambitions. The beleaguered automaker faces probes of brake problems with the latest model Prius in the US and Japan but remains tightlipped about adding the gas-electric hybrid to the millions of cars it has recalled. Toyota is also investigating possible brake problems with its luxury Lexus hybrid. Nihon Keizai, Japan's top business newspaper, said that Toyota Motor Corp. would soon notify Japan's transport ministry and the US Department of Transportation of a recall of 270,000 Prius hybrids. Toyota said it is considering a recall but no decision had been made. "Nothing has been decided on whether we will recall or not," spokeswoman Ririko Takeuchi said. Some owners of the 2010 Prius have reported their brakes do not always engage immediately when they press the brake pedal, or that the brakes have an inconsistent feel. The problem has been fixed with a software programming change for Prius vehicles sold in Japan and overseas since late January but not for vehicles sold before then. The US National Highway Traffic Safety Administration said it would assess the scope of the problem in the Prius and the safety risk to about 37,000 cars that could be affected. Toyota, however, has said it sold 103,000 of the new Prius in the US since May last year. See this story in: The Times of India (Feb 08) Toyota, Japan: Toyota Motor Corp, which has recalled more than eight million vehicles around the world for problems with unintended acceleration, has decided to recall its new Prius hybrid in Japan to fix a braking software glitch, a dealer said on Sunday. Safety regulators in both the US and Japan, the Prius's biggest markets, are investigating braking problems with the model, Japan's top-selling car last year and an icon of green design that has lifted the public image of Toyota. Toyota said last week it planned to make a final decision on whether to issue a recall or voluntary repair as soon as possible. The dealer, who declined to be identified, said the recall could come in the next few days. Toyota's president apologised on Friday for safety problems. "I would like to take this opportunity to apologise from the bottom of my heart for causing many of our customers concern after the recalls across several models in several regions," Akio Toyoda, the grandson of Toyota's founder, told a news conference in Nagoya. He said the company would make an announcement on the Prius soon. US automaker Ford Motor Co last week decided to roll out a software patch for consumers to address similar problems with braking on the Ford Fusion and Mercury Milan models. It said it notified its dealers of the problem in October but not the public because it did not believe the glitch represented a brake failure. Toyota officials were not available to comment. Toyota has come under intense scrutiny, with US safety authorities and members of the Obama administration accusing it of responding too slowly on problems related to uncontrolled acceleration that have been linked to up to 19 crash deaths in the United States over the past decade. Toyota to announce Prius recall this week Hindustan Times http://www.hindustantimes.com/business-news/auto/Toyota-to-announce-Prius-recall-this-week-report/Article1-506352.aspx Toyota to recall Prius for brake glitch: Dealer The Indian Express http://www.indianexpress.com/news/toyota-to-recall-prius-for-brake-glitch-dealer/576720/ Toyota to recall Prius for brake glitch Deccan Chronicle The Telegraph Reuters See this story in: The Economic Times (Feb 07) Wall Street, Main Street and Capitol Hill may have growing questions about Toyota Motor Corp and its response to a lengthening list of safety concerns. But in Hollywood, no stranger to scandal, the gas-sipping Prius will still roll up to the red carpet. The politically correct Prius has long been a darling of tree-hugging celebrities like Cameron Diaz, Leonardo DiCaprio, David Duchovny and Rob Reiner. The snub-nosed half-electric, half-gasoline cars have become a fixture at Holly-wood galas, which traditionally boast lines of Rolls-Royces and Jaguars. With Hollywoods backing, the Prius emerged as an icon of green design commanding an intense fan base of loyalists who helped boost Toyotas overall image. But that prestige took a hit on Thursday when US safety regulators opened an investigation into reported problems with the braking system on new Prius models. Entertainment industry figures said reports of problems with the Prius had to be kept in perspective against a record for quality and the cars contribution in drawing attention to fuel-saving technology. Weve been big boosters of the car and if there are issues, we expect them to be resolved. I trust the people at Toyota, said actor and environmentalist Ed Begley Jr, best known for a starring role in 1980s TV series St Elsewhere. Global Green USA, which provides hybrids and other alternative-fuel vehicles as limos for the Academy Awards, plans to keep the Prius in its line-up for the March 7 Oscars. The Prius is the green vehicle of choice for Hollywood and citizens who care about America and are interested in saving money at the pump, Matt Petersen, chief executive of Global Green USA, told Reuters. Get me the new Prius Backers note the Prius gets 50 miles per gallon in combined city and highway driving, more than any vehicle on the road. Begley said his family owns several Priuses, including a 2010 model, the subject of the US safety probe. Its very upsetting and cause for concern. Ill do everything that Toyota instructs me to do, but they have been known for making quality cars for a long time and while these matters are quite real, its an unfortunate blemish in a very, very good record, he said. Some say the biggest problem for the Prius is that rivals are rushing to bring forward alternatives. Those include rechargeable electric cars like the Tesla Roadster and the upcoming Chevy Volt, Fisker Karma and Nissan Leaf. Celebrities spotted behind the wheel of an all-electric Tesla Roadster include George Clooney and Dustin Hoffman. The Prius became a status symbol in Hollywood and still is for the most part, but they became a victim of their own success because they created their own competition, said Stephen Nemeth, the president of Rhino Films and producer of environmental documentaries like Climate Refugees. Nemeth, one of those selected by General Motors to drive a test version of its hydrogen-powered Equinox, said his associates are being courted by Toyotas rivals. I know a casting director who said she was turning in her Prius on Monday because Ford is offering $5,000 to people who trade in their Prius for their Ford Fusion, he said. Its a tangible example of another company taking advantage of the situation now. NYT See this story in: The Economic Times (Feb 08) Toyota: Toyota's recalls and disclosures in recent months are part of a lengthy pattern, in which the automaker has often reacted slowly to safety concerns, in some instances making design changes without telling customers about problems with vehicles already on the road, an examination of its record shows. Toyota received complaints from customers in Europe about sticking accelerator pedals as early as December 2008 and started installing redesigned pedals on new vehicles there last August. Then, last month, similar concerns in the US led to a pedal recall of 2.3 million vehicles. The European cars have now been recalled, too. In a congressional committee meeting on January 27, Toyota officials said they first learned of this problem through reports of sticking pedals in vehicles in England and Ireland in the spring of 2009. But Toyota later acknowledged it had received reports there as early as December 2008. Three years ago, it recalled 2007 and 2008 Toyota Camrys and Lexus ES 350s because the accelerator could stick under floor mats, a precursor to a much bigger recall last fall. And in early-1996, Toyota engineers discovered that a crucial steering mechanism could fracture on the Hilux Surf, which was sold as the 4Runner in the US. Toyota started installing a stronger version on new models. Yet it took Toyota eight more years to start recalling Hilux Surfs and 4Runners built before the 1996 design change, after an accident involving an out-of-control Hilux Surf prompted a police investigation. Toyota received a rebuke from the Japanese government and was ordered to overhaul its recall system. Many automakers address problems discreetly when feasible, hoping to avoid an uncomfortable spotlight. But Toyota, a company that built its reputation with meticulous attention to quality, is now facing a credibility crisis, as little-known problems are surfacing with many of its models. Most recently, Toyota acknowledged it had identified a flaw in the anti-lock braking systems of its Prius hybrids and altered the system for models built since January. Facing new investigations, Toyota said it was considering a recall. Late Friday, it began telling dealers that it would announce a fix early this week. Toyota officials, when asked about their handling of previous safety issues, responded largely with comments about how they would handle the matter now and in the future. "The company is prepared to cooperate fully and sincerely, and we are doing our utmost to deal with the matter in a way that brings safety and peace of mind to our customers," the company chief executive Akio Toyoda, said Friday at a news conference. "We acknowledge that we could have communicated better as a company," said James Wiseman, a spokesperson for Toyotas US division. "However, we have taken significant steps to address these issues." | ||||
| ECONOMY Agencies See this story in: The Financial Express (Feb 07) New Delhi: Prime Minister Manmohan Singh said the economy is expected to register a growth rate of 7.5 per cent in this financial year (2009-10), up from 6.7 per cent a year ago. "In the current financial year, the growth rate of economy is likely to be 7.5 per cent," he said while addressing a meeting of the Chief Ministers on price rise here. The economy, which had been growing at over 9 per cent, slipped to 6.7 per cent in 2008-09 following the impact of the global economic crisis triggered by the fall of investment bank Lehman Brothers in September 2008. Driven by stimulus packages and easing of monetary policy, India's economy during the second quarter (July-September 2009-10) expanded by 7.9 per cent, much more than anticipated by any analyst or thinktank. The RBI in its recent review of the monetary policy too projected a growth rate of 7.5 per cent for the current fiscal. Finance Minister Pranab Mukherjee, while presenting the Mid-Year Review of the Economy had said that economy could grow in excess of 7.75 per cent despite the impact of drought and floods on agriculture output. The Prime Minister further said that last year was dominated by the concern to protect the economy from the effects of the global economic slowdown and the government has done well on this front by acting swiftly. "The Government acted swiftly and I am happy to say that we have done fairly well on that front. At a time when the industrialised countries experienced a sharp decline in output we have only seen a modest deceleration and the growth rate in the first year of the global crisis 2008-09 was 6.7 per cent," he added. He said that the Government has greatly expanded public spending in rural areas, especially in employment intensive activities, and it has helped creating rural income. "I am particularly happy to say that we have also been able to protect the inclusiveness of the growth process to a large extent. The National Rural Employment Guarantee Act has been a central instrument for supporting income of the poor in rural areas," the Prime Minister added. | ||||
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Monday, February 8, 2010
Indian Auto Industry Update February 07-08, 2010
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