Hyundai Motor Announces 2012 Business Results Hyundai Motor Announces 2012 Business Results - Revenue rises 8.6%, net profit up 11.7% on increased sales, new models - Hyundai aims to sell 4.66 million units globally in 2013 Jan. 24, 2013 - Hyundai Motor Company, the fastest-growing automaker by brand, today announced its 2012 full-year earning results. In spite of the challenging business environment with fluctuating exchange rates, Hyundai managed to sustain its upward momentum. For the year 2012, sales revenue rose 8.6 percent to 84.47 trillion won (automotive: 71.31 trillion / finance and other: 13.16 trillion) from a year earlier, helped by increased sales volume and improved product-mix. Operating profit rose 5.1 percent to 8.44 trillion won, while net profit increased 11.7 percent to 9.06 trillion won (including non-controlling interest), fueled by robust performance at the companyâ€™s overseas plants and subsidiaries. Hyundai sold 4,410,357 units globally (Korea: 667,496 / overseas: 3,742,861) in 2012, an 8.6 percent increase from a year earlier. While its sales in Korea fell 2.2 percent to 667,496 units from the previous year, its overseas sales rose 10.8 percent to 3,742,861 units (exports: 1,243,763 / overseas plants: 2,499,098). In particular, sales jumped more than 10 percent in Europe to 444,000 units, bucking the marketâ€™s trend of shrinking demand. In the fourth quarter alone, sales revenue increased 10.7 percent to 22.72 trillion won (automotive: 18.75 trillion / finance and other: 3.97 trillion) with global sales of 1,226,847 units. However, operating profit decreased 11.7 percent to 1.83 trillion won from a year earlier, mainly due to currency fluctuations unfavorable to Hyundai. To overcome sluggish demand in the Korean domestic market, Hyundai aggressively expanded exports from Korea, while boosting sales in its overseas markets through its local production and sales network. Hyundai also enhanced its profitability through improved product-mix and efficient marketing based on qualitative growth. Hyundai forecasts that the global auto market, including some emerging markets, will face slowing demand amid fiercer competition and tougher government policies. Nevertheless, Hyundai aims to sell 4.66 million vehicles globally in 2013 (Korea: 668,000 / overseas: 3,992,000), a 5.7 percent increase from last year. Hyundai plans to achieve this by strengthening its fundamentals by promoting qualitative growth and securing future competitiveness, rather than quantitative growth. Cautionary Statement with Respect to Forward-Looking Statements
In this release and in related comments by Hyundai Motor’s management, our use of the word “expect,” “anticipate,” “project,” “estimate,” “forecast,” “objective,” “plan,” “goal,” “outlook,” “target,” “pursue” and similar expressions is intended to identify forward looking statements. The financial data discussed herein are presented on a preliminary basis before the audit from Independent Auditor; final data will be included in HMC’s Independent auditors report. While these statements represent our current judgment on what the future may hold, and we believe these judgments are reasonable, actual results may differ materially due to numerous important factors. Such factors include, among others, the following : change in economic conditions, currency exchange rates or political stability; shortages of fuel, labor strikes or work stoppages; market acceptance of the corporation’s new products; significant changes in the competitive environment; changes in laws, regulations and tax rates; and the ability of the corporation to achieve reductions in cost and employment levels to realize production efficiencies and implement capital expenditures at levels and time planned by management. We do not intend or assume any obligation to update any forward-looking statement, which speaks only as of the date on which it is made.
Hyundai forecasts lower sales by Indian unit in 2013 PTI NEW DELHI: Korean auto major Hyundai Motor Co (HMC) today projected lower total car sales from its Indian unit this year despite posting a marginal increase in 2012. According to the company's business plan for 2013, the company said its plant at Chennai is projected to have a wholesale volume of 6,33,000 units as compared to 6,41,000 units clocked last year, a decline of 1.3 per cent. The domestic sales of Hyundai Motor India Ltd, the company's wholly-owned subsidiary, during last year increased by 4.70 per cent to 3,91,276 units from 3,73,709 units in 2011, while exports went up by 3.12 per cent to 2,50,005 units from 2,42,431 units in the previous year. HMC, however, set a higher overall global sales target of 46,60,000 units for this calendar, up 5.7 per cent from 44,10,000 units last year. In 2012, the company's revenues in India stood at 5,097 billion Korean won (KRW) (over Rs 25,600 crore), up one per cent from KRW 5,052 billion (over Rs 25,400 crore). For the fourth quarter ended December 31, 2012, HMC had reported a 5.49 per cent decline in net profit at KRW 1.89 trillion as against KRW 2 trillion. Its revenues stood at
KRW 22.72 trillion as compared to KRW 20.52 trillion. In the calendar 2012, HMC had a net profit of KRW 9.06 trillion, up 11.7 per cent from KRW 8.11 trillion last year. Sales revenue during the year stood at KRW 84.47 trillion as compared to KRW 77.80 trillion last year, up 8.6 per cent.
Tata eMO electric vehicle still on the drawing board Aystery still shrouds the presence of Tata Motors in the US auto market. The Tata eMO concept car received a lot of attention and praise a year ago at the 2012 Detroit Auto Show as an "electric mobility study." Oh, and because it sported a $20,000 price tag and roomy interior. On the gasoline side of the ledger, the redesigned Tata Nano may or may not be available in the US within three years for under $10,000. But where does the eMO stand? Tata Technologies' Kevin Fisher answered a few questions about this, clarifying (again) that Tata Technologies doesn't build cars â€“ it advises clients on how to make cars, 80 percent of them being in the auto industry. Fisher previously called the eMO a "giant business card" and says Tata Technologies is still attempting to move the eMO forward. To do that, Tata Technologies will need the go-ahead from Tata Motors. Tata Motors builds cars for the Indian market, including the Nano and Indica (the company owns both Jaguarand Land Rover). For now, the eMO is still in the hands of Tata Technologies and Tata Motors hasn't committed to investing in or building the car yet. Even more perplexing is that Tata Technologies hasn't asked Tata Motors for support lately. "Tata Motors has their own product portfolio," Fisher told Forbes. "We don't have access to that and we work with them at arm's length." For now, Tata Technologies is seeking 15 patents on the eMO and spending "a considerable amount" to build and refine it, according to Fisher, who added that it's been a real challenge for the engineering team â€“ building a nimble, affordable electric car for the North American market. One important item on the to do list is more speed testing. When the prototype was unveiled, it was claimed it would reach 65 miles per hour. The problem? It's never exceeded 30 mph on a test track. Last year, we noted that Tata Motors has been working with France-based Dassualt Systems to develop more technology for the eMO. Both companies were analyzing how
to keep the cost and weight of the vehicle as low as possible to stay in the $20,000 price range, but a detailed plan never materialized. In other words, Tata-branded cars â€“ electric or gas-powered â€“ are still not scheduled for arrival in the US market. Will that ever change?
13 car models that revived up diesel numbers
Hero net profit slumps 20%, misses estimates Second consecutive decline due to rising material costs and marketing expenditure, company officials say New Delhi: Third quarter profit at Indiaâ€™s largest two-wheeler maker Hero MotoCorp Ltd slumped 20.4% to Rs.487.89 crore from the year earlier, missing analyst estimates by a substantial margin. This is the second such drop in a row after the firm reported a decline of 27% in net profit to Rs.440 crore for the September quarter.
The firm said material costs and other expenditure crimped profitability in the December quarter. Total income was flat at Rs.6,187 crore. Sales were flat at 1.57 million units in the quarter. Ebitda (earnings before interest, taxes, depreciation, and amortization) margins for the quarter stood at 12.59%, lower than 13.86% in September quarter and 15.6% a year ago. According to an auto sector analyst, the firm’s profits missed his estimates despite healthy sequential growth in sales volume. “There is just one word for it—bad,” said Mahantesh Sabarad, senior vice-president, equity research,Fortune Equity Brokers (India) Ltd, a Mumbai-based brokerage firm “They have missed our estimates by 25%. The only positive is 18% growth in sales over last quarter. But all that has come at a cost.” Profit lagged behind the Rs.586 crore median profit estimate of 37 analysts compiled by Bloomberg. Sabarad had estimated a profit of Rs.646 crore. Hero’s performance has come a day after archrival Bajaj Auto Ltd registered its highest profit. The firm reported a growth of 3% standalone net profit to Rs.819 crore. Interestingly, at the end of the December quarter of FY09, both the firms were neck and neck in terms of net profit. While Hero’s net profit stood at Rs.536 crore after selling 1.1 million units, Bajaj’s profit wasRs.526 crore after selling 900,000 units. Hero is in transition and the numbers don’t give a complete picture, said Anil Dua, senior vice-president, marketing and sales. “We are in an investment phase,” he said. “We are working on new launches and plants. These things have longer gestation period and will take time to fructify.” Angel Broking Ltd said that the firm reported a “disappointing set of results” and raised concerns that it may see its first decline in sales in 10 years. At the beginning of this fiscal, Hero aimed to sell 7 million units during the year as against 6.4 million sold in FY12. However, in the nine months to December this fiscal, it has sold only 4.24 million units, posting a decline of 2%. “Bottom line came in 18.9% below our estimates on account of 305 bp (basis point) y-o-y (year-on-year) contraction in operating margins. We lower our earnings expectations for FY2013/14 by 11.4%/9.3% mainly due to lowering of our volume (we now expect the company to register a 1% decline in volumes in FY2013 as against a growth of 1.9% earlier) and Ebitda margin (due to higher ad spends and raw-material cost pressures) estimates,” said Yaresh Kothari, sector analyst, Angel Broking. Angel has a neutral rating on Hero’s stock, which ended the day at Rs.1,818.50, down 0.92%. The benchmark Sensex rose 0.74% to 19,964 points. “Material costs were higher by 120 basis points across products in the third quarter. This has impacted bottomline,” said Ravi Sud, chief financial officer. One basis point is one-hundredth of a percentage point.
Other expenditure, which also affected profitability, increased 25% to Rs.625 crore due to higher marketing expenditure. “We had to spend on the promotion of our new products such as Maestro, Ignitor, Xtreme and Glamour. This increased our marketing spend,” said Dua. “Our marketing spend is normally 2% of net sales, but in the second half it will be higher than that as we will be continuing marketing campaigns even in the last quarter,” he said.
Luring young car buyers with gadgets, nail polish From navigation systems serving as game consoles to sound systems doubling as amplifiers and nail polish matching a paint job, automakers are trying new tricks to lure fickle young buyers. Connected consoles that sync with smartphones to stream music and even read incoming text messages aloud seemed to be almost standard features on most of the cars on display at the Detroit auto show. "It's difficult to capture this group because they're not brand loyal at this stage in their life," said Joe Vitale, an auto analyst with Deloitte. Young buyers also have higher expectations than their parents, he said. They take reliability, quality and safety as a given, want good fuel economy and access to "infotainment" like satellite radio and social media, and -- perhaps like their parents -- want a car that makes a statement. Aggressive styling, a renewed focus on design, souped-up interiors and zippy small cars are becoming more common on the showroom floor as automakers jostle for position with a group that is expected to soon be buying one in every four cars sold in the US. "When you build more emotional cars, you get more young people to buy your product," Jim Lentz, head of Toyota Motor Sales USA, said in an interview on the sidelines of the show. Toyota developed an entirely separate brand -- Scion -- to help it connect with young buyers and get them to develop the kind of brand loyalty their parents have. One way it connects is through a focus on personalization -- something young buyers care a lot about and for which they are often willing to pay a premium. Scion offers enthusiasts over 250 different ways to accessorize their cars, including sporty mufflers, lowering springs, graphics to highlight the trim and an interior lighting kit that illuminates the lower level of the interior in green, red, purple and white. Daimler's Mini brand also focuses on personalization and has got to be the hippest car at the show.
The choices of colors and patterns for the exterior seem endless -- including the classic Union Jack rooftop -- while the interior offers surprises like a hidden glove box and a circular key fob to match the console design. The joystick-operated sound system shifts the volume on the speakers to match your drive (say, shifting to the right on a turn) and a little goldfish turns good driving into a game by falling out of its bowl if a corner is taken too fast. Ford certainly doesn't expect that a bottle of nail polish in "Ford Fiesta Storm" alone will bring new buyers to its zippy small car lineup. It gets them in the door by offering a lot of higher-end features like heated side mirrors and a voice-activated entertainment system that will read incoming tweets aloud in a fuel efficient, funky and low-price little car. The matching polish perk is part of a broader strategy to get new buyers to make an emotional connection to their cars that will lead them to think of Ford again when it's time to replace their vehicle. Ditto for Volkswagen's Fender Beetle. It's not a huge seller, but the advanced sound system -- that you can plug your guitar into -- and the stylish interior adds to the already distinctive car's appeal. Young buyers also want their cars to be more than just a way to get somewhere, said John Mendel, head of sales for American Honda. "They're looking for the flexibility of being the Swiss Army knife of cars," he told AFP. Honda is reaching out with an expansion of its small car offerings, like the "urban SUV" concept unveiled on Monday that combines the function of a sport utility with the handling of a small car. GM has targeted young buyers with its Chevy Spark and Sonic cars, which offer bold design in a small package, bright colors echoed in the interior through stitching and trim, and textmessage reading sound systems that link up with smartphones. But its Equinox SUV and Silverado pickup are also big sellers among millennials looking for more utility. Hyundai tries to tempt young buyers with power and aggressive styling, but offers a great perk for anxious parents worried about teen drivers: a navigation system that will alert them if the car leaves a pre-set "safety" zone.
Luxury carmakers like BMW, Audi plan more 'Made in India' products in sub-Rs 25-lakh category
NEW DELHI: Luxury carmakers are planning more 'Made in India' products to increase the number of offerings in the sub-Rs25-lakh category to expand market. The three major global luxury car manufacturers that have a substantial presence in India BMW, Audi & Mercedes Benz - have been able to grow the Indian market five fold in the past three years by selling several models below Rs30 lakh, something they have been able to achieve on account of local production. They, along with new players, are now planning to bring down the threshold further, to below Rs25 lakh by assembling their smaller models in Indian factories. The plan to localise production by assembling in Indian plants, commonly known as completely knocked down (CKD) operations, helps carmakers offer lower prices as imported parts attract 10% import duty compared with the 75% charged on importing complete cars from overseas factories. Many automobile companies are increasingly preferring the local assembly route to bring down prices. Industry officials say demand should rise to at least 50,000 luxury vehicles by 2015, from 25,000 units sold in 2012. BMW, the market leader in the Indian luxury space, is looking at retaining its number one slot by assembling the new BMW 1 Series later this year from its Chennai plant. "All our cars made at our Chennai plant conform to global quality parameters. So, going forward, we have also decided to add our top-end 7Series saloon to the league of locally assembled cars. It would help us to increase the value for our customers and keep our prices competitive," BMW Group India President Philipp von Sahr said. In 2012, BMW sold 9,375 cars in India, maintaining a slender lead over it German peer Audi AG, from the Volkswagen Group which sold 9,003 cars. Audi also plans to assemble more cars on Indian shores starting with its hugely successful Q3 SUV from the middle of this year followed later with the A3, a sedan.
"We would increase our local production allowing us the flexibility of technology at better price points across different models," Audi India head Michael Perschke said. Audi will take its tally of locally made cars to five by the end of this year. "The simple strategy to localise cars is to offer stronger price points and package them as per the local needs. Any strong player would need local assembly to derive long-term advantages over its competitors," Perschke added. The BMW Group currently sells three brands - BMW, MINI and Rolls Royce - all of which are marketed and sold independently in India. The world's largest manufacturer of luxury car plans to locally assemble six models by the end of this year. It already assembles the 3Series, 5Series, the X1 and X3 SUV family at its Chennai plant, which has the capacity to produce 11,000 units per year on a double shift basis. BMW currently sells 11 brands and the rest of the models - 6Series, Gran Turismo, M Series & Z4 Roadste â€” are fully imported. The Tata Motors-owned Jaguar Land Rover (JLR) has also announced plans to expand its portfolio. This includes the local assembly of the 2.2 litre diesel variant of the XF luxury sedan in India. This move would bring down the starting price of the model by over Rs12 lakh for the existing Jaguar's XF variants with bigger engines that are priced between Rs57.15 lakh and Rs1.03 crore (ex-showroom) Mumbai. Companies say that lower prices t would help them to expand the luxury car market and bring in new customers. "We want to have successful sales at every price points. Even as many of our cars would be expensive than our competition, we offer more value in our
products by localizing our production in India," Mr Sahr added. The Indian luxury car space is dominated by the German carmaker - Mercedes Benz that comes third with 7,138 cars sold in India in 2012. Jaguar & Land Rover that sold 2,393 cars in 2012 is also gaining acceptance with the Indian customers. Mercedes Benz, which plans to invest Rs850 crore till 2014 for expanding its production capacity, will introduce the new A-Class shortly that would roll out from its Pune plant. "Most of our future products will be in the entry-level segment with prices starting from Rs20 lakh. We will launch the premium hatchback A-Class in the country during middle of this year," Mercedes Benz India MD & CEO Eberhard H Kern said. The luxury carmakers are planning to tap the younger customers with lower price points. Mercedes Benz, with its BClass at a starting price of Rs25 lakh, was able to attract young customers in the 30-40 year age group into its fold.
VW's Chinese budget car due in 2015 Development work on Volkswagen’s proposed £5400 super-budget car is well underway, according to Ulrich Hackenberg VW’s technical chief. It will significantly undercut both the new Up city car, which has been designed for more affluent Western European drivers, and the new Chinese-market Jetta saloon, which retails from £7500. Speaking before the opening of the Detroit motor show, Hackenberg told Autocar that his engineering teams were still working on hitting the cost targets for the new car. ‘It’s a tough job, but not impossible, and we’ve got the experience to do it. We’re still working to get to the targets.’Hackenberg revealed that ‘if the design is finalised this year, we can launch the car in two years’. He confirmed that the car - which will eventually come in different body styles depending on the local market - would have a new brand name. In order to drive costs as low as possible, Hackenberg told Autocar that not only would the car have to be built and partly-engineered in a low-cost country, but the materials would have to be sourced locally, and even the ‘second and third tier’ components would have to be localised. At the moment, VW bosses are concentrating on the creating the first version of the ultrabudget car for China, where it would also be built. A second version of the car would probably be engineered for India where it would also be locally produced. No details were forthcoming about the platform being used for the car, but it might exploit existing VW technology, such as some elements of the new Chinese-market Jetta, which uses the front structure of the current Polo.
Hackenberg cautioned that the car might have premium technology, but would be ‘good quality’. ‘This car is not just about fulfilling the need for mobility. It has to have good styling and the owner should be able to upgrade the specification over time. The owner wants to be proud of the car.’ Local considerations for China could include a wider range of colours and some bright trim work to enhance the appearance. ‘It doesn’t want to look too cheap’ Hackenberg told Autocar. VW is also working on a cost-effective way to allow smartphone integration into the car, despite the model’s simplicity. The new budget range is expected to be signed off later this year, with the first production cars appearing in late 2015. In the medium term, it looks unlikely that car would be sold in Western Europe and, if it was, it would not be exported from China. Volkswagen’s budget brand for emerging markets to be called ‘Tantus’?
To tap the aggressive growth the emerging markets have to offer with new car buyers, many established manufacturers are creating new brands that will focus on the BRIC nations. Nissan started the trend with the revival of Datsun and now Volkswagen wants a piece of the pie. CarMagazine reports that Volkswagen is scripting plans of launching a budget brand for emerging economies where base products constitute 40% of the market. Clearly, the question on your mind is how ‘base’ are we talking? Volkswagen has finalized three core products/platforms to start the brand – A 6 lakh rupees sedan A 6.5 lakh rupees wagon based on the sedan A 7 lakh rupees MPV A 7.8 lakh rupees crossover Affordable, entry-level three-door hatchback Most of these products will be like a Boxing Day dinner – leftovers from old VW models such as the past generation Polo, Jetta and Golf would be recycled. This would make them cheaper to build and more reliable because they have been tried and tested for ages. Despite being a budget or low cost brand, VW will not compromise on safety. The new product portfolio will include at least two airbags and ABS. But the so-called ‘vanity features’ such as power steering, rear disc brakes, ESP and air-conditioning will cost you extra. The same 1.2L petrols and 1.6L diesels that are present in the current Polo and Vento sold in India will build homes under the bonnet of the new ‘VW lite’ cars. Volkswagen will work extensively on getting more mileage from these old engines. A five-speed manual will be standard across the product range. But surprisingly, VW has plans to offer a 7 speed DCT as an optional extra for people who can afford it. Because these new VW-lite cars will not be anywhere close to VW’s future range of ultrahightech and super-safe cars, it makes little sense to sell them under the VW badge. Car Magazine reports that VW may use the ‘Tantus’ badge to sell these budget cars in the emerging economies. Volkswagen filed the Tantus moniker in China to tap the burgeoning EV market. However, not much development has been seen on the Tantus project since 2011.
Volkswagen may also call on the expertise of its Chinese partner First Automotive Works of Changchun to develop these cut-cost products. So come 2016, will we see a fierce battle between Datsun and Tantus in India.
Maruti Suzuki to develop two facilities in Gujarat to step up manufacturing NEW DELHI: In a move to step up its manufacturing in India, Maruti Suzuki - India's largest carmaker - has decided to develop twin facilities in Gujarat. The company's Japanese parent Suzuki Motor Corporation (SMC) has plans to concentrate on Asian markets following the recent closure of its US operations.Suzuki withdrew from the US market in November last year. Maruti, the largest subsidiary of Japanese carmaker Suzuki, has charted out its future production model on the lines of Haryana operations, where it operates five plants from two separate locations in Gurgaon and Manesar. To finalise its Gujarat plans, SMC chairman Osamu Suzuki is making an unscheduled trip to India on January 24 and 25. Maruti is now directly acquiring a 480-acre plot at Ughroz and Ukarade villages in Gujarat from farmers. This is in addition to the 700 acres allotted to Maruti Suzuki for a manufacturing facility in Mehsana by theGujarat government. The company plans to invest around 4,000 crore in Gujarat in the first phase that would go into acquiring the land and constructing the proposed plant, which will have an initial annual capacity of 2.5 lakh cars. The company has planned new models for India along with a strategy to export more cars from the modern Manesar factory and the upcoming Gujarat facility. "We are looking for a second location and the land is being acquired currently. We are saturated in Haryana with no scope of expansion. We would have a similar two-location model in Gujarat that would be developed and expanded in accordance with market demand," Maruti Suzuki chairman RC Bhargava had recently told reporters. According to a top executive, Maruti has already started the process of acquiring additional land as it has learnt a few lessons from the increased land prices at its Manesar locations. A court order has recently asked the company to pay many times the 20 lakh per acre it shelled out to acquire around 600 acres in 2005. "To avoid further complexities, the company has decided to acquire more land on its own. The acquisition would be done directly from land owners keeping in mind its future needs. Land price have already started moving north in Gujarat," the executive added. Purchase of new plots of lands is in accordance with the Maruti management's long-term agenda to expand its Indian manufacturing facilities, which will help Maruti meet future market demand in Asia. These new plants will be located around 100 km from Ahmedabad, and will be within a 300-km radius of the Mundra port, which has been developed by Maruti keeping in view its long-term export plans.
Renault betting big on Indian automobile market French automaker Renault says India will be the third jewel in its international strategy alongwith Russia and Brazil as it aims to increase its market share outside of Europe. Renault sold 1,279,598 vehicles outside of Europe in 2012, a nine percent growth, the first time it sold more cars outside its home continent. In 2012, Renault stepped up the pace in India. The Renault range now comprises five products, with Pulse, Duster and Scala joining the range after Fluence and Koleos. These launches illustrate the Groupâ€™s determination to be a key player on this market, which is the third key component in its international strategy, alongside Russia and Brazil. The Group had market share of 1.1%, it said in a statement.
Mahindra Two Wheelers readying segmentation strategy for growth Chennai Mahindra Two Wheelers has indicated that it would be adopting segmentation strategy instead of trying to stuff products in motorcycle and scooter segments in a bid to establish and grow its business. Backed by strong in-house R&D, the company intends to enhance product portfolio in motorcycle and scooter segments. The company, which has just re-entered the motorcycle segment with two new features-packed bikes, is charting at least three launches in the scooter segment during the next year. The company had withdrawn its first bike Stallio due to some technical issues. The firm sees greater opportunities to grow and position its two-wheelers by creating subsegments targeting specific customer experiences. The current two bike launches have also been driven by its segmentation strategy as it looks to tap the largest category — 110cc bike segment — first to create an addressable new segment targeting specific set of customers. It expects both the new bikes — Pantero and Centuro — to drive boost volumes. “In the 110 cc segment, there is a whole range of new models and each one is trying to capture different set of customers through unique positioning,” Anoop Mathur, president – two-wheeler sector, Mahindra & Mahindra told Financial Chronicle. While the company is charting a plan to create a slew of news segments in the motorcycle category, it is also aggressively planning to push its scooter volumes, presently driven by two products — Duro and Rodeo. “While our two scooter brands Duro and Rodeo, both 125cc products, have completely different positioning targeting unique segment of customers, we will come out with more products,” he added.
The company is preparing to launch at least three products in the scooter segment during the next 12-13 months. It saw 20 per cent drop in scooter volumes at 85,101 units during the first nine months of this financial year as against 106,429 units in the same period last year. The company saw its market share falling to 4 per cent from 6 per cent in scooter market, which actually reported 18 per cent growth during first three quarters of this financial year. “The chief contribution to the growth of scooters came entirely through new launches. There is a penchant for innovation, new technology and new products among the two wheeler customers and we are responding through new launches in the coming months,” pointed out Mathur. Mahindra’s two-wheeler R&D centre in Pune has indigenously developed two engine platforms – 110cc and 300cc. “We will design and manufacture two-wheeler engines in house,” said Viren Popli, executive vice president — strategy and market development, Mahindra Two Wheelers, which also has the advantage of using the infrastructure of Mahindra Research Valley, group’s modern automobile R&D facility near Chennai.
ROUGH RIDE Slowdown forces car cos to hold back hikes Pankaj Doval TNN New Delhi: Are carmakers taking the public for a ride? Despite warnings of impending price hikes from January due to various “cost pressures”, none of the major players have gone ahead and increased retail prices so far, making it more of a gimmick and possibly aimed at pushing sales in a sluggish market. With nearly half of January gone by, there have been no announcements on prices by top players like Maruti, Hyundai, Volkswagen and General Motors, though most of them had warned about the hikes in December and highlighted the same in their advertising campaigns. Officials and spokespersons of some of the companies said they are “still working” on the pricing and a decision can come soon. Industry analysts blamed the continuing slowdown in the car market as one of the reasons behind the reluctance of companies to raise prices. “This will be a further dampener to the already depressed sentiments,” an analyst said, asking not to be
named. The continuation of deep discounts in the market, even in the new year, also defy the logic of raising prices. The threat of raising prices by a few thousand rupees, and even hundreds for some, looks farcical at a time when freebies and discounts are running into several thousand. “It was perhaps to perk up demand in December that made companies speak of price hikes from January,” the analyst said. The poor demand is one of the major reasons that has made companies go soft in the market. Hit hard by high interest rates and dearer fuel prices, especially petrol, new car sales have slipped into the negative. Growth in car sales is forecast to fall to a ten-year low this fiscal and companies are saying that the going will be tough in the new year as well. “Customer footfalls at dealerships is very poor and while we do get enquiries, it is getting increasingly difficult to convert them into sales,” a top industry official said. Most companies say that only new models are leading the charge in the market. “The regular models, especially the petrol variants, are selling at a substantial cost for us as we have to spend more on discounts and advertising to push them into the market,” the official said. Auto lobby body Society of Indian Automobile Manufacturers has downgraded the growth forecast for car sales three times this fiscal. Against its healthy projection of 10-12% made at the beginning of the financial year, it has now said that sales will grow only by 01% now. Car sales in the April-November-‘12-13 period have fallen by 0.3% at 13.8 lakh units against 13.7 lakh units in the same period last year with as many as 10 of the 19 carmakers witnessing a decline in volumes. These include Tata Motors, Ford, General Motors, Toyota and VW.
Mahindra gets a new fortune
With the Rexton, Mahindra enters the segment ruthlessly dominated by Toyota Fortuner. It’s priced right, but is that enough to make the Rexton shine? In India, not many had heard about SsangYong until Mahindra & Mahindra acquired a 70% share in the Korean SUV major in February 2011. In fact, I doubt many would be even able to pronounce SsangYong correctly! With SsangYong in Mahindra’s kitty—which obviously takes the utility major closer towards its goal of becoming a global SUV player and provides the company the much-needed diesel engine technology—we look forward to some exciting times in the SUV market in India, beginning with the Rexton that Mahindra launched recently in two versions, RX5 and RX7. For our review, we pick the RX7 automatic. Although an entry-level SUV globally (it is present in over 70 countries), in India the Rexton sits alongside the likes of Toyota Fortuner, Ford Endeavour, Chevrolet Captiva, Mitsubishi Pajero Sport, Hyundai Santa Fe, etc—essentially the premium SUV segment. And this means ruthless competition, especially in the form of the Fortuner, which has that ‘one’ feature almost all Indians look for in an SUV—massive road presence. Now, the Rexton, at 4,755mm x 1,900mm, is the longest and widest SUV in its class, and though that results into massive interior space, the SUV’s slanting bonnet lines and wraparound headlamps don’t quite give the Rexton the brute frontal looks of the Fortuner. But that ‘softness’ diminishes once you look at it from the side. The sheer length of the SUV combined with muscular wheel arches, huge 235/75 R16 wheels mounted on alloys, side footboards and a blackened out B-pillar give it a tough, go-anywhere appeal. At the rear, the wraparound windscreen looks quite neat. The small roof-mounted antenna also looks good. Probably because the name is new to India, Mahindra has badged ‘Rexton’ at all possible places on the body, even inside the headlamps! The rear bumper also has a small ‘by Mahindra’ badge. On the inside, the impression the SUV creates is even better. The cabin is plush, plastic quality is superb, dual tone interiors look smart, and seat fabric and cushioning seem from a class above. Getting inside the Rexton is quite easy and the SUV is loaded with features such as the illuminated keyhole, touchscreen Kenwood audio system, Bluetooth telephony, GPS navigation, climate control, automatic sunroof, rear parking sensors (but no rear camera), automatic headlamps, steering-mounted controls, paddle shift, cruise control, bright cabin lights and more. Then there are a number of intelligent storage spaces inside the cabin. In fact, everything seems solidly put together. The legroom at both front and middle is aplenty and the middle seat easily accommodates three large persons. The third row of seats, as expected, isn’t very comfortable and come with limited legroom and no headrest. But once folded, the third row results into a massive amount of boot space. The climate control feature works well and you get the desired interior temperature in a matter of minutes. Mention must be made here of the melodious wind-chime warning bell that keeps ringing until you put on your seatbelts or if any of the door is open while the SUV is on the move. Unfortunately, once the SUV is on the move, it does lose some brownie points, primarily because the 2.7-litre, in-line, five-cylinder diesel motor is noisy, and gets progressively louder as you rev up the engine. Fortunately, the engine itself runs like a dream. RX7’s RX270 XVT
engine produces a maximum power output of 184bhp@4000rpm and a maximum torque of 402Nm@1600-3000rpm (RX5’s RX270 XDi produces 162bhp@4000rpm and 340Nm@3250rpm, respectively). RX7’s Etronic AT, having 5 gears, comes with a permanent all-wheel drive feature, making it a true SUV. You also have the option of using the manual mode in the AT version. The automatic box is not really responsive, especially at low engine speeds, but once above 2000rpm, the SUV simply takes off. The slow start and a weight of over two tonnes means the Rexton isn’t able to break the 10-second barrier to a ton in either the AT or the MT mode. (We took 11 seconds to reach 100kmph from standstill.) The power delivery, though, is smooth and linear. Since the Rexton is based on the old generation Mercedes M-Class (courtesy the technology collaboration SsangYong had with Daimler-Benz in 1991), it means you don’t have many ride and handling issues either. And a huge ground clearance of 252 mm means the SUV is at home even on the worst of the roads. The company-claimed maximum speed is 194kmph and the ARAI-certified fuel consumption is 11.18kmpl. In the segment the Rexton is going to compete, what is most important is pricing. And the SUV doesn’t fail here. At R18,08,371 (RX5) and R20,22,879 (RX7), ex-showroom Delhi, M&M’s new flagship gets a serious edge over its rivals and, to many, will be a value-formoney proposition.
Pay a lower car insurance premium if you are married Factors like profession, gender and marital status, among many others, are now being used by insurers to determine the premium. ET shows how you can bring down your auto insurance premiums Are you a doctor? Do you have a covered parking lot? Do you use your car sparingly? If your answers to these questions are yes, you may get a discount on the insurance premium on your car at the time of renewal. Faced with huge losses in their motor portfolio, general insurers are exploring various options to reduce the losses. Differential pricing is one of the options considered, which means premiums will go up if the insurer believes the incidence of claim is going to be higher or vice versa. "Traditionally, car premiums were decided upon the basic factors i.e. engine capacity, age of the car and geographical zones. Over the last four years, insurers in India have started using several other 'asset-based' parameters - such as the type of fuel used in the car, effective anti-theft devices etc. Further, few insurers now are trying with 'demographic' parameters as well - these include the occupation of the insured, the age of the driver/insured etc.," says Sanjay Datta, chief, underwriting & claims, ICICI Lombard. In fact, industry-watchers say your marital status and gender, too, could affect the premium figures. "In terms of demographic parameters, we have started taking into account the insured's age, gender, occupation and driving experience. Even marital status plays a role in influencing the premiums. For instance, married individuals in the age group of 32-60 are entitled to discounts as they are perceived to be more responsible drivers and we are thinking of using this as a rating parameter. They can also be counted upon to take good care of their vehicles. Discounts on the basis of such personal information can go up to 20%.
Likewise, the loading on premium, too, can be as high as 20%," says Madhukar Sinha, national head, personal lines, Tata-AIG General. However, the possibility of discount in one category being cancelled out due to loading in another cannot be ruled out. For instance, higher premium due to the fuel type may nullify the discount earned on account of occupation or age. PROVIDE MORE INFORMATION IN THE PROPOSAL FORM Simply put, the information you provide can swing the premium for you. For instance, Berkshire Insurance, which sells Bajaj Allianz's motor policies, offers a 5% discount to policyholders if they share personal information. "We have started offering discounts in premiums to certain professions (like doctors, software professionals, those with desk jobs) and also on the basis of income brackets and gender. The discounts will be in the range of 5-7% on policies bought online," says Vijay Kumar, head, motor insurance at Bajaj Allianz. You are also likely to score high on insurers' preference meter if you sparingly use your vehicle, as that would translate into fewer chances of making claims. This apart, you could be charged lower premiums if you park the car in a covered space. Again, the reason is lower possibility of claims. On the other hand, a car parked in the open is always at the risk of getting damaged. BUY POLICIES ONLINE If you are buying your policies through an intermediary, it is unlikely that s/he will encourage you to provide such details in the proposal form. Besides, going online has direct benefits, too. "One can save money on car insurance premiums by buying the insurance policy online. Some companies offer better rates for customers coming directly onto the company's website," says Datta. PROTECT YOUR NO-CLAIM BONUS Policyholders who have not made any claims in the previous year receive rewards in the form of noclaim bonus (NCB). On renewal, the cover could increase by up to 50%. Therefore, you need to make efforts to 'earn' this NCB. At a broader level, you can do so by following driving rules and taking adequate care of your car. Moreover, you can also retain the NCB by forgoing smaller claims. "If the claim amount is not significant, it is better not to make a claim. You should look at getting the vehicle repaired at a garage that charges reasonable rates. You can negotiate hard to bring down the costs. If you avoid smaller claims, you stand to gain 20% in the first year and up to 50% in the subsequent years as NCB," says Kumar. Simply put, if the amount is lower than the NCB you are likely to accumulate, you'd be better off forgoing the claim. Also, remember, since the NCB is linked not to the vehicle or the policy but to the policyholder, it will be transferred to your new car, too.
"You should ensure that when you sell your old car and buy a new car in the same segment, you can claim NCB on the premium for the new car also. The savings in such a scenario can be significant as the premium for a new car is always high." ASK FOR HIGHER DEDUCTIBLES If you are confident of your driving abilities or are unlikely to use your car extensively during the year, you can explore this option. Here, the customer agrees to bear a part of the expenses before the company steps in to foot the rest of the bill. "If the customer is confident of his/her driving skills and feels that s/he is not going to make a claim during the year, this is a good option. The deductible ranges from Rs 2,500 to Rs 7,500 and the savings in premium can be as high as 30%," says Kumar. CHOOSE YOUR FUEL TYPE WISELY While diesel cars have gained popularity due to lower cost of the fuel, the effect on premiums is just the opposite. Petrol cars attract lower premiums compared to diesel or CNG-run vehicles. Therefore, you need to bear this point in mind while deciding on the right vehicle. INSTALL ANTI-THEFT DEVICES "Further discounts can be availed by installing Automobile Research Association of India (ARAI) approved anti-theft devices in your car. This is another form of reward to the owner of the car for showing responsibility by installing such a device," says Datta. It is estimated that installation of such devices have brought down claims by up to 80%. "At the time of buying a car, ensure that it is fitted with a manufacturer-fitted anti-theft device. Devices procured later may not help much as the insurer will have to assess whether it is certified, which could result in hassles during policy issuance," adds Kumar.
Two-wheeler makers line up launches for 2013 Business Standard After a week-long shutdown of Honda Motorcycle and Scooter India’s ( HMSI) plants for maintenance, the waiting period for Activa has gone up from 10 days to more than 15 days. HMSI is now trying to reduce the waiting period for India’s largest-selling scooter, which sells about 100,000 units a month. HMSI, which has the second highest two-wheeler sales in India,is waiting for its Karnataka plant, which has a capacity to churn out 1.8 million units a year, to be operational. The new plant, which will open in the ensuing quarter, will allow the company to expand its retail presence. Yadvinder Singh Guleria, vice-president (sales and marketing), HMSI, said, “The slowdown has had no impact on Honda products. The demand is such that we have no stock in our plants right now and the Activa is again carrying a waiting period of more than 15 days.” While Yamaha is setting up a new plant near Chennai, Hero MotoCorp,India's two-wheeler market leader, says it is on course to set up two new factories and an R&D unit. Mahindra 2 Wheelers is also pumping in capital to boost its presence in the segment. Mahindra and Bajaj Auto kickstarted the new year with launches in the first week itself and a promise to follow up with several other products during the course of the year. Similarly, others in the pack will launch at least two-three new products and upgrades during the year. New launches in the price range of Rs 40,000-20 lakh will include economy bikes, automatic scooters, premium street bikes, sports bikes, big scooters, hybrid scooters, super bikes and commuter bikes. These new launches, companies hope, will keep consumer excitement high. The two-wheeler industry is ready with investments of more than Rs 8,300 crore towards these activities. Operating at 100 per cent capacity, HMSI's two existing plants in Haryana and Rajasthan with a total of 2.8 million units are struggling to fulfil demand. India’s scooter and motorcycle manufacturers have registered a modest growth of 4 per cent
in the current financial year (till November), well short of the target of 11-14 per cent. However, this has not kept the two-wheeler makers from making investments towards new factories, technology and products. For now, Pune-based Bajaj Auto, India's second biggest two-wheelermanufacturer, has adopted a wait-n-watch approach before finalising plans for further investment to augment capacity. It has a capacity of 400,000 units a month for two-wheeler and is operating at 80 per cent utilisation. When asked if Bajaj Auto will invest for enhancing capacity Rajiv Bajaj, managing director of Bajaj Auto, said, â€œWe are contemplating it in our minds because we are (operating at) 80 per cent capacity (now), but in terms of numbers it is 320,000 vs 400,000 and the future is uncertain. The current level of demand does not encourage us to actually put money on the ground and invest in a new plant but as soon as 320,000 starts looking like it is going to be closer to 400,000, we will look at it".
Hybrid and electric car makers told to turn up the volume as quiet vehicles pose a threat to pedestrians
Safety agency believes move could prevent up to 2,800 injuries a year
Manufacturers of electric and hybrid cars are being asked to make their vehicles noisier at low speed so they do not pose a threat to pedestrians and cyclists. A U.S. government safety agency believes new minimum noise regulations could prevent up to 2,800 injuries involving pedestrians and cyclists a year. Hybrid cars and trucks normally rely on electric motors at low speed with their noisier petrol or diesel engines only kicking in at around 18mph. In a statement, the National Highway Traffic Safety Administration said it feared the vehicles don't make enough noise at low speeds to warn walkers, bicyclists and the visually impaired. The proposed rule would require the cars to make additional noise at speeds under 18 miles per hour (29 kph). NHTSA says the cars make enough noise to be heard at higher speeds. Automakers would be able to pick the sounds that the cars make from a range of choices but the sounds would need to meet certain minimum requirements. Similar vehicles would have to make the same sounds. And the government says pedestrians must be able to hear the sounds over background noises. The public has 60 days to comment on the proposed rule. The agency will use public input to craft a final rule. NHTSA estimates that the new noise regulations would prevent 2,800 pedestrian and cyclist injuries during the life of each model year of electric and hybrid vans, trucks and cars. The rule is required by the Pedestrian Safety Enhancement Act that was passed by Congress in 2010. However the changes will not affect current hybrid or electric car owners and the changes will be phased in for new vehicles. Wade Newton, a spokesman for the Alliance of Automobile Manufacturers, pointed out that different locations would require different levels of noise. He told ABC news: 'The sound you would need in Times Square would be quite different than one that would be appropriate on a rural road.'
Luxe car brands see growth in India The Times of India India's car market may be stuck in first gear with barely 1-3% growth expected this financial year but the luxury end of the industry seems to be bucking the trend. According to a top auto industry official, India's luxury car brands together totted up 12.5% growth in the January-November 2012 period, with calendar 2013 promising anywhere between an 1118% clip. "Despite the slowdown, the Indian luxury car market continues to be one of the most exciting in the world," said Tomas Ernberg, MD, Volvo Auto India. "From around 2,000 units five years ago, it hit 24,000 units in calendar 2011 and 27,000 units in JanuaryNovember 2012." The estimates for 2013, he said, range between 30,000-32,000 units. The figures contrast sharply with overall car industry's fortunes in the April-November period with a mere 1.2% growth. Not surprisingly India is suddenly top-of-the-mind for luxe car brands, including Volvo. "No one can afford to not focus on India," said Ernberg. "Our estimates are that by 2020, the luxury car market in India will hit 1,50,000 units and our target is to claim over 13% of that market with 20,000 units in India." That fresh focus, he said, kicks off from 2013 with Volvo going "full gas ahead" with a pipeline of new launches, expansion of distribution network and a larger marketing team. The niche car brand - previously owned by Ford and now by Chinese auto major Zhejiang Geely - saw its sales jump 150% over a miniscule base in 2012 from 325 units in 2011 to 810 units in 2012 and is targeting another 50% jump in 2013 to 1200 units. With a $1.2 billion loan from China Development Bank, Volvo globally is cash rich again and although it saw sales slip 6% globally in 2012, the focus is to double worldwide sales to 8,00,000 units by 2020. India's luxury lineup is now increasingly veering towards SUVs and crossovers riding on the back of more than 60% growth in the overall utility vehicle sales. Volvo's own S60 and XC60 clocked 45% and 35% growth respectively but the balance is slowly shifting towards crossovers, saidErnberg.
TaMo hopes to sell more cars with dealer makeover Tata Motors, whose Indica and Sumo once counted among the top-selling brands, is trying every trick in the book to prop up its passenger vehicle sales that are down by a quarter since April. In a big makeover, the company has reshaped its entire go-to-market strategy and sales team to fight off an array of car and SUV models rolled out by local and foreign automakers alike. To begin with, Tata Motors is looking at enhancing customer experience across its 1,000 touch points and 900 service points. “We have reshaped our go-to-market and sales team. We are working in a different way now in managing our dealerships and customers. Our focus will be to enhance customer experience, giving them best-in-class experience, both in sales and service. As all our work around these things start kicking in, we will start seeing benefits,” said Ranjit Yadav (pictured), president, passenger car business unit. Karl Slym, Tata Motors’ new chief, recently spoke about aggressive plans for company’s passenger vehicle division and its ambition of coming back as a strong volume player in the segment. In line with the strategy, the company recently announced opening of flagship showrooms across metros. “We are not number one in our customer experience today. Our intention is to be number one and not in too longer period of time, but in the few coming quarters. So all the work that goes behind is happening now. We are working step by step,” said Yadav, who recently joined the company from Samsung. “We have revamped and upgraded our whole training process for our sales people and equipped them better. There were opportunities for us to improve, we spotted them and started working on them,” he said. Meantime, April-December passenger vehicle sales are down 25.34% compared with the same period last year. The company is hoping for an exciting 2013 as it plans to launch new products. “2013 will be an exciting year. The economy is a it challenging and the markets are a bit challenged, but there are lots of initiatives we are putting in place that should help us do well in 2013,” he said.
The company will launch a CNG variant of Nano, and a diesel variant this year along with different product renewals.
Yamaha targets double-digit growth riding scooter success Chennai Firm looks to grab 10% share of two-wheeler market by 2016 After Honda and Suzuki, it’s the turn of Yamaha to trigger more competition in the fastgrowing scooter market. The Japanese two-wheeler is aiming for a strong double digit growth in total domestic two-wheeler sales in 2013, driven by scooter, which are expected to account for about 40 per cent of the total number. Yamaha intends to give stronger focus on its scooter business during the calendar year and hopes to consolidate its volumes under its first scooter brand in the Indian market — Ray. With its proposed plans to increase monthly volumes from 10,000 plus to over 16,650 units during 2013, the company is embarking slew of initiatives to lure young women buyers for its scooter. “We have been getting very good responses to our scooter since the launch in September. While Ray is targeting at young women who are below 24 years, we expect more family customers to buy our product as it is slightly bigger than some of the scooters in the market,” Roy Kurian, national business head, India Yamaha Motors told Financial Chronicle. “We have sold about 35,000 units of Ray since the launch and expect scooter volumes to contribute about two lakh units to the total domestic sales target of five lakh units in 2013,” he added. Yamaha sold 348,406 two-wheelers in the country in 2012 compared with 343,466 units in 2011, posting a marginal growth of 1.4 per cent. But this year, the company is targeting to sell about five lakh units, which means the company will be recording about 43 per cent growth compared with 2012 volumes. This higher growth is expected to be driven by strong scooter sales of about 200,000 units. With 20 per cent plus growth in scooter market, Yamaha sees strong growth opportunities in the coming days. Average monthly scooter sales in the country during 2012 were about 2.4 lakh units compared with average monthly volumes of about 1.97 units in 2011. Scooter segment promises strong growth for two-wheeler makers supported by new launches, increasing urbanisation and growing acceptance of gearless scooters, particularly among women. This segment is expected to account for 40-45 per cent of the total two-wheeler sales in 2015 from the current levels of about 21 per cent. To woo more women buyers, Yamaha has just come out with a female riding training programme under which, it intends to train young women on riding a scooter and to facilitate obtaining a licence. This programme is expected to be conducted in colleges and schools across the country.
Yamaha has learnt through a survey it conducted that training has big influence on purchase decisions as any girl who learns to ride on a certain brand of bike would mostly end up buying the same brand. Thus, by offering free training to young aspiring women buyer, it plans to attract them to its brand. The company also sees more and more women opting for personal transportation due to recent concerns over womenâ€™s safety in public transport system. So scooter market is promising strong potential for two-wheeler makers. At present, Yamaha has over 400 dealers across India and plans to reach more location and plans to ramp up the network to about 2,000 by 2014. It is also working on its secondary network to be realigned to reach more customers in rural areas. With the addition of the recently launched scooter Ray in its portfolio, India Yamaha Motor is looking at an overall market share of 10 per cent by 2016.
Two-wheelers lose some spark Scooters made a comeback and entry level bikes suffered. That has completely changed the fortunes of players. Even as car and commercial vehicle sales began their plunge in 2011-12, two-wheelers (motorcycles, scooters and mopeds) held fast, recording a double-digit growth in volumes last year. But coming into 2012-13, two-wheelers also have lost speed with volumes growing by only about 5 per cent in the first eight months of this year.
What are the trends surfacing in this industry at this juncture? And more importantly, if you own stocks such as Bajaj Auto, Hero MotoCorp or TVS Motors, how are these companies poised? SCOOTERS, FLAVOUR OF THE SEASON While the lull in motorcycle sales (0.3 per cent volume growth for April-November 2012) has pulled down the overall growth for two-wheelers, scooter volumes have actually grown at a strong 20 per cent. Slowdown or boom, the trend of volume growth in scooters outpacing motorcycles has been happening in the industry for at least five years now. Thanks to this, from about 14.5 per cent in 2007-08, the share of scooters in total two-wheeler sales has now moved up to 21 per cent. Agreed, with scooters commanding only about one-fifth of the total two-wheeler volumes even today, a part of their high growth can be attributed to a small base. But the fact that scooters have been steadily gaining a larger share of the two-wheeler pie cannot be denied. Crowded traffic conditions, poor public transport, increasing number of women drivers, style and unisex appeal have been some of the demand drivers for gearless scooters, which form bulk of the market here. With scooters proving to be a good counter to the slowdown in bike sales too, companies are vying with each other to cash in on this trend. Several launches in the last one year, such as the Vespa from Piaggio, the Yamaha Ray, Suzuki Swish and the Maestro from Hero are testimony to this. However, the two listed players in this space — Hero (Pleasure, Maestro) and TVS Motors (Scooty series, Wego) are not on a strong wicket, thanks to Honda (Activa, Dio, Aviator). While Honda has always remained the market leader in this segment, 2010-11 saw the company ceding market share to TVS and Hero. But that remained short-lived. From 43 per cent then, Honda’s market share in scooters has moved up to 49 per cent now. But Honda’s aggressive marketing strategies after the split up with Hero have kept Hero’s share in the scooter segment stagnant at 16-17 per cent in the last two years. TVS’s market share has declined, coming down to 15.5 per cent, from 21 per cent two years ago. Besides the stiff competition from Honda, a second reason for TVS’s lower share could be the positioning of its offerings. While the 90-125 cc scooter segment is where most of the action today lies, TVS has only the ‘Wego’ in this category. The flagship ‘Scooty’ falls in the 75-90 cc category, which has garnered lower interest in recent times, going by sales numbers.
POCKETS OF GROWTH IN BIKES The rising challenge from Honda is not restricted to scooters alone. In motorcycles, lower disposable income in the rural markets, high inflation and increasing fuel prices dampened the demand for entry-level bikes this year. Volumes for bikes in the 75-110cc category (called mass commuter bikes) dipped by 2 per cent in April-November 2012-13, compared with the same period last year. Hero MotoCorp, the leader in this segment (CD Dawn/Deluxe, Splendor, Passion), bore the brunt of this fall. Honda defied the trend, gaining volumes in this category, thanks to the smaller base of last year. The company introduced the Dream Yuga, priced similar to the Splendor in the entrysegment in 2012. Second, as every other player in the 125-150 cc category bikes witnessed a dip in volumes, Honda again managed to grow its volumes here. Third, Honda also cashed in on the strong demand for the middle-of-the-road (110-125cc) bikes this season. High interest rates and fuel prices could have prompted aspirants of premium bikes to settle for this category, as they offer good value for money. But even amidst competition from launches such as the Hero Ignitor, Suzuki Hyate and TVS Phoenix in this segment, Honda held its ground, managing a healthy growth in volumes with models such as the Shine and Stunner/Fi. Thanks to all this, Honda now has a 11.5 per cent market share in motorcycles, up from 7.6 per cent in 2011-12. While Bajaj has managed to stick on to its 25 per cent share, Hero and TVS have been casualties. PROSPECTS With Honda planning to make India its biggest market for the two-wheeler business, the onslaught is expected to continue. True, Bajaj Auto is not tempted by the thriving scooter business; yet, among the three listed players, Bajaj seems better placed to deliver. This is due to other diversifiers in its business model such as a strong presence in the three-wheeler segment, its export focus, its tilt towards middle and premium segment bikes and consequently its ability to consistently maintain 19-20 per cent operating margins. For these very reasons, the Bajaj Auto stock has gained about 45 per cent in the last one year (29 per cent since April 2012) even as the Hero and TVS stocks languished. That said, Bajajâ€™s current valuations at about 20 times its earnings for FY13 seem a little stretched. Especially so, when domestic bike sales are still not out of the dark and its exports have taken a hit due to some regulatory issues in destinations such as Sri Lanka. Hence, existing investors can hold on or partially book profits, but fresh exposures need not
be taken to the Bajaj Auto stock currently. For the other two stocks, while the abovementioned troubles have levelled off TVS’s valuations at 10 times its estimated FY13 earnings, Hero, at 17 times, is only at marginal discount to Bajaj.
M&M unfazed as Navistar checks out MUMBAI, JAN 6: Ask Pawan Goenka if he is worried about the road ahead for Mahindra & Mahindra’s truck business. Prompt comes the reply from the President of the Automotive and Farm Equipment sectors: “You need staying power in the auto business and cannot break into a sweat over monthly sales.” M&M recently bought out partner, Navistar’s stake in the joint venture which operates out of a facility near Pune. The American truck-maker is going through a tough period and is prioritising business in the US and Canada. As a result, it has frozen investments in countries such as India. Goenka, however, does not think that there is any reason to panic. “We have a three-year plan for our trucks and will then take a call to determine the road ahead. We will not look at every quarter to take a decision but stay focused during these three years,” he says. The President of M&M admits that things would have been different had the split happened three years ago as his company would have been “ill-equipped” to operate trucks on its own. Today, there is no discontinuity with Navistar continuing to support the business even though it is no longer an equity ally. Reiterating that “there are no low-hanging fruits anywhere in any segment/sub-segment be it SUVs, bikes or pickups”, Goenka says one needs to take tough calls in business which, at times, could be risky and end in failure. “So far, the results will show that we have succeeded more often as in the case of Club Mahindra, Mahindra Finance, Satyam and Punjab Tractors,” he adds. In the auto space, the company has a lot of ground to make up in two-wheelers, the (Reva) electric car project, trucks and its recent Korean acquisition, SsangYong Motor. However, Goenka believes these are still early days in a business model which is essentially long-term and, hence, not worth worrying about. What is a bigger source of anxiety, though, is the slowdown in heavy commercial vehicles with the market clueless when a turnaround will occur. Further, the landscape has changed with more players entering the market. An arena which only comprised Tata Motors, Ashok Leyland and Eicher now includes Volvo-Eicher, M&M, AMW, Daimler, MAN and Scania.
As Goenka says, any HCV maker keen on having a meaningful presence should have a market share of at least 7-8 per cent. At present, five players account for a combined 20 per cent against Tatas and Leyland’s 80 per cent plus. To expect this to double would only be wishful thinking. “The only way out is to consolidate or continue losing money,” he adds.
Yamaha looks to rev up scooter sales CHENNAI, JAN. 4: Of the 5 lakh two-wheelers Yamaha targets to sell this year (2013), it expects two lakh units to be scooters. While the overall two-wheeler industry is growing at 10-11 per cent, the scooter segment is growing at over 20 per cent, said Roy Kurian, National Business Head, India Yamaha Motor. There is a huge potential for scooters in urban and semi-urban areas. This trend is driven by more women looking to be more mobile, said Kurian. Families are also increasingly looking at vehicles which the entire family can use, he said. Yamaha is targeting 1 million (10 lakh) units by 2015 and 40-45 per cent will come from scooters. It sold 3.44 lakh motorcycles last year. Hero and Honda are the big players in the scooter segment. Yamaha entered the space in September with the Ray range; since then, it has sold over 35,000 units. “Though it is targeted at the urban woman, Ray is also being used by boys and husbands.” NEW MANUFACTURING PLANT NEAR CHENNAI Yamaha’s upcoming manufacturing plant at Vallam Vadagal, near Chennai, will start production in 2014 with scooters. The plant will have a production capacity of 1.8 million units, taking Yamaha’s total capacity to 2.8 million units. Yamaha already has two plants in Uttar Pradesh and Haryana. To encourage more women to take up scooter riding, Yamaha on Friday launched a rider training programme. The 3-hour training will be given to women free of cost at Yamaha dealerships by company staff. The company is also targeting colleges to offer training. The programme covers aspects such as safety, balance, posture, start-stop, turning, cornering and braking. This is also an attempt to get customers to experience the Yamaha brand. The company has similar rider training programmes worldwide, especially in Asean countries. About 70 per cent of people who undergo this training end up buying the Yamaha brand, said Kurian. Yamaha hopes to repeat this in India, too.
Heavy Industry Ministry for lower excise on small cars, two-wheelers NEW DELHI, JAN. 6: To boost the sagging auto industry, the Heavy Industries Ministry intends to pitch for lowering excise duty on two-wheelers and motor vehicles, especially small cars, in the 2013-14 Budget. It also wants the Finance Ministry to incentivise replacement of old vehicles. “After detailed consultation with industry players and discussion within the ministry, various recommendations have been prepared. “All these aim at not only maintaining a healthy growth rate for the industry but also attracting investment,” a top Ministry official said. When asked whether there is any specific recommendation about creating an entirely different tax regime (either ad valorem or specific duty) for diesel cars, the official replied in the negative. At present, excise duties on passenger cars range between 12 per cent and 27 per cent with a fixed duty of Rs 15,000, depending on the engine size and length of the vehicle. It may be recalled that the Petroleum Ministry had, in June last, sought imposition of additional excise duty of Rs 1.7 lakh on small diesel cars and Rs 2.55 lakh on SUVs. The assumptions for additional duty rest on an average lifespan of 10 years and mileage of 18 km for small cars and 12 km for SUVs. However, the Finance Ministry is yet to take a call on this. CUSTOMS DUTY To make inputs cheaper, the recommendations also include removal of Customs duty on steel, alloy steel and aluminium. Also, the Heavy Industries Ministry is seeking exemption of SS wire cloth strips from the 5 per cent Customs duty, and inclusion of more input services in the Cenvat credit provision. To promote indigenisation and innovation, the recommendations talk about technology upgradation and interest subvention scheme for the auto-components industry. Weighted deduction to research and development service companies has also been suggested. ELECTRIC MISSION The Ministry also wants support to be given to the National Electric Mobility Mission Plan (NEMMP), which has set a sales target of 6-7 million units of of a full range of electric vehicles, along with resultant saving of 2.2-2.5 million tonnes of liquefied fuel, by 2020.
This is expected to lower carbon dioxide emissions by 1.3-1.5 per cent in 2020 as compared to a status quo scenario. Also on the agenda is promoting CNG (compressed natural gas), considered the least expensive among the four auto fuels. Experts feel that more tax concessions on CNG kits should be given. It is one of the alternative fuels which has been promoted in India both for energy security and emission reduction. Delhi and Mumbai have more than 100,000 commercial vehicles running on CNG.
Luxury cars rev up, overtake premium sedans with lower prices, discounts New Delhi: The premium sedan segment, consisting of cars such as the Honda Accord, Toyota Camry and Skoda Superb, is facing some serious competition from new models by luxury carmakers with similar or lower price points. Sales of premium cars fell sharply by 34% to 2,804 units between April and November of the current fiscal as compared to 4,256 units in the same period in FY12. Segment leader Skoda Superb managed monthly average sales of about 160 units in the eight months, while market leader of yesteryear, Honda Accord, sold only 36 units a month on average. In comparison, the leader in the entry-level luxury sedan segment, BMW's new 3-Series, saw monthly average volumes over two times the Skoda Superb at around 400 units in the period. Mercedes-Benz' C-Class also sells about 300 units a month. Jnaneswar Sen, senior vice-president for marketing and sales, Honda Cars India said, “Pricing of luxury cars are now very close to executive sedans and I wonder how they are sustaining it. Accord's sales are mostly affected by smaller sedans by luxury carmakers. To improve our volumes, we are training dealers on pushing the value and lower maintenance costs of the Accord.”The main blow has come from new entry price points being offered by luxury carmakers to increase their customer base with more affordable models. The trend was started by BMW when it launched the X1 in late 2010 at R22 lakh – the model gave it a sharp lead in volumes over rivals. Then in June 2012, Audi launched the Q3 compact SUV at R26 lakh. Rival Mercedes-Benz also jumped into the fray but chose a slightly different path by creating a new sub-segment. It launched the B Class Sports Tourer, the first large hatchback among luxury carmakers, in September priced at R21 lakh. BMW will join Mercedes next year when it launches the 1-Series hatchback in India and brings the entry price point for the whole segment further down to R20 lakh. Mercedes will also launch a smaller hatch, the A Class, next year. In comparison, the top-end Accord is priced at R28 lakh, while a higher-end Superb and Camry are both available at R24 lakh. V G Ramakrishnan, managing director at Frost & Sullivan, South Asia, said premium carmakers can survive the slowdown by reducing prices after investing in local manufacturing
and sourcing more components at home. “From a tax point, imported premium cars (as knocked-down units) are charged similarly as luxury cars, so reducing prices is tough today. There are too many products around R20 lakh, so premium car prices need to be reduced. It's tough for them to survive at the current prices, because in terms of aspirations, luxury cars are way above.”The second big hit for the premium car segment came from the price wars and high levels of discounts offered on select luxury car models, reportedly stretching up to R8-10 lakh. This made luxury cars such as the BMW X1, Mercedes-Benz C-Class and Audi's A4 sharply cheaper than premium cars like Accord, Volkswagen Passat, Toyota Camry and Skoda Superb. “When available at the same price, customers would definitely choose a luxury car over a premium model like the Accord. In that segment, its all about brand aspiration and a buyer would want as much bang for the buck as possible,” an industry executive said. In reverse gear * Sales of premium cars fell sharply by 34% to 2,804 units between April and November of the current fiscal as compared to 4,256 units in the same period in FY12 TOP SPEED BMW's new 3-Series saw monthly average volumes over two times the Skoda Superb at around 400 units in the period. Mercedes-Benz' C-Class also sells about 300 units a month. What will you drive? * HondaAccord R28 lakh * Skoda Superb, Toyota Camry R24 lakh * Mercedez-Benz B Class Sports Tourer R21 lakh * BMW 1-Series Rs.20 lakh
Tata Motors likely to launch 800 cc Nano in 2013; may be priced at around Rs 2.5 lakh The Tata Nano, arguably the world's cheapest car, is getting a quick makeover, a third one after it was launched in 2009. This time around, the company is planning to pack the little Nano with more punch. In the works is an 800 cc engine, while a diesel option is also under consideration. The move comes on the back of slack sales, which touched a low point in November, when the company managed to sell barely 3,500 cars against a target of 10,000. People who are closely associated with the project say an all-new Nano could hit the roads in another 12 months with a price tag of around Rs 2.5 lakh for the base petrol version. The new variant will race against the likes of Hyundai Eon and the Maruti Alto. Analysts say, the diesel option is a move in the right direction. "There will be acceptance of Nano 800 cc diesel in the market and it will help Tata spruce up the volumes. But the brand positioning of the Nano in the minds of the customers will prove to be deterrent," says
Basudeb Banerjee of Quant Capital, a brokerage that closely tracks movements in the auto space. Company officials say, despite its poor show, there is no plan to phase out the existing 624cc version, which will continue to bear the People's Car tag, while the new model will target the more aspiring ones. Some auto experts, however, expressed doubts about the impact of the makeover in a market dominated by global giants like Hyundai and Suzuki. Last week, Tata Group Chairman said that Tata Nano, is being 'refreshed' to realise its full potential. "We were not prepared to market the car as we should have. I think that has a lot to do with the fact that momentum got lost," he told PTI in an interview. He listed out the reasons due to which Nano, nick-named 'The people's car', could not realise its full potential as the momentum got lost in initial years due to issues like plant transfer and insufficient advertising campaign and dealership network. Asked whether these issues are being addressed, Tata said, "It is being addressed now and I think we will succeed. It is a three-four year old product (and) we have to do something to refresh the product, which we are also doing." To a query as to what went wrong with Nano, which was promised as 'people's car' with a price tag of Rs one lakh and that hit the road in 2009, he said there were "several things", including the events in West Bengal. "It caused us to move and caused us to build another plant. That cost us another year from the time of the launch which created a lot of excitement and three months from that launch date, the car should have been on roads. "Instead, because of those events it went on the road a year and half after that event," Tata said. Nano was originally planned to roll out from a plant in Singur, West Bengal, but the plant had to be shifted to Sanand in Gujarat after political protests at its earlier plant. The first Nano rolled out from a factory in Pantnagar in Uttarakhand in 2009, while output from Sanand plant began about a year later in June 2010.
Nano revving up for big league The worldâ€™s cheapest car, the Nano, may soon get bigger, stronger and costlier. Tata Motors is planning to fit the car with a 1-litre engine to revive the product that has had a rollercoaster ride since its launch in 2009. With a bigger engine, a sedan version may also be on offer. Vendors told HT that Tata had been working on a 966cc version to replace the Nanoâ€™s 624cc engine since the Alto is powered by a 796cc engine.
The technical head of a component maker said on condition of anonymity: “Significant changes are being made to the car and the chassis is being strengthened to take more weight.” He said, “They (Tata) also hinted that there could be a version of the car with a boot as well. All this will surely entail an increase in the price, as Tata does not want it to be seen as a cheap car anymore.” With the world’s smallest ever car engine, the Nano costs Rs 1.43-2 lakh in Delhi, while its main rival, the Maruti Alto, is priced at about Rs 2.40 lakh. When contacted, the company refused to be drawn into any speculation although Tata Group’s chairman emeritus Ratan Tata confirmed last month: “We have to do something to refresh the product (Nano).” While Tata has sold about 225,000 Nanos since July 2009, Maruti sold 300,000 Altos a year. The Nano’s 80-litre boot space is one of the reasons that affected its sales as the Alto has a 177-litre space.
Up to 35% cars on roads without insurance Mayur Shetty TNN Mumbai: Almost a third of cars and more than two-thirds of two-wheelers on Indian roads do not have even the mandatory third-party liability insurance, according to an analysis by insurance companies. Worse, many companies have found fake motor insurance policies in circulation. Insurance companies have drawn these estimates going by the number of vehicles registered and the total number of policies issued. The analysis, which was not possible in the past, has been facilitated with the help of technology. “Uninsured vehicles is a problem in motor insurance. Nearly 70% two-wheelers and 30-35% of four wheelers are uninsured. It is clearly a challenge to society as victims of accidents
caused by these vehicles do not get adequate compensation,” said G Srinivasan, chairman, New India Assurance, the largest non-life insurer and also the largest issuer of motor policies. Insurers say that one reason why such a large number of vehicles remain uninsured is the proliferation of fake policies. Several non-life companies have come across fake policies issued in their name. With advancement in printing technology, it is possible for fraudsters to replicate policies of existing companies, helping them get through police checks. However, it is at the time of accident and claims from third parties that insurers detect the existence of fake policies. Second, vehicle owners in small cities and villages do not face any scrutiny of their documents. According to Srinivasan, uninsured vehicles is one of the structural issues faced by the non-life industry in writing motor-third party insurance, which is a drag on the balance sheet of non-life companies. The other issues were rigid prices and the tendency of court awards to go up in keeping with inflation. Some insurers say that it is possible that the number of uninsured vehicles on road could be lower than New India’s estimates because many vehicles do not ply after 15 years. “In our estimates, around 20-25% of cars are uninsured and in two-wheelers the uninsured vehicles are likely to be around 50%. In two-wheelers, the renewals of first year policies are as low as 25%,” said Madhukar Sinha, head of underwriting at Tata AIG General Insurance. NO COVER AT ALL 70% TWO-WHEELERS WITHOUT COVER Vehicle owners in small cities and villages do not face any scrutiny of their documents. As a result, up to 70% of two-wheelers ply without the mandatory cover
FAKE POLICIES IN CIRCULATION Insurers have also come across fake policies. However, it is only at the time of claim settlement that these can be verified
Carmakers offering heavy discounts even on newly launched cars to put sales on track NEW DELHI / MUMBAI: Indians can now buy some mint car models at much reduced prices as sluggish demand has forced carmakers to bring almost every car that hit the market in the festive season under the discount hammer. The newly discounted models include market leader Maruti Suzuki's big-bang debut, the Alto 800, which is available at 16,000 off on its on-road price in its seventh week of launch, and Nissan's MPV Evalia, which comes with 20,000 discount bonanza from its dealers. The Chevy Sail hatchback that hit the market in November too comes loaded with freebies worth 15,000 as companies aim to drive sales in a weaker December. The festive season, which generally brings in double digit growth, was muted and even the new launches, facelifts and refreshes failed to bring much cheer, barring a few like the Alto 800 and some utility vehicles. With sales slumping into a four-year low in November and market sentiment remaining subdued in December, carmakers have increased discounts and freebies significantly on most models to push sales in December.
"Retail sales and deliveries are not so enthusiastic this month after some strong demand witnessed during the Diwali season that helped to clear off the inventories," said Mayank Pareek, chief operating officer (marketing & sales) at Maruti Suzuki, said. "Discounts on cars in December are at the all time high and now many diesel cars that had robust demand earlier have also hit the rebate path," he said in a recent media interaction. Maruti had managed to increase sales of its petrol compact cars by 16% during September-November when it sold 1,30,589 compact petrol cars including Alto 800, Alto, A Star and Wagon R. According to executives of various car companies, the average discounts on cars range between 13% and 18% in December compared to 8%-15% last year. Popular models such as Maruti WagonR, Hyundai i10, Tata Indica and Toyota Liva are coming with discount packages of up to 60,000 and exchange offers. Yet, experts expect December to be a low month. "We are not excepting any turnaround in sales even as freebies and discounts touch their highest point of 2012 as the macro economic conditions have not changed. Inflation and interest rates on auto loans continue to be high that is pushing back customers to buy new cars," Sageraj Bariya Managing Partner at Mumbai-based research firm Equitorials, said. With high interest rates, rising fuel prices and slowing economic growth expected to keep overall consumer sentiment low, they expect the tough times to continue next year as well. "We expect the trend to continue in the larger part of 2013 also," Bariya said. STRUGGLING TO SPEED UP Most models launch in 2012 with the exception of Maruti Ertiga, Renault Duster and DZire sedan have been dwindling on the sales chart. A dozen new cars including utility vehicles were launched this festive season including Maruti Suzuki's Alto 800, General Motor's Sail U-VA hatchback, Mahindra & Mahindra's Quanto and Rexton, and Nissan's Evalia. Also, there were significant facelifts from GM and Ford of Spark and Figo, and refreshes from Toyota, Tata Motors and Volkswagen. Barring Alto 800 and Quanto, most new launches have failed to excite the market. Sail U-VA hatchback, launched to take on Maruti Swift, managed sales of just 1,600 units in the month of Diwali while Swift did about 14,000 units. Japanese carmakerNissan managed to sell just 457 units of its Evalia multi-purpose vehicle in two months against its own
expectation of selling at least 2,000 units in a month. While the numbers indicate a rough ride, companies say the performance is good considering the environment. Lowell Paddock, MD of General Motors India, said, "We expect to perform in tandem with market growth." He said the market continues to remain sluggish due to high interest rates, high fuel prices, high input costs, inflation and negative sentiment. Sriram Padmanabhan, general manager, marketing, at Ford India, said the company is happy with the going of the new Ford Figo, and will stick to its plans to launch eight new products by mid-decade with the EcoSport being the second of the line-up to be launched next year. A Volkswagen Passenger Car India spokesperson said the company expects next year to bring in some cheer. "This year the key market drivers like interest rate, fuel prices have not displayed optimistic signs for the industry, we are sure the year 2013 will bring in some cheer in the market," the person said. Experts say, with festive season and new launches not delivering much, the industry is hoping for some government support in the upcoming budget to revive the sentiment.
Cheaper Midsize Cars Rated Safer Than Luxury Models New crash tests replicating some of the most deadly head-on collisions show less expensive midsize cars do a better job protecting the driver and front seat occupants than many luxury and near luxury midsize cars. "This is a surprise to us," says Adrian Lund, President of the Insurance Institute for Highway Safety. "It shows you don't have to spend a lot of money to get state of the art crash protection." The latest IIHS small overlap crash tests measure how well mid-size cars handle accidents involving their front quarter panels. Small overlap crashes are responsible for
approximately one out of every four frontal crashes. The Insurance Institute says more than 10,000 people are seriously injured or killed in small overlap crashes every year. The IIHS tested eighteen moderately priced midsize cars and rated two as "good" and eleven as "acceptable." The two cars rated as good by the IIHS are the Suzuki Kazashi and the Honda Accord. Lund credits Honda with making changes to the Accords design and structure so it can better withstand small overlap crashes. Honda's Advanced Compatibility Engineering, also known as ACE, is the key the Accords rating of good. "The idea is to dissipate the crash energy while reinforcing the passenger cabin so the car can better withstand the impact," says Chuck Thomas, Chief Engineer of Auto Safety Research for Honda. Here are the rankings of the midsize cars. Good •
Honda Accord (4 door)
Suzuki Kizashi Acceptable
Honda Accord (2 door)
Nissan Altima (4 door)
Chrysler 200 (4 door)
Volkswagen Passat Marginal
Volkswagen Jetta Sedan
Toyota Prius V
Has Toyota Dropped the Ball? Adrian Lund was not surprised the Toyota Camry and Prius V both rated poor in the small overlap crash test. The Camry is based on the same platform as the Lexus ES, which is one of four luxury midsize sedans rated as poor during the same type of crash tests conducted this summer. "I think Toyota has dropped the ball a bit," says Lund. "Toyota has not been as aggressive as other automakers staying up to date on occupant safety." Luxury Still Struggling The first group of vehicles the IIHS put through small overlap crash tests were midsize luxury and near luxury models. During those tests, just 3 of 11 models were rated as "good" or "acceptable". The Volvo S60 and Acura tl were rated as good while the Infiniti G models were rated as acceptable. The four luxury models rated as poor in small overlap crash tests were the Mercedes C-Class, the Lexus IS, Audi A4, and Lexus ES. Why the difference between the moderately priced midsize sedans and their more expensive counterparts? Lund says automakers have had more time to incorporate design changes in midsize models than they did with luxury models tested earlier this year.
Bleeding motor insurers find novel ways to stem losses MUMBAI: General insurers, which have been in losses for much of the last decade, are working out novel ways to boost their income, including charging higher premium for those who park their cars in open, and from those who are in field jobs such as sales. The insurance premium on automobiles is set to add to your annual expenses with insurers planning to introduce many parameters to calculate the premium, said three people familiar with the developing agenda in the industry. "Chances of a tree falling or any damage is higher on car parked in open than the one parked in covered space,' said Vijay Kumar head of motor insurance Bajaj Allianz General
Insurance. "We are taking into account different factors to price car insurance." General insurance industry has been reeling under losses mainly due to bogus third-party motor claims and due to poor under writing standards. Motor insurance contributes over 35% of the premium income for the insurers and it is the fastest growing segment. The premium income from auto policies in the first half the fiscal year was Rs 13,626 crores. These are proposals which have to be approved by theInsurance Regulatory and Development Authority before becoming a norm. Insurers justify the new parameters citing the practice in the West. In the US premium is lower by as much as 5% if in an elite profession. In the UK, the colour of the cars is added to determine the policy price. Claim ratio on third party motor insurance, which is the proportion to the premium earned, has soared 213% last fiscal from a year earlier, implying for every Rs 100 earned in premium, companies paid a claim of Rs 213. Insurers are also looking out ways to extract higher premium from those in occupation where the usage of the vehicle is quite high and where there are more than one user for a vehicle. This will be in contrast to the most common factors used by insurers now which include the age of the car, model of the vehicle, fuel type, zone, engine capacity and the market value of the vehicle. As a carrot, the industry is planning to offer a discount to female car and motorcycle owners. "Gender is another parameter in deciding premium. Women are given a discount as they are expected to be better drivers." said Sanjay Datta head of motor insurance ICICI Lombard General Insurance. But he defended the plan for higher premium for open space parking, "chances of another car banging is higher in open parking so there is a discount offered on closed parking." Profession will also become a significant factor in the determination of premium as the industry argues that by nature some are mild users and others are not. Doctors and teachers will be among the preferred
category with normal premium, but salesmen and businessmen will have higher premium. But the industry at this point does not have a scientific study to back the claim. The new factors are profession, gender, income group and occupation,'' said an executive who did not want to be identified. Insurers are using risk analytics with an objective to compartmentalise further based on colour of vehicle and usage of vehicle. Insurers are offering discount to people in high-income group as they are expected to use more than one vehicle that lowers the damage risk
Maruti Suzuki looking to foray into LCV space with 800 cc diesel engine MUMBAI: Maruti Suzuki, India's largest car manufacturer, is exploring a foray into India's fastgrowing small commercial vehicle space. The segment is currently dominated byTata MotorsBSE -0.20 % Ace with over 50% market share. Though the Japanese carmaker had the Omni Van, used as a cargo vehicle, it did not have a competitive offering in the load-carrier segment, due to the absence of a small diesel engine. But with the development of company's two-cylinder, 800 cc, diesel engine for the passenger car shifting to India, it is actively exploring options to use the potential workhorse to enter the small pick up truck market, ET learns. The project is codenamed 'AP' and if the exercise fructifies into an actual investment, the possible entry into light commercial vehicle ( LCV) space could happen "between 2015 and 2017", according to informed sources. ET has learnt that the company is likely to develop an all-new platform or may use the Suzuki carry pick up truck platform which is sold in South East Asia and may tweak it to handle the overloading abuse in the country. When contacted, a Maruti SuzukiBSE 0.63 % spokesperson replied that the company does not comment on future product plans.
According to Frost & Sullivan, the Indian small and light commercial vehicle segment is likely to grow by a compounded annual growth rate of 18% over the next five years to 8,30,000 units by 2016. With the development of infrastructure, the country is expected to shift to hub-and-spoke model of transporting goods. In the hub-andspoke model heavy trucks ply on big highways, or hubs, and small commercial vehicles act as spokes in cities where the movement of heavy vehicles is restricted. In the April-November period, the mini truck and the pick-up truck segment combined (i.e. weight not exceeding 3.5 tonnes) posted a growth of 24% with sales of 2,75,900 units. In the same period, market leader Tata Motors posted a growth of 22.9% selling 1,57,183 units. Despite the entry of major players like M&M, Piaggio and Ashok LeylandBSE -1.26 %, Tata Motors continues to lead with a market share of 57% this fiscal. Experts believe Maruti Suzuki may prove a major threat to Tata Motors as it has a wider reach in the country. Deepesh Rathore, MD of IHS Automotive, says the technological entry barrier are limited in the mini truck space and the segment is one of the fastest growing segments in the Indian automotive industry with further potential to grow large volumes. "Despite the entry of many players in small truck space, Tata Motors continue to enjoy over 50% of the market share and the others too are growing, that clearly shows that there is a room for more players. Maruti Suzuki can certainly be a strong challenger to Tata Motors with the widest possible reach, but having a suitable diesel engine is the key," said Rathore. Just like the passenger car space, even in the mini-truck category, the demand is getting upgraded from 0.5-1 tonne segment of Ace Zip to 2-tonne segment of Tata Motors Super Ace, Mahindra Genio and Ashok Leyland Dost category. While M&M and Piaggio fared well in the last fiscal with their Maxximo and Ape mini trucks, the two automobile companies have seen sales dipping over 20% and 70% respectively, in the current fiscal.
Experts say it will be interesting to watch, which space Maruti Suzuki would prefer to enter. "There is a clear upgrading happening from sub-one-tonne trucks to higher payload trucks of 2 tonnes and above and it is clearly seen in the numbers of Ashok Leyland Dost which has been a run away success and Tata Motors and M&M's pick-up trucks, too, continue to register double-digit growth. Since Maruti Suzuki's project is at an early stage, they will be watching this evolution very closely," said an analyst with a leading broking firm. Maruti Suzuki India mulls assembly plant in Africa as exports shrink NEW DELHI: Maruti Suzuki India, the nation's biggest carmaker by volume, is considering setting up its first overseas assembly plant in Africa as it seeks to revive flagging exports. The New Delhi-based company is scouting for new export markets and Africa is more or less untouched, Chairman RC Bhargava said in an interview. Countries that are on the cusp of motorisation may be key to Maruti's plan of doubling exports in the next four years as Europe struggles to recover from a slowdown, according to Mayank Pareek, head of sales. "We will look at local assembly for two reasons," Bhargava said. "Firstly, there's usually a tax advantage. And second, there's pressure from governments in these countries to assemble models locally." A local manufacturing facility will help Maruti drive down costs for buyers and boost sales in these emerging markets for basic models such as the Alto and M800, said Umesh Karne, an analyst at Brics Securities, who recommends buying the stock. Exports as a share of revenue shrank to 10% from two years earlier as sales of its A-Star compact hatchbacks dwindled in Europe, prompting the automaker to turn to Africa. "Whenever import volumes rise above a certain threshold, countries impose duties, so after a certain point, Maruti will have to look for local assembly," said Mumbai-based Karne. "Africa is at the same level where India was about 10-15 years ago. Basic cars without airbags or other features will allow Maruti to offer low prices and sell large volumes." Europe Demand
Europe, which accounted for 70% of Maruti's exports three years ago, now contributes to 30% as the debt crisis in the region damped demand. Car sales this year are due to plunge to the least in the European Union since 1995, according to auto-industry group ACEA. Algeria in northern Africa is the biggest market for Maruti, followed by Indonesia, Chile and Australia, Pareek said. Maruti also sells in South Africa, Morocco and Egypt. "The mix is completely reversed now," said Pareek. "If you had conceded that Europe is gone, you would've been finished. The whole idea is take up the challenge and find alternative markets." The company is exploring Colombia and the Dominican Republic to boost sales, according to its annual report. The automaker will refrain from setting up factories in countries such as Indonesia and Thailand, where parent Suzuki Motor already has manufacturing facilities, Bhargava said. BestSeller Local sales at Maruti are set to rebound in the current financial year after dropping 11% in the previous 12 months. The latest version of its best-selling model Alto, which the company started selling in October, may revive growth to 6%, compared with a 1% expansion for the industry forecast by the SIAM.
Two wheelers: Honda making significant strides to catch up with Hero and Bajaj The two-wheeler industry makes up almost three-fourths of the automobile industry in India. A look at some recent industry reports will reveal that while Hero and Bajaj retain their dominant position in the bike segment, Honda is making significant strides. An analysis of 2,500 male respondents reveals that Bajaj enjoys the greatest Differentiation in the category, while Hero enjoys the highest scores on Relevance and Esteem, indicating greater connect with consumers and respect. Surprisingly, it is the "newcomer" Honda that enjoys the highest Knowledge scores (Awareness). What does this mean for leadership battle? Brand Strength, which is a combination of Differentiation and Relevance, indicates the future potential for the brand. Hero is trailing Bajaj on Brand Strength, indicating lower momentum and energy on the former's future growth potential. Brand Stature, which combines Esteem and Knowledge, measures current and past
successes and tells us how closely brands are woven into the lives of consumers. On this metric, Hero leads the category, which is to be expected since the brand has enjoyed market leadership for several years. To understand how brands fare on both parameters of Brand Strength and Brand Stature, we plot them on the Power Grid. As a category, 'Motorcycles' is well established, understood, and located in the top-right, commitment space. Hero and Bajaj are also positioned firmly in the commitment quadrant. Also notice the relative positions of the sub-brands vis-A -vis their mother brands. Older sub-brands from Hero like Splendor and CD Deluxe fall in roughly the same region as Hero. However, consumers are largely indifferent towards its brands such as Glamor and CBZ Extreme. This signals the need for Hero to work harder on these brands. Bajaj has most of its brands in the commitment space, with only Avenger languishing in the fatigue space. While Honda, the challenger brand, itself is placed in the commitment space, demonstrating consumers' willingness towards the brand, its sub-brands are in the new/indifferent space, possibly owing to their newness in the Indian market. TVS, an older player, has brands that consumers are either curious about or committed to. However, consumers have placed the mother brand TVS in the Fatigue space along with its sub-brand TVS Sport. We have noted similar concerns for other bike makers like Yamaha, Suzuki, and Mahindra. Bike makers need to establish powerful sub-brands that are seen in the same light if not better than the mother brand. This becomes clearer when we look at the preference patterns for these brands. We contrasted the Preference scores for a mother brand and a prominent sub-brand within the same stable. A startling revelation from the data was erosion of Preference for Hero. It is no longer seen as the leader in Top Preference; that status is now enjoyed by Bajaj. Honda pitches in the Preference battle at the second place ahead of Hero and TVS. The implication of this in the battle for market share can be inferred from current sales trends. We also see that hero Splendor+ and Bajaj Discover enjoy greater preference than their mother brand. Powerful sub-brands strengthen the overall equity of the mother brand. In
contrast, for other bike makers the mother brand enjoys higher preference, indicating consumers' openness towards these manufacturers and not for the sub-brands with similar gusto. The Indian consumer is becoming aware and discerning of the variety of options available.
Global automotive majors setting up manufacturing bases on growing market for passenger vehicles MUMBAI: Drawn by the growing domestic market forpassenger vehicles (especially lowbudget and diesel cars) and commercial vehicles, numerous global automotive majors have set up manufacturing bases, and are expanding their footprint. They are also looking to make the most of India's rising prominence as a global manufacturing hub to meet their export targets. Auto component manufacturers tend to locate their production facilities near these OEMs, driving the growth of domestic logistics market, including transportation and warehousing. New analyses from Frost & Sullivan finds that the total automotive sector including auto components and automobiles spent a total $3.13 billion in 2011 on logistics activities. Within this, auto components industry spent an amount of $1.65 billion in 2011 on logistics activities, accounting for 5.5 per cent of the industry turnover. Transportation accounts for the largest share of the entire logistics spend of the industry, while warehousing accounts for the second largest share. The automobile industry spent an amount of $1.48 billion in 2011 on logistics activities accounting for 3.5 per cent of automobile industry turnover. Transportation accounts for the largest share of the entire logistics spend of both the industry segments and is also the most outsourced function to logistics service providers (LSPs). Although the market has significant potential, the rising costs of materials erode the profits of auto component and automobile manufacturers, and limitations in logistics infrastructure result in supply chain inefficiencies. "Auto components and automobile companies are exploring alternate sources of raw materials to reduce input costs, while logistics service providers must seek to adopt global models and standards to improve the supply chain efficiencies of their clients," said Srinath Manda, Program Manager, Transportation & Logistics Practice, Frost & Sullivan. Importantly, they should look to plug security loopholes, as around 65 per cent of Indian auto component companies declared that their most important concern in logistics is the risk of information leak to competitors through their logistics service providers (LSPs), while around
78 per cent of Indian automobile companies declared that their most important concern in logistics is the safety of goods during transit and warehousing by LSPs.
Sub-4 metre sedans open up new segment for Indian carmakers The differentiated tax structure for smaller and larger vehicles in the Indian market has resulted in the emergence of a unique category of compact sub-4 metre sedans and utility vehicles which are finding increasing favour among consumers. Come mid-2013, half a dozen sub-4 metre vehicles will be on road in India in what would be a first for any country globally. While Maruti Suzuki (MSIL) and Mahindra & Mahindra (M&M) have already moved in with sub-4 metre products, sedan DZire and compact SUV Quanto respectively earlier this year, up ahead are launches from Ford (EcoSport), M&M (sub 4-metre Verito) and Honda (Amaze) in the category. Deepesh Rathore, managing director, IHS Automotive India, said: "Excise duty on sub-4 metre vehicles at 12% is half of that levied on larger vehicles. Manufacturers can reduce the length of the vehicle and introduce products at aggressive price points in the market. This has resulted in the creation of category of products which is unique in India. The segment holds a lot of promise and all car makers be it Ford, Honda or Hyundai are exploring opportunities." Between April and October this year, nearly 115,003 sub-4 metre vehicles were sold in the country. In the entry-level sedan segment, for one, growth has largely been driven by introduction of the sub 4-metre DZire by Maruti Suzuki in February this year. The company has sold 87,359 units of the car between April and October this financial year, which is an increase of 74% over the 50384 units sold in the same period last year. The segment itself has grown by 32% to 122,613 units in this time.
"The growth in the entry-level sedan segment has been driven by sub-4 metre products. With interior space remaining the same, it seems that price points and enhanced features have a more important role to play than a slightly reduced boot space," said Shashank Srivastava, executive director (international market development), MSIL. Currently, the company registers nearly 92% of average monthly sales of 12,500 units of the DZire from the sub-4 metre variant while the remaining numbers come in from the demand for the older longer variant from fleet operators. The skewed numbers in favour of sub-4 metre variants are also evident in sales at Tata Motors and M&M. While Tata Motors sold 23,185 units of the sub-4 metre Indigo CS and a mere 123 units of Indigo between till October this fiscal, Mahindra has registered over 12,000 bookings for the sub-4 metre SUV Quanto since its launch in September this year. "The demand generated by the Quanto has necessitated that we increase production of the vehicle by 40%. We will produce 3,500 units of the Quanto from the unit in Nashik by January next year," said Pravin Shah, chief executive (automotive division), Mahindra & Mahindra (M&M). To tap into the growth potential in the category, Mahindra has scheduled for launched a sub-4 metre version of the Verito in the last quarter of the current fiscal. Ford too will bring in the sub-4 metre EcoSport early 2013. "As a strategy, we try to develop products in compliance with the policies and the tax structures in a country while at the same time keeping in mind the market requirement. It makes for an attractive proposition to have more sub-4 metre vehicles in our portfolio. It made the case stronger to bring the EcoSport platform to India. Our engineers worked around the vehicle, tailored in consumer requirements to offer an attractive product," said Vinay Piparsania, executive director (marketing, sales and service), Ford India.
Fiat to launch a whole range of products in next four years Fiat India is upping the ante in the coming years. Having lost a lot of time in trying to figure the right distribution channel, it finally parted ways with Tata Motors on that front earlier this year and is now ready to address the product lineup. Come 2013, Fiat will launch the first refresh, the Punto facelift. Up for launch in the first half of the calendar year, the Punto Evo, as it is called in the rest of the world will probably be what will make its debut. The Evo gets a whole bunch of styling tweaks on the outside, including a new grille, headlamps, tail lamps and a new interior. 2013 will also see two additions to the Linea range. The first will be the Linea refresh, based on what we've seen on the international model. Again, the changes will be mostly
cosmetic and changes to the interior, with some addition of features. But the big news is the Linea Classic. What could be a cheaper version of the Linea, the Classic will likely help Fiat fill in the space in the entry C-segment, a strategy even Ford has applied with the Fiesta (Classic and new Fiesta) saloon. Come 2014, though and Fiat will go up a gear. It is planning to launch a B-segment CUV or Compact Utility Vehicle. Likely to be the Punto platform based Qubo, it is a 5-seat MUV/CUV with lots of storage space for knick-knacks and the like. You can read more about the Qubo in our exclusive story here! The other big launch, surprisingly is the next-generation Punto. Destined for launch in mid2014, the new Punto is likely to be more spacious than the current car and will have the usual set of Multijet and Fire engines, with the possibility of Fiat's TwinAir engine making a debut here. The Punto will likely address some of the issues of the current car, notably being lighter and more fuel efficient, while retaining strong design characteristics. But before the Punto, a new Linea will arrive in the first quarter of 2014. The new Linea will be more spacious and have more features and is likely to be price positioned a little higher, making it a more direct competitor to the likes of the Hyundai Verna. The Punto story however doesn't end there (phew!). By mid-2015 a special Punto model will arrive in the country, possibly a hotter version and by early 2016 the hatch will get a refresh. In all Fiat will have four product lines for India; Punto, Qubo (B-segment CUV), Linea Classic and eventually the new Linea. Fiat will appoint a total of 120 dealerships across India by the end of 2013 across 126 cities.
Fiat-Chrysler go on a product blitzkrieg for India MUMBAI, DEC. 6: Italian carmaker Fiat is banking on a young, tech-savvy India to help it make an aggressive comeback over the next four years. Along with group company Chrysler, nine products will be launched to grab a five per cent market share. These will include the iconic Jeep brand which will make its debut next year-end with the Grand Cherokee and Wrangler. Mike Manley, Chief Operating Officer for Asia and President and CEO, Jeep Brand, said at a press meet here on Thursday that the first quarter of 2015
and 2016 would see a B-segment (compact) SUV followed by one in the larger C-segment a year later. While the Cherokee and Wrangler will be directly imported, the other two SUVs will be assembled at the Tata-Fiat Ranjangaon plant near Pune. This will give customers a wide range of both model and pricing options to choose from. “The Jeep brand is already available in 120 countries. There are active Jeep Clubs in China and we are looking to create them in India too,” Manley said. From the Fiat stable, there will be four new products between 2013 and 2014 supported by a strong refresh plan, said Enrico Atanasio, Managing Director of the Indian operations. This will include a new Grande Punto, Linea and an SUV. “Fiat and Chrysler represent a portfolio of technologies. While one has small cars and platforms as its strengths, the other has larger SUVs and pick-ups to offer,” he added. In addition, Fiat plans to launch its Abarth racing car brand as part of the menu for India. According to Atanasio, the idea was to bring the “essence of Italy” into the car world here. Fiat’s strategy will be to woo auto enthusiasts with international Italian design, high technology and fuel efficiency under the value-for-money umbrella. “There is a piece of Jeep inside everybody. The idea is to reach out inside and kindle your emotion,” Manley said. The distribution network will be distinct for the Fiat and Jeep brands with the idea of targeting different age groups across top metros and smaller centres.
JLR to go cheaper down the road alongside German rivals Tata Motors-owned Jaguar Land Rover (JLR) is mulling introduction of smaller luxury sedans and sports utility vehicles (SUVs) to strengthen and consolidate its presence in the luxury car market in India, dominated by the German trio of BMW, Audi and Mercedes Benz. Rohit Suri, vice-president, JLR India, said: “The segment where the German players dominate have products priced around Rs 25 lakh. We are looking at smaller categories of vehicles and these products are at initial planning stages.” Currently, the Land Rover Freelander2 is the cheapest product JLR has on offer in India, tagged between Rs 34.40 lakh and Rs 40 lakh. Luxury carmakers have started gaining the bulk of their sales from entry-level models in recent times. While BMW XI (Rs 24.50 lakh) contributed nearly a quarter to the sales of the company till October, Audi sold out its allotment of 1,000 Q3s (Rs 27.21 lakh each) for 2012 within three months of the launch. To cash in on entry-level products, BMW has lined up for launch the 1 series compact car in India for 2013-end. Mercedes, too, is set
to bring its A Class compact car next year. JLR, which recently embarked on its most ambitious product development programme to put on road 40 products over the next four-five years, is exploring options to capitalise on the entry-level luxury car segment. Global Range Rover Brand Manger Scott Dicken, while declining to share details of how many smaller products the company is looking to add to its portfolio, said: "When the industry is gradually downsizing in terms of vehicle's powertrain and other specifications, we cannot avoid it, and we are looking at all options." The product introductions will be backed by aggressive network expansion (particularly in tier-II cities), with the number of dealerships increasing to 25 from 15 by 2013-end. The company is also exploring options to assemble more products to offer them at competitive price points in the Indian market. "We are looking at more models to be assembled in India. We are conducting a study to find which model will make business senseâ€?, added Suri. The Evoque is one of the models being considered for assembly. JLR assembles only the Freelander2 at the Tata Motors facility in Pimpri. JLR on Friday launched its version of sports utility vehicle Range Rover, with the price starting from Rs 1.72 crore (ex-showroom Delhi). Depending on specifications and variants, the price could go up to Rs 1.9 crore. The vehicle will have petrol and diesel variants. While the petrol one will be powered by a five-litre V8 engine, the diesel one will have a 4.4-litre V8 engine. JLR, with a market share of eight per cent, sold 1,243 units in the luxury car market in India between April and October this year. German counterparts BMW, Audi, Mercedes Benz and Volkswagen accounted for 14,093 units sold in the same period.
Honda Motocycle, Bajaj Auto battle it out for no 2 slot Honda Motocycle & Scooter India and Bajaj Auto are slogging it out for the No. 2 slot in the domestic two-wheeler market with Honda taking the lead in seven out of the 12 months between November 2011 and October 2012. Meanwhile, market leader Hero MotoCorp maintains a comfortable lead.
BMW, Audi and Mercedes adopt dual strategy to boost sales The three luxury car makers that have been battling each other for decades are now employing a similar strategy to produce more locally and import higher-end models in India Germany's luxury carmakers BMW, Audi and Mercedes-Benz are embarking on a two-pronged game plan to boost sales in the New Year: produce more cars locally, thereby making them more pricecompetitive; and, at the same time, import new models - at least a dozen between the three of them to keep the allure of their brands going. Leading the pack is BMW, which will assemble its flagship 7 Series sedan at the Chennai plant from next year and later roll out the all-new compact hatchback 1 Series from the same plant. BMW plans to launch three new products next year to maintain its leadership over Audi and Mercedes Benz. BMW currently assembles the X1 SUV at Chennai and will roll out its new version from January onwards for the Indian market. The product offensive will continue with next generation of the 7 Series and 1 Series hatchback slated to hit Indian roads in the second half of 2013. BMW is currently struggling to hit the previous fiscal year's level of sales. It has sold 12% less car in the April to October period even as arch-rival Audi's sales jumped 53% in this period, resulting in both carmakers running neck and neck with sales of a little over 5,000 sedans and SUVs. Philipp von Sahr , BMW Group India's newly-appointed president, remains confident of achieving the previous year's target. "We are not chasing volumes, but are surely looking at some improvement in sales helped by the new product launches. We faced a slack period due to the model change of the
high-volume 3 Series sedan, but will gain incremental numbers with the recently launched X-6 and other models." On Thursday, BMW launched the new X6 Sports Activity Coupe at a Delhi ex-showroom price of Rs 79 lakh for the diesel variant and Rs 93.4 lakh for petrol. The world's largest luxury carmaker also plans to almost double its dealerships in India to 50 by 2014. Meantime, Audi will start assembling its compact SUV, the Q3, next year and will bring the new version of its hugely popular Q5 SUV. The all-new R8 PI coupe is also expected and the company is contemplating bringing the Audi S6 sedan to the Indian market. It has already launched the S4 sports sedan, the Q3 SUV and the iconic TT couple to increase its portfolio, and would double its dealerships across India to 25 by the end of 2012 calendar year. Mercedes Benz has been lagging behind with sales of 3,651 cars in the first seven months of the fiscal year, a 10% decline over a year ago. It is now counting on the compact crossover B Class, which was launched in September, and the A Class hatchback, to be unveiled in 2013, to drive sales. "We would start assembling the new GL Class SUV at our Pune plant next year. Besides, the all-new S Class, B Class CDI and the all-new A Class in both diesel and petrol variants are also a part of the launch plan of 2013," a senior Mercedes-Benz executive said. From just 3,000 cars five years back, more than 25,000 cars are being sold every year, and demand is expected to exceed 100,000 by 2020.
Hero Moto's Splendor regains pole position it had lost to Bajaj Auto's Discover MUMBAI: A month after Bajaj Auto's Discover came from behind to overtake the Splendor, Hero MotoCorp's flagship bike has regained pole position as the largest-selling twowheeler brand in the world. Backed by the strong rural buying and the onset of festive cheer in the month of October, Hero MotoCorp retailed over 5 lakh units domestically, with Splendor accounting for over 1.8 lakh of those. No 2 player Bajaj Auto sold some 2.62 lakh bikes in October, of which over 1.52 lakh were Discover.Honda Motorcycle & Scooter India (HMSI) at No 3 sold 2.36 lakh two-wheelers last month in the domestic market. When contacted Anil Dua, senior vice president, marketing & sales at Hero MotoCorp, said: "Our 15-day sales figures post the shraddh period (which ended on October 15) are more than the full month figures of most two-wheeler makers in the country." Hero MotoCorp's pullback in October has helped it get significantly ahead of its competition with sales of 3.41 million in the first seven months of fiscal year 2013; some 1.4 million on of these were Splendors, said a senior Hero Moto executive who did not
want to be named. In contrast,HMSI did sales of 1.52 million units and Bajaj Auto sold 1.48 million bikes in the April to October period, according to industry estimates. Said a spokesperson for Hero MotoCorp: "The cumulative domestic sales of Hero MotoCorp at 3.4 million in the April to October period are more than the combined domestic sales of the No 2 and No 3 players." The October resurgence is just what Hero Moto needed to regain lost ground. Hero's market share had slipped to 42.7% in the April to September 2012 from 45.3% in the same period a year ago. Analysts expect the company's market share to improve in the third quarter, although they reckon it will be some time before it once again accounts for one of every two bikes sold in the country. When contacted, K Srinivas, president, motorcycle business, Bajaj Auto said the company is not privy to the numbers, but asserted: "We expect the race to be very close. What is important to note is that Discover's sales in the October of 2011 were a fourth of Splendor; that gap has narrowed significantly at present. We still have lots of headroom to grow considering we still haven't started exporting the Discover 125 ST." He adds that the trend is in Bajaj's favour. "It is upward for Discover and downward for Splendor." Hero's Dua for his part is counting on the festive season and an improvement in sentiment in rural areas to get his brand back in the grove. He adds that from the negative terrain of -5%, the industry should be back in the positive now; and for fiscal year 2013 he expects 5-6% growth. "As a market leader it our endeavour to match that growth or even outperform," said Dua. Analysts point out that the short-term outlook is bright for Hero, although the long-term scenario isn't quite that. Says Yaresh Kothari, auto analyst with Angel Broking: "In the October to December period Hero MotoCorp should post good numbers, but growth may taper off after December. The competition is stiff and Bajaj's new 100 cc bike that is expected to be launched at the end of the year could make things more difficult for Hero."
Scooter sales jump 21%, companies line up Rs 600-cr expansion NEW DELHI: Scooters have defied a slowdown in the Indian market. One of the smallest segments in two wheelers, its robust growth has given a fresh impetus to twowheeler companies. Scooter sales in the domestic market grew 21% in the first six months of the fiscal even as motorcycles declined 0.79%. The strong demand, boosted by the growing urban infrastructure and rising number of women owning scooters, has encouraged companies to hike capacities to tap this growth which has been rare across the Indian automotive market. "We are adding 10,000 scooters to take our monthly capacity to 40,000 by March next year. We have seen consistent expansion in the past two years where demand has simply outstripped out capacities," says Atul Gupta, marketing head, Suzuki Motorcycle Private. Companies have lined up an investment of Rs 500-600 crore this year to take the cumulative scooter production beyond the Rs 30-lakh mark due to a backlog of order bookings. According to scooter manufacturers, while most bikes are currently available off the shelf, scooter models command a two-to-four months of waiting in selective markets. Leading the way is Honda Motors that is credited for reviving the scooter market in India with its Activa way back in 2001 - even as erstwhile market leader like Bajaj Auto's presence in scooters gradually faded - is now returning to the segment with some fresh plans to rejuvenate its presence in the scooter segment.
Its Indian subsidiary HMSI is working on plans to develop high-power scooters besides strong focus by refreshing its flagship brands like 110-cc Activa and Dio to maintain its lead. "We changed the perception about scooters in India. Our current range of automatic scooters enjoys tremendous consumer confidence as a complete family vehicle with delivering highfuel efficiency without compromising styling. With a consistently expanding demand we expect to cater to the Indian demand as we gradually ramp up production in our third plant coming in Karnataka next year," said YS Guleria. Vice-president (sales & marketing) HMSI. Two-wheeler companies are most bullish on the scooter potential in the Indian market and is expected to grow from the current 20% to 35% by 2016, when the Indian two-wheeler market is expected to double to 20 million units. Scooters have caught the fancy of new age customers. Besides, the growing base of women customer's, scooters with automatic transmission and multi-purpose use are generating stronger demand in smaller places. "Scooter sales are spread across states or hinterland markets. While demand is higher in urban areas, the semi-rural markets are also spurring growth in recent times," Guleria added. Hero MotoCorp enjoys the second-biggest chunk of the scooter market, following the success of its newly-launched Maestro. The company, which has a full-year capex of 350 crore for its entire operations this year, has planned to hike its monthly production to over 60,000 units at its Gurgaon plant. "Even as bike sales have slowed, scooters are keeping us busy and generating a huge latent demand to keep our expansion plans intact. With an average sales crossing 50,000 units last month, we are scaling up our scooter capacity to over 60,000 units a month from about 40,000 units about a year back," said Anil Dua, senior vice-president (marketing & sales)
HMCL, said at an analyst call last week. The demand, which stayed ahead of production in the past two years, has promoted new players like India Yamaha Motor, Italian Piaggio and Global Auto to foray into the segment. "We are looking at an overall market share of 10-15% market in the scooter segment by 2016 with the success of the RAY scooter which is targeting young urban women," said Jun Nakata, director (sales & marketing) India, Yamaha Motor.
Can Maruti Suzuki's new Alto 800 stop slump in sales? Maruti Suzuki launched a new version of Alto 800, the country's largest-selling car, on Tuesday, with the hope that it will reverse the recent slump in sales.
But analysts don't expect the new model to set the car's sales chart on fire, with people increasingly preferring diesel cars.
Will Honda be able to surpass Hero in terms of market share? MUMBAI: Ashok Tiwari, a 38-year-old government employee from Mumbai, has been riding a Hero Honda Splendor for over a decade. After 1 lakh km, Tiwari wants to buy a new bike. But he's undecided between Hero and Honda, the erstwhile partners who had carved the Indian market between themselves but now compete with each other for market share. Tiwari is tilting towards a new Splendor, but the absence of the Honda badge is forcing him to do a rethink. Unlike Tiwari, Guranath Balkrishna Dhadwe, a 32-year-old auto spare parts businessman from Mumbai's western suburbs who rides his motorcycle for more than 60 km a day, made the switch when the time came to replace his old bike. "Owning a Passion (from Hero) was a good experience. I wanted to get a new bike and my friends recommended Dream Yuga (from Honda). I have been using the bike for the past few months, and I am pleased with it," said Dhadwe. Tiwari and Dhadwe are not alone. A recent research report from Antique Broking says many others are doing a similar rethink. A survey by the firm of Hero dealerships across the country found a 5-10% drop in conversion of enquiries into sales for its popular models Splendor and Passion. The worry for the New Delhi-headquartered Hero is that it is starting to reflect on the numbers. After a 15% growth in FY12 with record sales of 6.2 million units, it seemed Hero MotoCorp had managed the transition post the break-up with Honda well. But the slowdown in the market and rising competition has come as a surprise with sales declining 3% in the first six months of the current fiscal year. In September 2012, Hero posted a 26% decline in sales, its steepest fall in over a decade. The month also saw Hero's flagship brand Splendor, the world's largest-selling two-wheeler brand, ceding the spot to Bajaj Auto's Discover. Sales of Splendor have Halved Sales of Splendor have almost halved from 2.4 lakh units in April 2012 to a little over 1.20 lakh units in September. During the same sixmonth period, Honda Motorcycle and Scooters India (HMSI) has seen the sales of entry-level motorcycles jump almost five-fold, from 7,290 units in April to 34,745 units in September, led by Dream Yuga.
Hero's market share shrank to 42.7% in April-September 2012, from 45.3% in the year-ago period, and the biggest gainer has been HMSI, with a 6% rise in share. In September alone, Hero's share fell to 36.8%, almost a 4% drop over the previous month. The market share picture clearly indicates that HMSI has been bucking the trend in the slowing two-wheeler market. "We are currently the fastestgrowing two-wheeler company in the country," said YS Guleria, vicepresident (sales & marketing), HMSI. No clear reasons are evident for the sudden drop in Hero's performance. It could be that the split with Honda has started to impact Hero, though this was not a problem last year. The slowdown could be another reason. A clutch of analysts ET spoke to say it is a combination of both and other factors too. "Customers have been asking dealers for the older stock of
motorcycles with the Hero Honda badge and are even ready to pay a premium for those," said an analyst, who did not wish to be named. A prospective Hero customer still banking on Honda's technology is bad news for Hero, since the erstwhile partner is now a competitor. "Hero's loss of market share has been more severe than expected, the falling sales mix and higher marketing costs incurred to defend market share would significantly impact earnings," Deutsche Bank said in a recent research report. "There is heightened technology risk for Hero as it would need to develop own products to defend domestic share and enter export markets," it added. MAJOR TRANSITION Hero MotoCorp has undertaken a major transition, right from rehauling network, brands, products and R&D, and even operational aspects. The company is alternatively looking at adding new exports. It has lined up an investment of over Rs 2,500 crore, which will go into new capacity, R&D, branding and marketing, etc. VG Ramakrishanan, MD of Frost & Sullivan India, said it is during such periods of transition that managements tend to take an eye away from sales and marketing functions and focus on more critical issues such as R&D and branding. "When you are facing your own problems, there will always be a competitor who will take advantage to position itself strongly," said Ramakrishanan. Hero maintains that the transition has been smooth and it has been growing across the country and Splendor continues to be the largest-selling motorcycle brand in the world for the first six months of this fiscal. "We remain committed to our multi-focal strategy of new launches, network expansion, rural drive, innovative communication and on-ground customer activation. All our brands are in good health. The strength of our new brands has been demonstrated in the kind of response two of our latest launches under the brand name Hero â€” Maestro and Ignitor â€” have received," said the Hero MotoCorp's spokesperson. MAJOR BRAND PUSH In view of the major effort to reposition brand Hero, the company's advertising spend, which is already more than double its competitor Bajaj, is likely to soar further with celebrities such as AR Rahman and Ranbir Kapoor being roped in. The 'Ham mein hai Hero' jingle did get the common man humming, but is it yielding results? According to Alpana Parida, president at DY Works, a leading brand firm, customers today are looking for a globally benchmarked product. With Honda leaving Hero, it seems the promise of technology has left. "Hero as a brand name is a brilliant one and it is embedded in the common man's consciousness and does exude warmth and a good feeling, but I think, at this point in time, an overtly Indian campaign was not the right thing. They could have focused on technology and let the common man know that Honda might have left, but not technology." Given that the company is now under tremendous pressure to reposition its brand Hero, high
advertisement and marketing spends will further impact margins in the near future. So what led to this sudden fall? Experts say the reasons are multiple â€” there is the brand and product fatigue of Splendor and Passion, and the novelty of new models is also playing a role. According to Deepesh Rathore, MD, IHS Automotive, the product portfolio of Hero is the most jaded amongst two-wheeler players with competitors launching a fresh range of products. So, when the slowdown hit the market, it hit Hero the most. "Hero will find it tough to make a strong comeback in the short term, as it is occupied with long-term strategies. According to me, they will lose 300-400 basis points more in market share in the near future. Hero will have to bring in the next generation of products as quickly as possible and make sure they are on par with the competition," said Rathore. PRODUCTS AND R&D One of the biggest fears at the time of break-up was the absence of strong R&D and technology. Not surprisingly, Hero is fast-tracking its own R&D and has entered into numerous technology tie-ups. It has forged partnerships with EBR Racing, AVL, an engine specialist, and Engines Engineering over the past one year. The company plans to invest Rs 400 crore in a new R&D centre in Kukas, Rajasthan, and will hire around 500 engineers. Hero will continue to launch 8-9 new products and variants every year, based on existing platforms. It is likely to replace all its products on new platforms only by 2015 with the help of technology of the new partners. However, by then, Honda and Bajaj would have flooded the market with their own range of new superior products. FINANCIAL IMPLICATIONS The increased cost for R&D, though critical, may strain the company's operating profitability in the near future. Hero Moto-Corp's spend on R&D in FY12 increased to over Rs 47 crore from less than the Rs 30 crore that it had been spending till FY11. It is set to increase further with the company's endeavour to establish a technical stronghold. Already, the company's operating margins are under pressure. As per its annual report, Hero MotoCorp's operating margins in FY12 stood at 10.7% â€” the lowest since FY03. Due to the uncertainties regarding the company's market positioning as well as R&D and brandrelated issues, many brokerage houses have downgraded Hero. According to Bloomberg, only 31% of the analysts currently recommend a 'buy' on the stock against 42% 'buy' recommendations that the stock enjoyed about six months ago. Bajaj Auto, on the other hand, has seen an increase in the number of analysts recommending a 'buy' from 55% in April 2012 to 69% now. Bajaj has overtaken Hero in terms of valuation after a gap of nearly a year-and-a-half. The 12-month trailing price-earning multiple (P/E) for Hero has fallen from 18.03 at the end of
FY12 fiscal to 14.83 today, while for Bajaj Auto it has increased from 13.37 to 16.89. While Hero's Splendor might have lost out to Discover for a month, Bajaj Auto still believes it will be tough competition going ahead. "The industry is going to be competitive, and Honda is a strong player. I would not like to write off any player, but I will still say that it is going to be very competitive amongst the three of us (Hero, Bajaj & HMSI)," said K Srinivas, president (two-wheelers), Bajaj Auto. But is everything gloomy? Experts say Hero's inherent strengths are still there: A wide product portfolio, deeper rural reach and strong brand recall. Mahantesh Sabarad, auto analyst with Fortune Broking, said the Honda tag going away is still an issue, but it is only in certain markets and not all. "We should not write off Hero based on the performance of one or two months. The company has massive distribution reach, which is unparalleled. While the company does not have the Honda brand, it still carries Splendor, Passion, Dawn, etc, in its portfolio, which are strong brands in themselves. If things really worsen, they have a strong balance sheet and they can resort to discounting or a price war to protect their market share," said Sabarad. "Some customers may move to Honda in urban centres, but in rural markets Hero will continue to be the king. And when you are talking about markets moving from urban to rural, Hero will be in a much better position than others," added Ramakrishanan. "We currently have more than 5,000 touch points, which include authorised dealerships, service and spare parts outlets and authorised representatives of dealers (ARDs). We plan to add another 400 touch points this year," added the Hero spokesperson. Hero believes that market growth will revive in the forthcoming festive season and it is ensuring sufficient stocks are available across dealerships to leverage the opportunity. One of leading dealers of Hero MotoCorp in the interiors of Maharashtra told ET, "So far, there has been no impact of the Honda brand going away, and there have been no queries from any of the customer so far on the same. We still continue to sell well, with good monsoon and talk of good crops, we expect to grow even faster in the festive season." All the analysts ET spoke to said there is near-term pain for Hero. Yet, they said, it will be able maintain a market share of 40-42% over the next few years. Unlike the past, Hero is spreading wings globally, with plans for four assembly plants including a manufacturing location in Latin America, Africa and Asean region, which will derisk the company from the competitive domestic market. The firm had said it was looking at a $10-billion (Rs 55,500 crore) turnover in the next five years and sales of 10 million units with exports at about 10% of total sales. It expects to sell 1 million units overseas by 2016-17. Looking at the way things are shaping up, it seems like a tall task.
Bajaj Auto to leave Indian bike enthusiasts breathless with the new Pulsar 375 sports bike; a rival to Honda CBR 250R? Bajaj Auto Limited, the country's second largest two-wheeler manufacturer, is believed to be working towards a new project, the Bajaj Pulsar 375 sports bike. Rumours started floating regarding the new bike (Bajaj Pulsar 375), when the company launched the Pulsar 200 NS (Naked Sports) model in January 2012. Post the 200 NS, most of the Indian bike enthusiasts were wondering as what will be the Bajaj Auto's next offering and thus, the company has planned to answer all the queries right away, with the segment defining Pulsar 375. The upcoming sports bike is expected to be launched somewhere around the first half of 2014. Recently, the Austrian sports bike manufacturer KTM announced to launch a 375 cc bike in about six months in the Indian market. Bajaj Auto owns a 47 per cent stake in KTM and sought the help of the Austrian sports bike maker in developing its own Pulsar 200 NS. So, it is going to make an interesting contest between the KTM 375 cc and Bajaj's upcoming Pulsar 375. Currently, the Indian market has no direct competitors to the upcoming Bajaj sports bike but considering the glorious history of the Pulsar brand, the Pulsar 375 will definitely set the pulse racing of its domestic admirers. As the name suggests, the yet-to-be launched Bajaj 375 will feature a power-mill of 375 cc, which will be more than capable of churning out more than 30 bhp of adrenaline pumping power. Considering the huge engines, the Royal Enfield Bullet Classic 350 can be deemed a viable rival against the Bajaj Pulsar 375, but otherwise both the motorcycles are vastly different in every other aspect. For instance, the Pulsar 375 is going to be cutting-edge and futuristic sports bike as against the Bullet Classic 350 that is purely a cruiser bike. The upcoming Pulsar 375 is expected to feature similar designs and cues of the Pulsar 200 NS, besides the drive train is believed to be nothing like the country has yet seen. As potential rival, the Honda CBR 250R can be pitched against the upcoming Bajaj Pulsar 375. Currently, the Indian sports bike aficionados have to shell out an amount close to Rs. 1.78 lacs for the Honda sports bike. Evidently, the history of Bajaj Auto of producing aggressively priced products in the country's bike market dictates that a gruesome territorial dispute between the Pulsar 375 and Honda CBR 250R is definitely in the offing.
Bajaj has so far found no segment in the domestic two-wheeler market, where it failed to anchor its guard and with the yet-to-be launched Pulsar 375 industry boffins have placed tremendous hopes of the sports bike writing a new chapter in company's history.
Teething troubles for Hero rebranding Hero MotoCorp, the world’s largest two-wheeler producer, has completed its rebranding exercise, pulling out the Honda name from its entire product range, two years ahead of the agreed deadline. Most of its 3,000 sales and service outlets and some of its major products have switched to the new branding conceptualised by London-based Wolff Olins. This was preceded by months of aggressive brand campaigns, including a new catchphrase — Hum Mein Hai Hero — replacing the earlier Desh Ki Dhadkan. However, more than 12 months after the exercise kickstarted, most buyers walking into Hero showrooms are still confused as to why the Honda name is missing on the two-wheelers, according to reports from at least two brokerage houses. The impact may have been reflected in Bajaj Auto’s claim on Wednesday that Discover has overtaken Hero’s flagship Splendor for the first time ever in September. Hero has however refuted this, saying Splendor, which contributes to 35 per cent of its total sales, still retains the top spot. But analysts say Hero is indeed feeling the impact of the brand change. During a recent field visit to a few dealerships, analysts from Antique Stock Broking said they found a certain amount of customer discomfort. “We understand from Hero dealers that after the company has dropped the ‘Honda’ tag from the Splendor Pro and Splendor Plus, conversions (from enquiries to actual sales) have been impacted by 5-10 per cent”, says the Antique report. Another report from Spark Capital said “our recent channel checks suggest some amount of customer discomfort, particularly in the north and the west.” The slackening of consumer confidence comes at a time when almost every two-wheeler manufacturer in India is pushing for a bigger pie of the domestic market where Hero commands a 44 per cent share. The Antique report further adds, “interestingly, some dealers also said that in smaller towns, people still commonly refer to Hero bikes as ‘Honda ki gaadi’. We were aware of this phenomenon prevailing much earlier, but assumed that it had diminished substantially over the years”. Market watchers say unlike in the West, the Indian market is still only in the developing stages and any changes in traditionally trusted brands could also mean loss in clientele.
Harish Bijoor, chief executive, Harish Bijoor Consultants, says, “The two-wheeler market presently is very dissipated. Any reorganisation of brand takes time to percolate down. A divorce (of brands) is not very well understood in a growing market like India. It is certainly a challenge for Hero and it will need to address this well as the power of two companies has now gone down to one”. Though the market leader readies itself to pump funds into enhancing production capacities, sales of its largest selling model Splendor have actually been going down for some time. According to a production schedule of Hero, it intended to make only 93,000 units of the Splendor 100cc in September, down from the levels of 225,000 units three months ago. Splendor is the bread and butter model for Hero and has been riding high on its promise for ultra-high fuel efficiency levels of around 70-75 km/litre. Over the past few months, newer models such as Bajaj Discover, Honda Dream Yuga and Twister, Suzuki Hayate, TVS Star City and Jive have been launched in this segment. According to Hero dealers, the inventory days with them has gone up to 45 days, which analysts say, is unusual during this part of the year. The onset of the festive period kickstarts demand growth for two-wheelers bringing down the inventory days to about 20-25 days. A Hero MotoCorp spokesperson says, “As already stated, owing to the slowdown in the market, we have adjusted our production plans. However, we will ensure that there is sufficient stock available at the dealerships to leverage the high retail opportunity that comes with the festive season. All our brands are in good health, and we have a robust communication plan leading up to the festive season.” The Delhi-based company, which has 18 products in its line-up, recorded its second straight fall in monthly sales in August. The year-on-year fall in sales in July for Hero was a first in 26 months. The last such fall was in April 2010. Domestic sales of Hero MotoCorp fell by 26 per cent in September to 404,787 units as compared to the same month last year when it was 549,625. The company’s share in the local market till August had fallen to 43.78 per cent from a high of 48 per cent recorded in March 2010. As per market watchers, a majority of 100cc bike buyers especially that of Splendor have veered towards gearless scooters commanded by Hero’s former partners Honda. As per SIAM numbers the scooter segment has grown to 1,167,726 units, recording a growth of 23 per cent during April-August even as the two-wheeler industry recorded a growth of just 7 per cent.
Hyundai plans utility vehicle costing less than Rs 10 lakh
The company has re-launched the brand in India after six years Amrit Raj New Delhi: Inspired by the success of Maruti Suzuki India Ltd’s Ertiga and Renault India Pvt. Ltd’s Duster, the country’s second largest car manufacturer Hyundai Motor India Ltd plans to develop a utility vehicle that will be priced at less than `10 lakh, two company executives said. “We have just started doing market research in that segment,” said one of the two executives. “We are yet to decide whether that will be an MUV (multi utility vehicle) or an SUV (sports utility vehicle). For us, that segment is very exciting.” Neither executive wanted to be named. They spoke on the day Hyundai relaunched its Elantra sedan on Monday. Utility vehicles in the `5-10 lakh price bracket have emerged as a new option for Indian motorists, who until recently could only graduate from a hatchback to an entry-level sedan within that price. The Ertiga was launched in April and the Duster in July. Mahindra and Mahindra Ltd will launch a compact version of its Xylo multipurpose vehicle later this year, and Ford India Pvt. Ltd will be launching the EcoSport early next year. General Motors India Pvt. Ltd (GM) is working on a five-seater SUV aimed at the emerging markets, Mint reported on 3 July. Hyundai’s car will be aimed at other emerging markets besides India, said the second company official. “The vehicle will be on a global platform, but it will be aimed at consumers in the developing markets,” said this official. “We will be taking at least two years time to develop this product.” A little over one in five of the 2.5 million passenger vehicles sold in India are utility vehicles, according to a report by Deloitte Touche Tohmatsu India Pvt. Ltd, a consultancy. Out of this, 11% are SUVs such as the Mahindra Scorpio and Tata Motors Ltd’s Safari. The rest are utility vehicles such as Maruti Suzuki’s Eeco and Tata Motors’ Ace. “The UV (utility vehicle) segment has been evolving and growing very rapidly in the last two years,” said Rakesh Srivastava, vice-president (national sales), Hyundai Motor India. “We’re studying the market and will announce our plans when we’re ready.” The number of SUVs on the roads will continue to rise, according to the Society of Indian Automobile Manufacturers (Siam). “In the next five-seven years, the segment is expected to grow at a compounded annual growth rate of 15-18%,” Vishnu Mathur, director general of the lobby, said last week. “The growing aspiration of Indians and a shift towards diesel cars have fuelled growth in the segment.” The UV segment has also been driving growth in the Indian passenger vehicle industry. In the four months to July, sales in the segment grew 53.66% to 162,589 units, while the overall passenger car industry grew 5.55% to 634,298. Hyundai on Monday re-launched the Elantra, priced at under `13 lakh, six years after it had first introduced the model. It was discontinued in India in 2006 as sales flagged. Elantra will compete with General Motors India’s Cruze, Volkswagen India Pvt. Ltd’s Jetta and Toyota Kirloskar Motor Pvt. Ltd’s Corolla. The so-called premium segment, which comprises cars priced between `11.5 lakh and `15 lakh, accounts for less than 5% of India’s 2.2 million unit a year passenger car market. This segment is expected to double by 2015, according to Siam. “The Elantra has received an overwhelming response worldwide. We are confident that it will raise the bar and set a new benchmark in the executive car segment in India,” said Bo Shin Seo, managing director and chief executive, Hyundai India.
The diesel version of the Elantra will cost `12.91 lakh, while its petrol variant can be bought for `12.51 lakh. The cars will have 1.6-litre diesel or 1.8-litre petrol engines. Car sales in India have slowed this year because of declining economic growth, high interest rates and weak consumer sentiment. Hyundai remains positive about the Indian market in the long run. “I firmly believe the current situation is temporary and Indian market has big potential in the long run,” Bo said.
Hyundai undecided on whether to hunt down Ertiga or Duster India’s second largest car manufacturer, Hyundai Motor India Ltd, is planning to develop an Utility Vehicle, but finds itself at crossroads. “We have just started doing market research in that segment,” said a Hyundai executive, in condition of anonymity, to Live Mint. “We are yet to decide whether that will be an MUV (multi utility vehicle) or an SUV (sports utility vehicle). For us, that segment is very exciting.” The UV (Utility Vehicle) market is booming in India and impressed by the success of the Maruti Suzuki Ertiga and the Mahindra XUV500, many other players are planning to jump in. According to a report released by Deloitte Touche Tohmatsu India Pvt. Ltd, a little over one in five of the 2.5 million passenger vehicles sold in India are Utility Vehicles. The SUVs like Scorpio, Safari amount to only 11% while the rest are commercial vehicles like the Tata Ace. The vehicle will sit on a global platform but will be sold only in developing countries. Since there is no evidence of the car yet, the final product must be at least two years away. Hyundai is using the i20 platform to develop three vehicles in Brazil – a hatch (HB20), a sedan and an SUV – tailored for the Brazilian market. The Ford EcoSport, for instance, was developed in Brazil, but will be sold globally with modifications. Hyundai may use the Brazil-made SUV to take part in the UV segment that is touted to grow massively in the next couple of years, not only in India, but in Asia, Europe and Russia. But there’s a twist to this story. Hyundai India has officially placed more importance on the MPV body style. It showcased a MPV concept Hexa Space, with a versatile seating arrangement and ‘Fluidic’ design language. Now is this a hint of the MPV coming first? The slowdown of the Indian automobile market hasn’t affected hopes of manufacturers as they are bullish about its potential over the long run. Pulsar not only transformed the way Indians commuted, but also changed the DNA of Bajaj Auto By riding on the platform of power even as the rest of the industry was obsessing with fuel efficiency and price, Bajaj Auto changed the rules of the game with the brash, individualistic, testosterone-fuelled Pulsar. Circa 2001: Bajaj Auto commissions a market research agency to survey how a newlydeveloped bike will be accepted in the market place. Amechanical engineer from theNational Institute of Technology who joined Bajaj Auto in 1989 is one amongst the top team who meets the agency for feedback. "The tank and exhaust are too big," droned the agency chief. "Reduce the size of the tank or else it will limit the relevance of the bike," he forewarned. The engineer patiently heard out the agency honcho. And ignored his advice. "The very same tank and its character lines became the signature of Pulsar," he says more
than a decade later - a period in which some 50 lakh Pulsars have been sold (till May 2012). The engineer in question is Abraham Joseph, now Bajaj Auto's chief technology officer, who has gone on to develop a series of wildly successful Pulsars - ranging from 135 cc to 220 cc along with other thriving models like the Discover range. But Joseph's biggest break - and for that matter Bajaj Auto's - is the blockbuster of 2001 that has earned him the sobriquet, 'Father of the Pulsar.' With good reason. The Pulsar not only transformed the way Indians commuted, but also changed the DNA of the country's second-largest two-wheeler maker that till then had successful but staid models like the M-80, the rear-engine three-wheeler and of course the scooter blockbuster, Chetak. Other than transforming Bajaj Auto into a respected maker of bikes, the Pulsar did plenty more for the Pune-headquartered company.
For one, it provided the manufacturer a platform to make a much-needed shift from monotonous high-volume manufacturing - in 1997-98, Bajaj Auto produced a mind-boggling 1 million scooters - to innovation-led product development. The mid-nineties also witnessed a dramatic shift in the preference of Indian consumers, from stolid scooters to bolder bikes. By 1999, motorcycles had overtaken scooter sales for the first time in the country. Bajaj Auto was at crossroads - mobikes accounted for only a fraction of two-wheelers sold, and inflexible systems, manpower and mindsets all contributed to the company being relegated from top dog to the No 4 positon, behind Hero Honda, Yamaha and TVS Suzuki.
"Pulsar was not just a bike for Bajaj Auto," says VG Ramakrishnan, vice-president , automotive and transportation practice at Frost & Sullivan. "It was a do or die product. It was one single product that virtually saved the company." The company could just not get its earlier launches in the 100 cc and 110 cc right. By 2001, by when the Pulsar was ready for launch - the 150 cc and 180 cc models hit the road in November - Hero Honda ruled the roost with 100 cc bikes. Almost the entire bike market was 100 cc, and we were fast losing ground to Hero Honda," says K Srinivas, president - motorcycle business, Bajaj Auto.
The Bajaj Auto strategy was clear-cut : offer exactly the opposite of what the leader was. If Hero Honda was talking about fuel efficiency, Bajaj made power its proposition. "In one word, what Hero owns is mileage, and the one word Bajaj owns is power, thanks to the Pulsar," Rajiv Bajaj, MD & CEO, Bajaj Auto, told ET recently. "It redefined motorcycles in India," he says. Before the launch of Pulsar, people never thought of power bikes; it was something that never crossed their mind. It's a breakthrough product," adds Srinivas. The transformation in the R&D labs, where the path-breaking DTS-i technology was developed , and on the shop floor - production of the Pulsar was out of a spanking new factory in Chakan on the outskirts of Pune - had to be communicated to consumers. The focus on power and muscular styling had to be the product differentiator, even as the rest of the industry was riding on the more predictable platforms of fuel efficiency and price. This led to a shift from the familial 'Hamara Bajaj' slogan to the brash, individualistic, testosterone-dripping 'Definitely Male.' "When we saw it (the Pulsar) for the first time," recalls Abhijit Awasthi, national creative director of Ogilvy India, "we knew it had to be male. It was so muscular." Till then, people used to say 'bike chalti hai,' but this has to be 'bike chalta hai,' adds Avasthi, who spearheaded the 'Definitely Male' campaign. "Till then all bikes were referred to in the feminine," avers Sanjay Saraswat, vice-president (marketing), who joined Bajaj Auto in 1988. "But one look at the Pulsar and it stood out as the male bike amongst females." Over the years, Bajaj Auto has done well to refresh the product, along with launching new engine sizes. For instance, by 2006 when the Pulsar crossed 1 million in sales, it was the only bike with a digital speedometer and LED tail lamps. A year later, the Pulsar broke the 200 cc barrier with a 220 cc model (after launching a 200 cc bike). And Rajiv Bajaj recently let on that by 2013 the Pulsar will have a 350 cc avatar.
But for a product that has been in the market for over a decade, how serious is the problem of brand fatigue setting in? "How will you keep fresh in the minds of the consumers," asks Ramakrishnan of Frost & Sullivan. "That's their biggest challenge." For the next five years, they don't need to replace Pulsar, he says. "But they will have to think of another killer product in the category." Rajiv Bajaj in the interview to ET had indicated that "350 cc may be a good place to stop as of now. But 10 years down the line, the Pulsar can go much further." In that period, appetite for heavier bikes will build up, and the entry of rivals in these categories will - even as they prove head-on competition for the Pulsar - will help grow these segments. And as Saraswat puts it: What will get ahead of the Pulsar will be another Pulsar. It's the pulse of Bajaj Auto. M&M-Renault, Tata-Fiat, Hero-Honda: Former partners turn competitors MUMBAI: When Renault India launches its much-awaited sports utility vehicle (SUV), the Duster, in July, consumers, critics and car fanatics will be tempted to draw comparisons with another SUV that rolled out recently: Mahindra & Mahindra's XUV500. With good reason: M&M would have picked up more than a trick or two from the French auto giant when they were partners in a joint venture. The five-year-old JV ended in 2010, with M&M buying out Renault's stake. Along with the equity holding, M&M also got to keep a few learnings that are becoming visible in its new launches. For instance, a senior auto industry official, who has worked closely with Renault India, says on the condition of anonymity that M&M learnt key aspects of monocoque manufacturing - where the entire body is a single shell, as in the XUV500 - from Renault. While the ride with Renault would have provided M&M with valuable inputs when producing the XUV500, the French giant isn't one to watch passively: it is getting ready to flag off a yet-to-be-named seven-seater multi-utility vehicle to take on the XUV500. M&M and Renault are not the only partners who have turned into head-on rivals after their alliances hit the end of the road. Tata Motors and Fiat, which recently snapped a distribution alliance, may now end up with products that compete for the same consumer. And Japanese two-wheeler giant Honda, after partnering the Munjal-owned Hero Group for 26 years, is launching bikes positioned directly against the latter's bread-and-butter products, Splendor and Passion. A senior industry executive, who refuses to be named, says Indian partners are privy to 6070% of info. The information available to Indian partners pertains to prospective launches for the next sixto-seven years as well as the financial costing of virtually every component that will go into these models. During the lifespan of the Mahindra-Renault JV, a Mahindra team visited Renault's R&D design centre several times, says a person who was closely involved with that process. So, for instance, the Mahindra team would have been privy to the variants that Renault could produce on its Logan platform - like the Sandero, a hatchback that the French automaker was once planning to launch in India. Meantime, the Logan became the Verito
after M&M bought out Renault in the JV. Pawan Goenka, president of M&M's auto and farm equipment sector, points out that although "Renault engineers are still supporting the Verito, all the new engineering on the erstwhile Logan is being done by M&M engineers." He adds that M&M is looking at extending the Verito platform to make other products. "The final decision on what kind of products to make is still in the works," adds Goenka. To be sure, it doesn't take too long for co-operation to turn into competition once a JV ends. Consider the Tata Fiat JV, which was based on a joint strategy where pricing, positioning and marketing efforts were pre-decided; also decided was that products would not directly compete on positioning and price to avoid cannibalisation of sales. That is set to change. Says Enrico Atanasio, senior vice-president for commercial operations at Fiat India: "At this point in time, our products are not directly competing with our (former) partner's products but, going ahead, this may change when our new products come in. They may compete directly with Tata Motors, but that probability exists a year-and-a-half to two years from now." An email sent to a Tata Motors spokesperson regarding Fiat's solo plans was not replied to. Fiat, which has the hatchback Punto in the Indian market, is now working on launching small cars below that price point, along with a number of SUVs and multi-purpose vehicles - all segments in which Tata Motors is present. At the high end, Fiat also plans to launch the Chrysler range of Jeep and Wrangler products, which will compete with Land Rover, the iconic brand that Tata Motors had acquired from Ford along with Jaguar four years ago. A year-and-a-half after a break-up with the Munjals, Honda has trained its sights on its former partner's leadership position. The Indian operation, Honda Motorcycle & Scooter India (HMSI), launched the Dream Yuga a month ago to take on Hero MotoCorp's Passion, which accounts for 20-22% of the Indian company's annual sales volumes. The bigger bang is yet to come: HMSI is getting ready to launch a competitor to the Splendor, Hero MotoCorp's mainstay product that accounts for 24-28% of annual sales. Hero MotoCorp is the leader by far in two-wheelers with a 45% share of the India market in fiscal year 2012. The Munjals are now relying on other alliances - with AVL for engines, EBR racing for technology in heavier bikes. But a marriage that lasted for more than a quarter of a century with Honda would have also helped it absorb a lot of product development expertise enough for Hero MotoCorp to invest in an R&D centre of its own. "We will also be soon setting up a technology/R&D centre spread over 250 acres at Kukas, Jaipur, in Rajasthan, which is going to be the largest two-wheeler R&D centre in the country," says Pawan Munjal, MD & CEO, Hero MotoCorp. The R&D strength may well determine whether Hero MotoCorp can stave off the Honda challenge. "If the Indian company does not have a good R&D base or understanding of technology, it runs the risk of being at the mercy of the technology partners. A good R&D setup can support future products," explains RL Ravichandran, an executive director on the board of Eicher Motors.
Maruti, Ford build smaller engines to counter petrol price hike MUMBAI: Rising fuel costs coupled with a focus on emission control have resulted in more and more large sedans being powered by small engines that are being tweaked to deliver as much as their larger counterparts can. A one-litre engine, with the equivalent power of a 1.6-litre petrol engine, will motor the soonto-be-launched Ford's sports utility vehicle called EcoSport. Then, Maurti's 1.2-litre diesel engines that reside in the super-compact sedan Dzire are also powering the recently-launched multi-purpose vehicle Ertiga. Toyota, too, is sharing its 1.4litre diesel power train between the super-compact Etios and premium sedan Corolla. Similarly, Renault's sedan Fluence and small car Pulse share the same diesel engine with a displacement of 1461 cc. "The key driver is fuel economy; Ford has done it (with a one-litre engine), by delivering 20 per cent improvement over a 1.6-litre engine in terms of fuel economy and performance - in terms of torque and power," said Michael Boneham, president & MD of Ford India. "The bigger engines are being replaced by smaller engines with a turbocharger, which gives the power of a larger engine without compromising on fuel efficiency," added IV Rao, India managing executive officer (engineering), Maruti Suzuki. So, although the engine under the hoods of the Ertiga and the Dzire are the same, the difference is the turbo power: the Dzire with the same 1.2-litre engine gives 75PS, or hose power, while the same engine tweaked gives a 90PS for the Ertiga as well as the SX4, Maruti's mid-size sedan. To be sure, diesel turbochargers have been around for decades, but it is only of late that there has been an evolution in turbochargers in petrol engines. It is this evolution that will drive the shift towards smaller engines, explained NP Thimmaih, former managing director of Honeywell Turbo Technologies. "The penetration of turbochargers is currently at about 25% for both petrol and diesel globally; we expect it to touch 70 per cent by 2020 and it is the adoption of gasoline turbochargers that will drive this penetration," added Thimmaih.
Hormazd Sorabjee, editor, Autocar India, explains that more sophisticated turbo charging and engine management systems have allowed smaller engines to develop as much power and torque as larger ones. The trend is catching on in India as fuel economy plays a crucial role.However, manufacturers say that customer perception needs to change as there is a feeling that smaller engines in larger vehicles make it underpowered. The issue here is that a turbocharger gets activated at a particular optimum and that may prove to be a chicken-andegg situation as Indian drivers tend to be soft on the accelerator in their endeavour to save fuel. Which, in turn, means that the turbo charger does not kick in. The acceptance is coming in. Maruti Suzuki's Ertiga despite having a smaller power plant has managed to get over 32,000 bookings in a month and half. With emergence of such advanced technology, experts say more than half of the cars in India will be powered with capacity of 1.2 litre and below by 2020. Smaller engine will help reduce the price tag on cars and also lower emission levels. Future emission requirement and CO2 compliance will require using new technologies like gasoline direct injections, said VG Ramakrishnan, senior director, automotive practice, Frost and Sullivan.
The infamous vehicle recalls On November 19 , 2012, Honda recalled 11,500 units of its premium bike â€” CBR 250R â€” in the country because of a defective brake system. These models were produced between March 2011 and September 2012.
At present, the standard variant of the CBR 250R is available at Rs 1.48 lakh (ex-showroom, Delhi). Over the past couple of years, a number of car manufacturers has resorted to recalls; however, this is the first time a two-wheeler maker in India has had to do it. In July 2012, the Society of Indian Automobile Manufacturers (Siam) had notified a “voluntary code on vehicle recall” for passenger vehicle, two-wheeler and commercial vehicle manufacturers. Under this policy, car companies declare any defect in vehicles on their own. However, they are not held accountable for the defects. In developed economies such as the US, Europe and Japan, recall norms are strictly implemented and customer feedback taken into account. Some other recent major recalls ********************** On October 10, Toyota Motor said it would recall more than 7.4 million vehicles worldwide as a faulty power window switch was a potential fire hazard. ********************** On August 13, Ford India said it has recalled over 128,000 units of its top selling Figo and Classic cars — one of the biggest such exercise in India. The recall was aimed at rectifying problems related to the steering and rear suspension of the cars. The recall impacted different batches of cars made between January 2008 and December 2010, and from September 2010 till February 2011. ******************** In January 2011, Japanese auto major Honda recalled 57,853 units of its mid-sized sedan City in to replace a faulty spring that may cause the engine to stop. In September 2011, Honda called back as many as 72,115 units of its City sedan to guard
against a potential power window switch problem in cars manufactured from 2005 to 2007. In January 2010, Honda had recalled 8,532 units of its second-generation City, manufactured in 2007, because of a defective power window switch that could cause fire. ******************** In 2010, Maruti recalled 100,000 units of small car A-Star to replace a part in the fuel tank. The problem was discovered in an internal survey and no complaint has been received so far, the company said. In 2001, Maruti recalled nearly 76,000 Omnis made between August and December 2000 to get the fuel hose system inspected and, if found defective, have it rectified. In 2006, the carmaker recalled 500 units of Zen. The company had also recalled some units of its hatchback Swift in 2005. ******************** In 2011, Toyota recalled all Etios sedans and Liva hatchbacks manufactured before October 8 to check their filler hose. The Japanese giant has organised a service camp to check the affected parts and replace them. The Etios sedan and the Liva hatchback are the cash cows for Toyota.
******************** In 2011, Tata Motors asked an estimated 140,000 Nano owners to bring back their cars for change of the starter motor free-of-cost. The company on its part denied that the replacement exercise was a recall. The company spent around Rs 110 crore to fix the problem. *********************
In April 2006, Ford recalled 7.9 million F-150 pickups and 14 other models in the US for a short-circuit in the ignition switch that could lead to a fire in the steering column. ********************* In 1971, General Motors recalled 6.7 million Chevrolet Bel Airs and 15 other models in the US. The problem was a separated motor mount that could allow the engine to lift up and affect the throttle linkage, causing sudden acceleration and a possible loss of control of the vehicle. ************************ In 2005, Ford recalled 4.5 million vehicles for overheating cruise control deactivation switches in the US. ********************* In 2009, Toyota recalled 4.3 million units of its best-selling Camry for an unsecured floor mat in the US. ******************** In October 1972, Volkswagen had recalled 3,7 million vehicles in the US, including the popular Beetle, to repair a loose screw on the windshield wiper arm.
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Honda can't just bet on Brio; it needs a complete makeover to win back India As car launches go, it was neither wildly extravagant, nor unique. After all, launches are de rigueur in the run-up to the festive season, and Honda Siel's brand new baby, the Rs 3.95-lakh Brio, was just one
Yet, Brio is not just a car launch. Brio's price was just one factor. Honda Siel, to be sure, never before aspired to be a volume player; it much preferred its association with status and luxury. (Honda has 99.9% stake in this company, the rest belongs to Siel.) But that was not all. There were significant departures from the Honda model - test drives for the media, in Vizag of all places, the focus on developing dealer network in Tier-II and Tier-III cities, the thrust on local sourcing, not just assembling. Says Seki Inaba, director (sales and marketing), Honda Siel Cars India: "We are betting on India to be the No. 1 car market in the world, ahead of China, in the future. Brio is the first step towards a shifting growth trajectory for us in India." It is rare to see Honda on the backfoot. From the 1990s till recently, Honda's cars, led by the Honda City, commanded a premium and enjoyed long waiting lists. This enviable consumer pull was at work in the used car market too, and Honda cars commanded the best value. But over the past two years, Honda has found itself at the crossroads. Weighed down by its global woes, poor pricing strategy, which many call brand arrogance, and a lack of focus on India, the brand posted flat sales. Meanwhile, aggressive rivals such
So, the Brio is the down-but-far-from-out company's attempt to regain lost ground. For the first time, the company is trying out the aggressive pricing strategy for size and enter the volume segment of compact cars, which comprise over 60% of the Indian car market. Whether the move will pay off remains to be seen, but as Mohit Arora, executive director, JD Power and Associates, a global marketing information services firm, puts it, "This brings Honda back in the reckoning in India." Made
Since the price point is the most obvious change unleashed by the Brio at Honda India, let's analyse it first. So far, Honda never looked at competitors to set prices - it was always a cost-plus model, where ABS and airbags were standard features in every model's base versions. For the first time ever, Honda has attempted to offer a lower entry threshold for customers. Says the company spokesperson: "Earlier the perception was that Honda is only for rich, its maintenance is high. Now it is being positioned as an affordable, accessible brand." Considering the Rs 3.95-lakh tag on Brio, close to Toyota Liva's (Rs 3.99 lakh), it's clear that competition played a significant role in its pricing strategy this time. "As we enter new segment, we have to adjust to different dynamics," says Takashi
Unlike Honda's previous cars, which followed a mostly imported component strategy, with Brio, Indian requirements and local sourcing were factored in from day zero. Moreover, Indian engineers and vendors were involved right from the drawing stage, and work on the car began in 2008-09.
Brio's localisation today stands at 80% and, according to Nagai, it will go up to 90% soon. Even the raw materials have been sourced locally. For instance, the steel sheets required to make a car's door panels
The local vendor base has gone up 25% - from 110 before Brio to 134 at present. "This [localisation] strategy will be deployed horizontally to develop other models," says Takahiro Higuchi, who led the R&D Paving
A new car, in an untried car segment means that Honda had to overhaul its marketing infrastructure too. When the Jazz was introduced, it launched in seven cities. Brio takes things up several notches a launch planned in 12 cities with 10 more city launches at the dealer level. Its dealership base is poised to increase - from 125 dealerships in 78 cities in the beginning of this year to 143 dealers in 91 cities by end-2011 - and the new additions will largely be in the smaller cities. Think Asansol, Gorakhpur,
The thrust on engaging with local media is high. Besides inviting them for launch and plant visits, they are
executives. Brio's price obviously makes it an attractive proposition for first-time car buyers. Jnaneswar Sen, senior VP (sales & marketing) Honda Siel, says: "We are revising our training standards so that the selling process that a customer goes
A significant point. Before Brio, the repurchase rate among Honda City customers was a high 64%. "Honda buyers knew the brand and had pretty much made up their mind when they walked in," says Atul Bhalla, a senior executive at Prime Honda, a Delhibased
This is no longer a given. "Now there will be lot of upgraders and first-time buyers who will need handholding,"
So, the sales staff in dealerships has undergone a seven-day training module. Also, a comparison sheet between different competing models has been prepared as a ready reckoner to help customers, something that most other auto majors always did. Dealers are also ensuring that there are enough display and test drive cars at each outlet, so that nobody
Talking about test drives, can you guess why Vizag was chosen for media trials than a more visible locale like, say, Goa (where test drives for Jazz were held)? To get a lot more of the regional press to participate. The
Adding a small car to the stable, localisation, a strong India-focus...Honda is late to the party. Toyota, VW, Ford have been doing all this for a while now. But the thing is, Honda is not just any car maker. Think
Honda Siel is the sixth largest car company in the world. Strongly focussed on engineering and technology, Honda's personality was shaped by its founder, Soichiro Honda, who was a race driver. He believed that a well-built product will sell on its own, and that's the reason Honda has been mostly led by technocrats. This also explains the company's heavy investment in R&D - it is a leader among the auto giants in this sphere. It ploughs back 5.5% ($5 billion) of its revenue into the R&D budget.
All this shapes Honda's personality. It is known to be a company with strong beliefs, one that does not follow industry fads. Here's a case in point: Back in the 1990s, when the racier V8 engines were all the rage, Honda steadfastly refused to build it, despite the fact that it was globally renowned as an engine company. When dealers in the US tried to pressure it into introducing the engine in its SUVs, Honda famously protested by sending across a shipment of V8 beverages to silence them.
Any way you look at it, Honda is a cautious, conservative company that takes time to make investments and hates to make compromises. If demand slumps, it prefers to reduce production instead of the typical knee-jerk reaction of rolling out discounts. "In China they have routinely set production targets short of demand," says Michael Dunne, president, Dunne & Co., who has tracked China for a long time. Honda also does not sell to taxi fleets or rental agencies
As senior Honda Siel executive explains: "We just decline
This strategy worked well for Honda, for years. It's fuel-efficient line-up, be it the Accord, Civic or the Fit, constantly wooed baby boomers in a competitive market like the US, while the Detroit majors were battered by the recession. "Honda does not aspire to be the biggest or the fastest. But it firmly believes in engineering excellence and perfection," says a senior auto industry executive working with a Japanese firm with close to three decades of experience. It is in this context that Honda's
The past few quarters haven't exactly been kind on Honda. The City, since its launch in the 1990s, had ruled the midsized sedan market in India. Early this year its crown was usurped by Hyundai's Verna
Desperate times call for desperate measures. In August Honda did the unexpected - it announced dramatic price cuts of City and Jazz ranging from Rs 66,000 to over Rs 1.5 lakh. The last time such price
The move seems to be working, but the larger picture remains bleak. Since 2006, while the India's auto market has doubled from one million to two million cars annually, Honda's sales numbers have remained
More worryingly, in April to August 2011, sales dropped sharply by 13% in a market that grew by 2%. In contrast, aggressive competitors like VW have surged from zero to 51,000 in just two years. Honda's biggest problem in India has been pricing. It brought in Civic Hybrids in 2008-09, but sales were poor courtesy stiff pricing. Honda had to liquidate stock and cut losses. The story of the overpriced
Honda's import-led model with low localisation was simply not working out. The situation was made worse by the appreciating yen - a problem that affected all Japanese companies post-financial crisis. But
"We took a call that we are going to make losses but let's not take our eyes off the customers," says a senior Toyota executive. So Toyota increased prices marginally, but concentrated on cutting down on
expenses. Honda, on the other hand, hiked prices on the City, Civic and CRV by around 4-20% in April 2009. The CRV's price rose by a whopping Rs 3.54 lakh.
The Indian market soon bounced back but Honda had outpriced itself and the impact was beginning to show. In 2010-11, the car market grew at 30%, but Honda's sales fell by 4%. Global
Things aren't looking any better outside India. This August, Consumer Reports gave thumbs down to Honda Civic 2012. Given that the Civic has been consistently on its top pick list since 1973, this was a drop the auto world noted with dropped jaws. Guess who came on top? Hyundai Elantra. This was possibly
Barely a decade back, Hyundai was grappling with quality issues in the US market. "Earlier Honda was far ahead of others on quality and engineering excellence. Now they have moved forward sharply bridging the gap," says Rakesh Batra, national leader (automotive), Ernst & Young. Bill Visnic,
"Honda was the first company to make variable-valve timing technology mainstream for affordable cars in the 1990s," he says. On the other hand, this century's big innovation is direct injection engines and Honda has lagged behind its competitors in introducing it in the US, adds Visnic. Says Rebecca Lindland of Global Insight: "They grew on the back of the baby boomers. But now it's the GenY, people under 35, who are in the market and they are just not enamoured of Honda the way their
In diesel-enamoured Europe, petrol-focussed Honda does not have a big presence. In China, VW and General Motors dominate. Sensitive and complicated geopolitical ties between China and Japan mean that Japanese firms will have a limited play in the world's largest car market. The centre of gravity for the fluid and complex auto industry is shifting from the West to the East where the dynamics are very different, and the complex environment and demand requires some agility. "Small cars and diesel are two big things that are different about India," says Inaba. The
By 2020 India will be the third-largest car market in the world or. Given the constraints in China, Honda expectedly is waking up to the importance of India. Brio is the best example. Another tipping point, according to insiders, came in 2009, when the newly-appointed Honda Motors CEO Takanobu Ito
Impressed by the two-wheeler HMSI plant in Gurgaon, he apparently asked his team back in Japan if they could match the cost structures of the India plant. The answer was predictably negative. Since then the gears have shifted.
In the past, Japan was the reference point for any pricing conversation. Now, says a senior executive, the benchmark has shifted to the most efficient Honda plant in the world. Trips by senior Japanese executives to the India centre have risen and there are many executives from the headquarter on India deputation. Need more proof of India's growing importance? Realising the need for a diesel engine in India, Honda has given up its diesel-aversion and is currently developing a model that is expected
That's the question many are asking. While Brio does make Honda a player in the volume segment, though the absence of a diesel offering handicaps it substantially. Today there are close to 15 auto players vying for 25,000 monthly car sales (petrol). So Honda is now pitching itself in a market that is competitive and shrinking. From the Figo to the i10, almost all manufacturers report a sharp dip in the sales of the petrol variants and a surge in the diesel ones. In August 2010, for instance, the SwiftFigo-Polo segment sold 40,000 petrol variants. This August, the number has dipped to 25,000. The demand has shifted to diesel. In July 2010, 39% of all compacts sold were diesel. The figure this August
Honda must also grapple with many internal challenges. It will not be easy for a company positioned at the upper end of the car segment to step down and connect with tighter customer purse strings. Dealers, marketing strategies, and everything in between will have to undergo a dramatic makeover to cater to first-time buyers, who are far more difficult to handle and win. Furthermore, in the compact car segment, the benchmark for cost of operations is Maruti Suzuki. Honda, and others, will have to get
Though Honda moves slowly - but it moves surely. "Once they take a decision their execution is
flawless and excellent," says a senior ex-General Motors executive who worked in the US and saw it first hand. Whatever happens, this promises to be an interesting ride for Honda.
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Hero MotoCorp Ltd. 210, Ganpati Plaza, M.I. Road, Jaipur - 302 001, India. Tel: +91-141-2372476, 2361731 Fax: +91-141-2361252 Email: email@example.com Percy Dubash Director Corporate Practice Adfcators PR Phone: +91 22 6757 4444 Email: firstname.lastname@example.org For further enquiries Roma Balwani Senior VP & Group Head â€“ Corporate Communication Mahindra & Mahindra Ltd Phone: +91 22 2490 1441 Email: email@example.com
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