I N D I A ’ S N O . 1 M A G A Z I N E F O R A U T O M O T I V E N E W S , V I E W S & A N A LY S I S
Vol. 13 No. 30
www.a mo nl i ne.i n
19 August 2013
Two of a kind
Strikes and Strife
Visitors to Auto Expo 2014 will have a tough time commuting between two locations 50 km apart.
An indepth analysis of why auto cos are beleaguered by strikes at their factories.
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Varroc to set up plant in Chennai The plant set up over 5.5 acres will have a capacity to manufacture 2.2 million parts annually. Slated to begin production of polymer components by mid 2014. Anand Mohan
he Va r roc g roup will set up a plant in Chennai next year to manufacture polymer components for the two-wheeler industry. The company is setting up the facility to supply to Yamaha to begin with. Located in Sriperumbudur, the manufacturing unit will be set up over a 5.5 acre plot with a capacity to manufacture 2.2 million parts annually. It is slated to begin production by mid 2014 when polymer components like mirror assemblies and seat assemblies for Yamaha will be manufactured. The company will expand its product portfolio as business scales up. Varroc is going through a high growth phase since the acquisition of Visteon last year and by challenging itself with ambitious plans to become Rs 20,000 crore company by 2020. In order to realize this vision and to ensure smooth integration of its M&As, the company has appointed Amit Dakshini as a Chief Strategy Ofﬁcer of the company. Amit, as his proﬁle states, has ‘over 17 years of experience in strategy planning, mergers and acquisition, joint venture, business development, business planning, management consulting and ﬁnancial modeling.’ The Varroc group has over a couple of dozen plants in the country. Amit says, “Following
an OEM has become a norm in the industry. When an OEM sets up a new plant, component manufacturers follow them because proximity makes JIT easier.” Just In Time manufacturing works better with shorter delivery times, especially for large body parts like polymer components. That is why it is the ﬁrst business Varroc is setting up among its many businesses. Amit adds, “Another Varroc project will come up soon in the western region but we will provide more information on that later.” Our guess is either in Neemrana or Sanand. We’ll let you know soon. Amit joined Varroc a few months ago, yet in addition to talking to the press about the company’s developments, he already dabbles between many roles. He says, “My role is to assist in developing strategy for the next seven years to achieve our MD Tarang Jain’s vision to be a Rs 20,000 crore company by 2020. In addition, I will oversee implementation of strategy across the businesses, identify and execute inorganic growth opportunities and also assist in the integration of M&As executed by the Group.” He will also oversee corporate marketing.
Visteon Integration Varroc acquired Visteon last year before the arrival for Amit. The size of the acquisition and the quantum of work required in integrating what is now Varroc Lighting Systems
Varroc’s acquisition of Visteon will help them position as a 4-wheelers lighting major. By 2020, it wants a significant portion of business to come from the lighting business. with the rest of the Varroc group is yet to be completed. It is one of the first assignments for Amit. He says, “Varroc Lighting Systems is almost equal in size of Varroc so integration there is not just a two-three months activity. It will take time and we have consciously decided to avoid rushing into the integration. Of course there are a lot of synergies on the customer and on the technology side that we plan to leverage into India and other key geographies. This was also one of the key strategic rationale for Varroc in acquiring Visteon.” He adds, “Its also important to note that even without any major integration till now, VLS is performing reasonably well.” The acquisition of Visteon helps Varroc position itself as a 4-wheelers lighting major. By 2020, the company wants a signiﬁcant portion of its business to come from the lighting business.
Amit Dakshini, Chief Strategy Officer, Varroc.
Challenging market conditions The industry is going through a tough phase and almost every manufacturer is approaching the situation with solutions of its own. Varroc says this is not a slowdown. Amit comments, “What we are seeing is a correction. We are not waiting for things to bounce back. We are preparing to work in this kind of environment. Any slowdown helps you bring about internal corrections in terms of talent, management bandwidth, looking at processes and improving efﬁciencies.”
Parts like seat assemblies will be manufactured for Yamaha. Varroc plans to add more products when the business demands.
India is beginning to emerge as a 4-wheeler export hub but much before, it has established itself as a 2-wheeler exporter. Almost every 2-wheeler OEM is exporting to more than a handful
of countries. For a parts supplier though, supplying to OEMs for export models doesn’t reﬂect as exports for them. Large component manufacturers are looking at production in other markets to increase global footprint. Varroc is a good example of that. Amit says, “If you look at the ASEAN region for two wheelers, you will notice that it is almost the same size as the Indian market, which is about 12-13 million. Indonesia is about 8.5 million so Indonesia is a market we cannot ignore.” He adds, “While we are looking at 4-wheelers, the 2-wheeler space will be a strategic market for us even seven years later. China is number one, India is second and Indonesia is third, so for any Indian components major, After India, Indonesia and the Southeast Asian region is the next strategic market to focus on.”
EDITORIAL Some good, some bad
n times of a crisis, it’s said that unity is strength and working together will help you get out of sticky situations better. The automotive industry doesn’t seem to work that way.
First you can see the upcoming 2014 Auto Expo in New Delhi that’s in a bit of a ﬁx. The Greater Noida venue will be large enough to host only OEMs so the components industry is left either living out of makeshift tents or having different dates for the expo which doesn’t bode too well for the industry that is technically larger than the OEM business. Then in a smaller example is Mahindra, who has now decided to go on its own in its CV business. The Expo is painting a bad picture for the Indian auto industry after a chaotic yet successful event in 2012. Equations between the governing bodies need to be resolved soon to get the show back on track and not steal the one positive week the country deserves in such challenging market conditions. Mahindra buying out Navistar on the other hand in its trucking business is a strategically good move. The American partner was bleeding and couldn’t be as effective in the JV as Mahindra wanted it to be. So that it doesn’t pull the ambitious
Indian major down, Mahindra has decided to soldier on alone into the future. The next three years will not be easy but the company must learn from competitors like Bharat Benz on ways to tackle the CV industry that’s going through a very tough phase. You will get to read more about this and all other stories in the CV industry in out Commercial Vehicle special coming up next week. We promise you it will be a must read for everyone dealing with the commercial side of things.
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QUOTABLE QUOTES Roelant de Waard, Sales Head, Ford of Europe on current market conditions in Europe to Automotive News Europe
All customers seem to be aware that we are in a recession -- as an industry, as a region -so they’re expecting very good deals.
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Dr Pawan Goenka, President, Automotive and Farm Equipment Sectors, M&M on the merger of CV business to The Mint
Now that we do not have a joint venture, it doesn’t make sense to have a separate entity. The board has given us a free hand of three years to turnaround the business. We still have two years and 4 months.
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Views and opinions expressed in this magazine are not necessarily those of Network18 Media & Investments Ltd (Network18)*, its publisher and/or editors. We at Network18 do our best to verify the information published but do not take any responsibility for the absolute accuracy of the information. Network18 does not accept the responsibility for any investment or other decision taken by readers on the basis of information provided herein. Network18 does not take responsibility for returning unsolicited material sent without due postal stamps for return postage. No part of this magazine can be reproduced without the prior written permission of the publisher. Network18 reserves the right to use the information published herein in any manner whatsoever. Printed by Mohan Gajria and published & edited by Lakshmi Narasimhan on behalf of Network18 Printed at Print House India Pvt. Ltd. R – 847/2. T.T.C. MIDC, Rabale, Navi Mumbai – 400 701., and published at Network18, ‘A’ Wing, Ruby House, J. K. Sawant Marg, Dadar (W), Mumbai - 400 028. AUTO MONITOR is registered with the Registrar of Newspapers of India under No. 67827/98. Views and opinions expressed in this publication are not necessarily those of Network18. Network18 reserves the right to use the information published herein in any manner whatsoever. While every effort has been made to ensure accuracy of the information published in this edition, neither Network18 nor any of its employees accept any responsibility for any errors or omission. Further, Network18 does not take any responsibility for loss or damage incurred or suffered by any subscriber of this magazine as a result of his/her accepting any invitation/offer published in this edition. No part of this publication may be reproduced in any form without the written permission of the publisher. All rights reserved. *Ownership of this magazine stands transferred from Infomedia18 Ltd (Infomedia18) to Network18 Media & Investments Ltd (Network18) in pursuance of the scheme of arrangement between Network18 and Infomedia18 and their respective shareholders and creditors, as approved by the Hon’ble High Court of Delhi and the necessary approval of Ministry of Information and Broadcasting is being obtained.
WHAT’S INSIDE Moving in
SIAM: sales continue to fall
Mahindra rides tractor revival
Two of a kind
Most US consumers uncomfortable with fully autonomous vehicles
Fiat introduces limited edition Punto
Mahindra Trucks and Buses will function independently; company looks at infusing Rs 500 crore over three years as M&M reinvigorates its trucks business.
Poor economic conditions and unfavourable government policies continue to wreak havoc in the automotive industry as overall industry sales fell 0.95 percent in July.
Even as vehicle sales has been on a downward journey over the last several months, M&M came up with an uplifting performance on the back of renewed momentum in its tractor division.
For the first time, there will be separate venues for OEMs and component manufacturers at the 2014 Auto Expo.
TE Connectivity’s survey found that the majority of US consumers are not yet comfortable with the idea of fully autonomous vehicles and that safety needs to be enhanced before adopting the technology.
Fiat India have rolled out a limited edition Punto Sport 2013 featuring a 1.3L 93 PS advanced multijet diesel engine and sporty features.
Polaris inaugurates dealership at Lucknow
Polaris India recently kicked off its innings in Uttar Pradesh with inauguration of its dealership - Beekay Motors- in Lucknow for its entire range of off-road vehicles.
Why Oregon Lawmakers Think We Need a GPS-Tracking Mileage Tax
More US states are considering a ‘vehicle miles traveled’ tax to make up for gas-tax revenue shortfalls as drivers will be spending less money at the pump with cars getting more fuel-efficient.
14 THE OTHER SIDE
Arun Dey, Chief Executive-Automotive, Reliance Retail Ltd
Dey holds an MBA from XLRI, Jamshedpur and a BTech from IIT-Madras and has earlier worked with Escorts, Asian Paints, and Maruti Suzuki.
19 AUGUST 2013
Hedging bets The rupee depreciation is playing havoc for importers. However, companies are taking steps by entering into long-term agreements with their global sourcing partners. Abhishek Parekh
upee depreciation of more than 10 percent since the beginning of this year is proving to an opportunity and a threat depending on which side of the fence one is sitting on. Even as the falling value of rupee visa- vis the dollar is proving to be a major advantage for components and vehicle exporters, it is creating a tricky situation for companies that are dependent on imported components in their manufacturing process. “We are managing the volatility in rupee value vis- a-vis the dollar through hedging without going all out. We seek to gain benefit from a favourable exchange rate scenario as it unfolds and hence we do not
hedge our entire forex exposure,” said VS Parthasarathy, Group CIO & EVP-Group M&A, Finance & Accounts Member of Group Executive Board, Mahindra & Mahindra Ltd. “Rupee depreciation works to the beneﬁt of our exports, be they auto, tractors or 2 wheelers. And as India becomes an export powerhouse, SEZs, which is also one of our businesses, can provide a platform to take exports to new levels,” said Anand Mahindra, Chairman, M&M during the company’s recent AGM in Mumbai. Mahindra has been a vocal proponent of falling rupee for a while now and has been opposing any measures to intervene in the free movement of rupee. The company is looking to invest around Rs 10,000 crore over the next three to four years including around
Rs 7,500 crore in new product development efforts and set up a new plant for automobile manufacturing. Most component manufacturer reassess and renegotiate on cost parameters including raw material prices, foreign currency f luctuat ions a nd ot her predetermined va riables w ith their customers and parent organisations on a quarterly basis. The practise is meant to minimise the impact of unforeseen f luctuations on the input side for OEMs and their suppliers. Many Indian subsidiaries of global component groups enter into long term agreements with their parent entity in global sourcing relationships. The agreements allow f luctuations in the exchange rate between currencies within a pre-determined price band.
“We have been consistent in dealing with our parent organisation (Cummins Inc, US) through which most of our exports takes place as a part of our global sourcing arrangement. We take account of rupee f luctuations and accordingly draw up the agreement,” said a senior company official at Cummins India. He added that though the rupee depreciation has made imports from India more competitive for the parent company, it has to be seen in a holistic perspective as parent company also sources components from other emerging markets like China, Brazil and Russia. Most currencies in these emerging market economies have moved in tandem vis a vis the US dollar. “Given the weak market and subdued vehicle sales in the EU and the US, any per-
ceived advantage in terms of competitive product price is getting nullified. We have not witnessed any spike in demand from our export customers and are watching the situation as it is still developing,” said a top official working with a leading camshafts manufacturer and exporter. He added that import substitution is an ongoing process for most auto component suppliers as rupee volat i lit y has sig n if ica ntly increased in recent years and most manufacturers have learnt their lessons during earlier volatile phases. Indust r y players were unwilling to hazard a guess on the future direction of the rupee-dollar exchange rate movement but af f irmed a proactive approach to managing risk emanating from any adverse movement.
In terms of the decision to demerge, Goenka attributed it to the nature of the joint venture. “Since it was a JV, it makes sense for us to make it into a separate company. As far as trucks are concerned, MTBL owns all the IPR. We can make full use of the technolog y of Navistar in these trucks or anywhere else. It’s a licensed engine from Navistar for which we pay royalty. We have full freedom to use that engine in any application in India and limited freedom to export that through Navistar. We cannot sell the engine business because it’s licensed. If we wanted to, we could have sold the truck business. We can also modify the engine as we go along.” Mehta added that the downturn and the discounting in the market was making it difficult for OEMs to see profits. “In the short term the positive monsoon might show some positive movement for the industr y. Our products have been well accepted. We have almost 30-40 percent of the big accounts who use our products. If the mood
of the industry improves within the next 2-3 months, then we should do well.” Asked about capacity utilisation at its HCV plant at Chakan, Dr Goenka said that overall HCV industry is running at 30 percent capacity. “It’s fair to assume that at the end of three years we will have ICVs and MCVs hit the market provided at the end of one year we get a go ahead. There’s a milestone that comes after one year.” M&M also has no plans on the anvil to merge SCVs with MBTL. “The ecosystem for SCVs is totally different in terms of the people involved in development, selling, distribution. Merging will take away the focus of what we want to achieve. Our focus now is to turn around our business of LCVs and M&HCVs,” Goenka added. The company sales in FY-13 declined 13.87 percent to 11,902 units. And in the first four months of this fiscal year April to July, the company’s sales were down in line with the market by 24.5 percent to 3,329 units.
Moving in Mahindra Trucks and Buses will function independently; company looks at infusing Rs 500 crore over three years. Our Bureau Mumbai
arly this year, Mahindra & Mahindra purchased pa r t ner Nav ista r’s stake in their India JV, Mahindra Navistar. By doing so Mahindra took complete ownership of the operations: Mahindra Navistar Automobiles Ltd. (MNAL) and Mahindra Navistar Engines Pvt Ltd (MNEPL). Now seven months later, the company has officially announced its plan to demerge operations of its trucks and buses business from its subsidiary Mahindra Trucks and Buses Ltd (MTBL) and merge it into Mahindra & Mahindra. The $19 billion Mahindra Group will also infuse Rs 500 crore into the business, thus reaffirming its commitment to the trucks and buses arm. Of this, Rs 200 crore would go towards strengthening the existing product portfolio and another Rs 300 crore is planned to enter into the fast growing intermediate and medium duty truck space (7.5 tonne to 16 tonne trucks), which constitutes about one-third of the overall truck market. The Rs 300 crore spend is in two parts: There is small seed money right now to take the company from where it is to complete exploration. Total styling, a large chunk into product development since it involves high capex. The entire process is expected to take 10-12 months. This money will be spent over two years. If everything goes to plan, then it
will be a full three years before which the company will have spent the money. Dr Pawa n Goen ka, President - Automotive & Farm Equipment Sectors, M&M, said that all the assets and liabilities of MTBL will be transferred to M&M Ltd. “Currently we have assets worth Rs 250 crore that will be transferred to the parent company. We have also accumulated losses to the tune of Rs 920 crore and those too will be transferred into M&M’s account. We should complete the process by FY14.” He added, “We are fully committed to our commercial vehicles business and intend to focus on running the LCV, Truck and Bus business as a separate division post the proposed demerger, with the objective of growing our presence in the Indian commercial vehicle industry. We plan to invest significant resources over the next few years which will help us strengthen our ex isting product range and refurbish the current LCV range. Explorator y work has also begun for the introduction of new products that will help address the ICV and MCV segments in the 7.5 to 16 ton GV W category.” MTBL has also announced new branding for its heav y commercial vehicle range. The multi-axle trucks will now be called Mahindra Truxo 25 and Truxo 31; tractor trailers as Traco 35 and Traco 40; and the tippers as Torro 25 and Torro 31. It will also launch a 49 tonne tractor in Q1 2014 and will be named Traco 49.
Dr Goenka pointed out that it has a wide range of LCVs on offer. In fact, it has nearly 30 variants in LCVs. What remains to be launched is an expanded range of tippers. What buyers can expect will be upgrades in the coming one or two years in LCVs. Some of the investments of Rs 200 crore will also go into bringing out BS IV compliant engines. M&M has given itself three years to turnaround its lossma k ing tr ucks a nd buses business. “M&M as a group makes some short-term bets and some long-term bets. We have placed a long-term bet on our truck business. The board has given us three years of free hand and committed a certain amount of money. We are pretty confident on the potential and our capability to turn around business,” said Dr Goenka. Goenka said the company is conducting a study on the potential of entering into intermediate and medium duty trucks space. If the plan is feasible, the company will infuse an additional Rs 250 crore to Rs 300 crore into the commercial vehicle business. Nalin Mehta, MD & CEO of Mahindra Trucks & Buses said, “Overall market is down 50 percent over the last two years, so our sales too are impacted. The discounts are ranging from unprecedented 20 -22 percent in the market, we have been left with no choice, but to play the game. The new investments are lined up so that the company is prepared to participate in the growth, when the revival takes place.”
19 AUGUST 2013
Bajaj Chakan strike ends
he Vishwa Kalyan Kamgar Sanghatana (VKKS) union at Bajaj Auto’s Chakan plant have called off their nearly twomonth long strike and resumed work on August 14. The strike began on June 25, the same day the KTM Duke 390 was launched, and persisted despite many workers returning to work within a week of the start of the strike. Workers affiliated to the VKKS had gone on strike in June demanding that each worker be allowed to subscribe to equity shares of the company at a discounted rate of Re 1 per share (share prices were around the Rs 1,900 mark then) and be allowed to buy up to 500 shares. The demand was rejected, with Bajaj Auto Ltd. (BAL) terming the demands ‘baseless, unwarranted, impractical and improbable’ and declaring that no shares will be given irrespective of the period of the strike. In a statement released to the press on August 13, Rajiv Bajaj, MD, BAL, said that he was “very pleased” that the workers’ union had called off the strike, and hoped that “their decision is a ref lection of their understanding, however late, of their erroneous choice of direction”. In his statement, Bajaj also sought to assure the 22 suspended workmen that their “cases will be considered objectively and sympathetically in the collective interest of all stakeholders”. The Chakan facility manufactures all the Pulsar and KTM models and has an installed capacity of 3,600 units per day. The strike caused a loss in production of up to 20,000 units in June. To keep production losses in check, the company shifted part of the production to its Waluj facility where 40 percent of the production was managed pending resumption of full-scale operations at Chakan.
India’s most costefﬁcient generator
ngine major Cooper Corporation have launched a new diesel generator under the brand name Cooper ECOPACK. The generator is said to consume less fuel, be lighter in weight, smaller in size and meets US and European emission norms. Years of in-house research and the technical collaboration with Ricardo, UK, have culminated in the launch of the Cooper ECOPACK genset. It is available in power ranging from 10 KVA - 180 KVA. The 10 KVA to 40 KVA genset range is powered by a twin-cylinder, in line, 4-valve, liquid-cooled Cooper diesel engine, based on state-of-the-art CRDi technology. This stand-apart genre of power generators is entirely produced at Cooper Corporation’s assembly plant located at Satara, Maharashtra. The entire range goes up to 180 KVA powered by 3, 4 and 6 cylinder Cooper engines.
Outstanding features Commenting on the launch of Cooper Corp’s ECOPACK generator, Farrokh Cooper, Chairman and Managing Director, said, “The ECOPACK series will set a global platform for Cooper Corporation as this genset enjoys a unique position among other diesel power generators in India. It owes this distinction to several outstanding features and beneﬁts like 25% lower fuel consumption, 25% smaller in size, 40% lighter in weight, 42% saving in maintenance cost and several times quieter. Cooper Corp’s Eco Pack could be used for homes, farm houses, bungalows, hotels and retail outlets, ofﬁces, telecom towers.”
Sales continue to fall: SIAM Anand Mohan
oor economic conditions and unfavourable government policies continue to wreak havoc in the automotive industry. According to indstry body SIAM, overall industry sales fell 0.95 percent in July, with unit sales dropping to 17.29 lakh compared to 17.45 lakh in the same period last year. The only silver lining is that sales seem to have picked up last month compared to the collective total of the first four months of the financial year. April-July sales fell by 2.09 percent in 2013 versus 2012. With the festive season coming and a slew of product launches lined up, expect the industry to recover to an extent. The industry will get a new lease of life if commerce minister
Anand Sharma’s recommended incentives, especially for the CV industry, are passed by the government.
Sector-wise industry analysis Passenger vehicles sa les declined 7.49 percent during April-July 2013 over the same period the previous year. Of these, cars were the worst-hit dropping 9.73 percent while van sales fell 2.39 percent. The bull run in the SUV segment has ended mainly due to high tax slabs pushing up their sticker price. UV sales fell 1.03 percent in April-July 2013. Positioning India as an export hub for small cars and UVs is certainly boosting export numbers, though. Passenger vehicle sales rose by 2.4 percent in the first four months of the year bucking the trend of f lagging sales in the industry as a whole. Overall automotive
exports fell 3.37 percent. The two-wheeler segment registered a dip of 0.64 percent during April-July 2013 over April-July 2012. Healthy scooter sales arrested the fall to an extent with an increase in sales of 13.11 percent in the four months of FY13-14. Motorcycles sa les declined by 3.40 percent. TVS, the sole moped manufacturer, saw sales slip by 13.07 percent in the segment.
Still dismal CV sales continue to slump, falling 9.91 percent in AprilJuly 2013 as compared to the same period last year. Considering that 2012-13 was a dismal year for the CV industry, these figures are even more alarming. Even LCVs, which enjoyed an extended run in the green, have de-grown 6.11 percent. The three-wheeler segment declined by 3.45 percent in April-July 2013 over the same period last year, despite an increase in exports of 46.47 percent. Passenger carrier sales fell by 2.84 percent and goods carrier sales declined by 6.05 percent.
19 AUGUST 2013
Mahindra rides tractor revival Our Bureau Mumbai
The farm equipment sector was the saving grace for the company; exports also fared well
Dr Pawan Goenka
ven as the domestic passenger vehicle segment has been on a downward journey over the last several months, M&M came up with an uplifting performance on the back of renewed momentum in its tractor division. “It would have been difﬁcult for anyone to have imagined that the scenario would turn out to be so favourable with respect to tractor industry and so negative for the automobile
sector even three months back. We are expecting tractor sales to grow by 10 to 12 percent in the current ﬁscal. The outlook for passenger vehicle sales continues to be grim in absence of any positive momentum,” said Dr Pawan Goenka, President, Automotive & Farm Equipment Sectors, Mahindra & Mahindra.
No strife here The company’ s gross revenue and other income for the
quarter ended June, 2013 stood at Rs 10,887.8 crore as against Rs 10,115.8 crore during the corresponding period last year, a growth of 7.6 percent. The net proﬁt after tax for the quarter is Rs 937.9 crore for the current quarter as against Rs 725.6 crore in the same period last year, a growth of 29.3 percent. The consolidated gross revenue and other income of the group for the quarter ended June grew by 9.5 percent to Rs 19,356 crore from Rs 17,670.8 crore ($3.2 billion) in ﬁrst quarter last year. The growth in the consolidated revenues in the current quarter is around 14.3 percent over ﬁrst quarter last ﬁscal. The consolidated proﬁt after tax before minority interest for the current quarter is Rs 1,249.9 crore as compared to Rs 1,019.7 crore in ﬁrst quarter previous year, a growth of 22.6 percent. Dr Goenka attributed the growth in the profit in the quarter to a good volume performance by farm equipment sector and tight control on expenses. The operating margin of the entity for the current quarter is 14.4 percent as compared to 13.9 percent in ﬁrst quarter last ﬁscal. The company had a block closure of around nine days in
July at its Chakan facility and is evaluating a similar block closure this month as well in order to rationalise production to market demand. The facility is operating at around one third its capacity currently. The company’s new tractor manufacturing facility at Zaheerabad is already making around 50 to 60 tractors per day and is likely to touch production target of around 100 units in a few months. The company is looking to invest around Rs 7,500 crore in capital expenditure programmes over the next three to four years and additional Rs 2,500 crore in group companies and associates to maintain its leading position across various businesses. In the current quarter, the company sold 56,969 passenger utility vehicles. In cars, the company sold a combined volume of 3,255 cars and exported 4,771 vehicles in the current quarter. Total tractor sales in the quarter stood at 71,696 units in the domestic market as compared to 56,861 units in the ﬁrst quarter last year, a growth of 26 percent. Ssangyong Motor sold 29,286 units in its domestic market (South Korea) and exported 40,174 units (including CKD), selling a total of 69,460 units in the ﬁrst half of 2013. It reported
revenue of 1,660.6 billion won, operating loss of 14.3 billion won and a net loss of 3 billion won after tax. Its ﬁrst half sales volume and revenue grew by over 22 percent compared to the same period last year. “Our immediate priority at Ssangyong is to improve the company’s profitability even as we stabilise its operations and grow sales in domestic and export market,” pointed out Dr Goenka. In exports also, Ssangyong was able to continue with the sales growth trend by recording a 15.4% increase over the same period last year due to increased volume in overseas markets including Russia, Latin America and India. In the second quarter, Ssangyong recorded sales volumes of more than 12,000 units for three consecutive months. It recorded a net proﬁt of 6.2 billion won in the second quarter, compared to a loss of 21.5 billion won in second quarter of the previous year. Ssangyong Motor also started a two-shift system in assembly line 3 in May to actively meet the growing demand for SUVs, and it successfully concluded its wage negotiations on July 25 without strike for the fourth consecutive year.
Two of a kind For the ﬁrst time, there will be separate venues for OEMs and component manufacturers at the 2014 Auto Expo Pradeb Biswas Mumbai
he news that Auto Expo organizers were seeking potential venues to host the 2014 edition had been out long ago. The main reason which made the organizers think about a change in location was the space constraint at Pragati Maidan. After a lot of searching, it seems the organizers were unable to ﬁnd a suitable location big enough to accommodate the hundreds of participants. Organizers have been vocal about the fact that Delhi and the NCR regions lack any big public space that can comfortably accommodate Expo participants with adequate breathing space. The solution they have come up with is to host the 2014 Auto Expo at two different venues. While the vehicle manufacturers will display their products at a Greater Noida venue, the component ma nufacturers will showcase their offerings at Pragati Maidan. Both the venue
are approximately at a distance of 50 kilometres from each another. This means all participants will be pretty much hassled as they will travel from one location to another to ﬁnd out what others are showcasing while manning their own stalls. The plans of separate venues is already giving participants jitters even though the expo is still months away. While requesting anonymity, a senior ofﬁcial from Delphi Automotive Systems told Auto Monitor, ‘If there are going to be separate venues for the vehicle manufacturers and the component manufacturers, then what is the point of having a show together? The component manufacturers can have their own separate show. The primary reason for having separate venues seems to be the space constraint of having such a big expo at one venue. The lack of a spacious venue has been highlighted by the organizers in the past. The crowds are likely to get attracted to the venue where the vehicle manufacturers will be displaying their entire range.
The Auto Expo 2014 will be different for the crowd that flocks in large numbers. There will be some shuttling to do.
The separate venues will end up creating an identity crisis for the automobile component manufacturing industry.’ “There will be shuttle service in place to transfer the expo participants from the Greater Noida venue to the Pragati Maidan venue and vice versa. The vehicle manufacturers will be located at the Greater Noida venue while the component manufacturers will be located at the Pragati Maidan venue. The show is still being organized jointly by CII and ACMA and only the venues are separate. The separate ven-
ues will facilitate better crowd management. The component manufacturers will have lesser crowds to deal with and only those companies who are serious about business will attend,” said Harish Lakshman, Vice President, ACMA and MD of Rane TRW Steering Systems Ltd. “The objective of the auto expo is to open up new avenues for business growth. The expo acts as a ground for knowledge sharing and details emerge of the expected technological breakthroughs and what trends will eventually fade. If the component and vehicle manufacturers
showcase their product portfolio under one roof then only the auto expo makes sense. Otherwise if all vehicle manufacturers display their offerings in a separate location then the expo will be reduced to a general show meant only for the public. Two different locations mean people will have to shuttle between them causing logistics difﬁculty. If there are separate venues for component and vehicle manufacturers then what is the point of continuing to call it as an automobile expo,” said Kithur Mohamed, Managing Director, Knorr-Bremse.
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A N A LYS I S
Pradeb Biswas ﬁnds out some of the signiﬁcant reasons that are aiding the causes of calling for strikes at auto companies. And what could be done to keep them few and far between.
total of 49 days went by before the agitating workers at Bajaj Auto’s Chakan plant called off their strike. In a statement issued to the press, Rajiv Bajaj, Managing Director, Bajaj Auto, said “I am very pleased that the Vishwa Kalyan Kamgar Sanghatana (VKKS) union has unconditionally called off their strike at Chakan. I hope that their decision is a reﬂection of their understanding of the erroneous choice of direction.” While this may have sent out sighs of relief among the higher management of Bajaj Auto as it means that production could resume at the plant now, this assuagement might not last long. The VKKS union had told journalists that they will continue with their wage revision demands to the higher management. This suggests that an amicable agreement between the workers and the management of Bajaj Auto has been reached for the time being. But what remains unanswered is whether the underlying issue that pushed the workers to strike been resolved? For some years now, there has been a series of protests emerging in the automobile industry. The repercussions of this has been severe – both for the workers and the company. While production is most affected, there is also the fear that this is not a one-off event. Some protests have lasted for a month, while others continue to simmer underneath. Barely six months to a year pass before there’s a new workers agitation taking place. The worrying trend is that with each new worker protest sees an increase in its intensity and demands. This has had a cascading effect and several such protests or strikes are a common occurrence across the automobile companies. A common thread linking the workers’ agitation that have taken place in the auto industry be it at Maruti Suzuki or Hyundai or Hero MotoCorp or Mahindra and Mahindra, and lately Bajaj Auto were in the nature of the demands. All these strikes were the outcome of the lack of sensitivity on the part of the higher management to the workers’ demand for an increase in wages and increments. The long work hours coupled with high production targets create a high work pressure environment and rotational shifts contribute to frustration.
The Paisa Factor According to sources at Bajaj Auto, the workers at Chakan plant earn in the range of Rs 22-25,000 per month. They wanted this revised. In March 2013, shop ﬂoor workers at the Hero MotoCorp plant in Dharuhera, Haryana, demanded an increment of around Rs 18,000 per annum for the next three years. At that time the salary of an experienced worker was around Rs 50,000. Over three years, the increment would push their salary over Rs one lakh. In July 2012, the contract workers at Maruti Suzuki’s Manesar plant demanded better pay from the management. According to numerous reports, at that time the permanent workers earned a salary of around Rs 20,000, and contract workers around Rs 6,000. The demands made were for a salary hike (around four times their existing salary), gifts with every launch, cheaper home loans, and an increase in paid leaves. By the time the strike came to an end, the workers’ salary was increased by around 50 percent along with provision for interest free loans. The subsequent media reports about these wage hikes acted as a catalyst for workers in other automobile companies to achieve their dreams of a salary hike by means of a strike. Hyundai was the next company which suffered. The company increased salaries of around 2,000 workers at its Chennai plant by around 45 percent. This was followed by Honda Motorcycle & Scooter India (HMSI) increasing salaries by around 50 percent. Before
this hike, HMSI employees had a salary of around Rs 25-30,000. As per the settlement agreement, HMSI agreed to an annual Diwali bonus of around Rs 8,000 apart from a gift worth Rs 5,000 and a ﬁnancial incentive of Rs 3,000 for meeting production targets. Additionally workers would be given Rs 1,000 for every new model launched and HMSI would pay 50 percent of interest for a 20 year home loan worth up to Rs 12 lakh. This wage pact was agreed upon by the workers’ union and the management
to be valid till July 31, 2015. Earlier strikes were a yearly occurrence at HMSI. But post the new wage agreement the company has seen a steady schedule in its production. Following this, the workers at Hero MotoCorp Workers Union (HMCWU) started questioning that if Maruti Suzuki has increased salaries of its workers and all other auto companies in the Manesar belt are following suit then why should HMCWU continue to work for low wages? The VKKS union at Bajaj Auto was the latest to join this bandwagon with the same ideas. Across the shop ﬂoors of all automobile companies, contract and permanent labour perform similar set of duties. The permanent workers are paid a salary that could be four times higher than those earned by contract workers. The contract workers’ contention would naturally question the disparity in the payment. What makes their condition worse is the lack of job security. One often hears from MNCs who
It is a big investment for auto companies to hire people, train them, and hope their performance matches internal quality standards. To avoid the risk, the management prefers contract workers. Not only will they put in the hours demanded, but will give their best.
have moved operations to India that India became an attractive destination for them when one considers the low labour costs as compared to the US or Europe. It also pushes them to make India as a base for domestic sales and exports. Probably, the MNC OEMs presume that workers will continue to work under those terms for a longer time than what they would like.
The core issues Some studies and papers on labour unrests in the automobile industry point out that contractual labour comprises over 80 percent of the workforce. With the vast majority of workers feeling exploited leading to frustrations over low wages, it naturally gives way to letting off steam. According to some sources in the automobile industry, there is also a possibility that some of these uprisings and unions are backed by political parties or individuals with vested interests. With a deaf and blind higher management on one side and eager to help unions with political associations on another, no points for guessing the better side. There is no Central Law that requires organizations to compulsorily recognize trade unions or have collective agreements with them. But state governments like Maharashtra, West Bengal, Orissa, Madhya Pradesh and Andhra Pradesh have a set up for registering unions. The existing labour laws are of not much help either to both the parties. Their demands and conditions are different. The management wants to keep wages at a minimum while not forfeiting their choice of hire and ﬁre based on demand and supply situation. The unions are agitating for higher wages, job security and “better” working conditions.
19 AUGUST 2013
A N A LYS I S
12 The existing laws are interpreted as per the scenarios. The prevailing mindset is ‘deal and manage when faced with it’.
The ground situation Across industries and sectors, between management and non-management staff, it is near impossible to ﬁnd an employee who is content with the remuneration and perks offered. But in India, especially in the automobile industry, the labour situation is different. The majority of workforce is hired either on temporary, contract or casual basis. Organizations prefer this system as it means less payment and the ﬂexibility of increasing or reducing their number depending on the work load. It is a big investment for automobile companies to hire people, train them, and hope their performance matches internal quality standards. To avoid the risk, the management prefers contract workers. Not only will they put in the hours demanded, but will give their best. With limited employment opportunities for non-skilled labour in non-agricultural sectors, for the workers it’s better to have low pay than no pay. Analysts point out that workers employed in the automobile sector take home more than their average counterpart. According to estimates of market research ﬁrm JD Power, there is a dearth of around three lakh skilled workers for India’s automobile sector. Compounding the existing skilled labour shortage was the entry of newer competitors and the setting up of new plants. The vacancies at the new ofﬁces of the latest entrants and new plants of the existing players were ﬁlled by poaching from the existing talent pool. This also meant higher wages was offered to the management staff to lure
For auto cos management, the ground situation is difficult as the market demands have become higly volatile.
them in making a job switch. This increased workers’ unrest about the disparity in the pay scales between them and the permanent staff. Workers can see the management come to ofﬁce in cars, get subsidized food, wear different uniforms and get preferential treatment. While contract workers have to struggle on a meagre salary. The global economic slowdown which started in 2008 is yet to improve which means jobs are few and workers who don’t have one aren’t likely to get one easily.
Is there a way out? The issues can be sorted out with managements increasing the quantity, quality and frequency of their interactions with the workers. The management could set up a centre that would counsel the workers and listen to their woes on a regular basis. Instead of waiting for a prob-
lem to arrive at their doorstep they should be the ﬁrst to reach the problem. Instead of shying away from worker unions, management should engage them in discussions to ﬁgure out a legitimate solution to the issues. For the management of automobile companies, the ground situation is difﬁcult as the market demands have not only become volatile but the frequencies of cyclical downturns have become shorter. Given the tough economy their survival depends on lean manufacturing and ensuring supply as per demand. It is understandable that ensuring welfare of all workers is too much to ask. But they should not make workers feel that they are being exploited while companies keep costs low and margins high. The demands of the workers may not be unreasonable either. All that a worker expects for his hard work is a secure future and
long term association with his ‘malik’. Political parties are making inroads into the labour camps of automobile companies as the workers pleas are not being heard. If the management listens to its workers and assures them of steps being taken, then outside fractions will not be able to enter these unions. Unions get stronger when members increase with more workers feeling their individual grievances are not being heard. The government needs to do its bit by initiating labour law reforms which have been pending for nearly four decades. For the employers and the employees there needs to be a system which offers safety and sustainability. Employers and employees together need to figure out a solution. (NB: On request, we have withheld the names of the sources who spoke to the author.)
Driverless vehicles According to a survey conducted by TE Connectivity, consumers vehicles are reluctant to to relinquish full control of the vehicle not to mention concerns about the capability of the car to auto-navigate.
E Connectivity Ltd. has announced the ﬁndings of its survey on autonomous vehicles, which examined consumer attitudes toward ‘driverless’ cars. The survey of 1,000 adults in the U.S. found that the majority of consumers are not yet comfortable with the idea of fully autonomous vehicles and that safety is the most important aspect that needs to be enhanced before adopting the technology. Nearly 70 percent of respondents stated they would not be comfortable in an autonomous vehicle (i.e. a car that operates itself without real-time input from the driver). Close to 30 percent of consumers surveyed said they would be comfortable in a car with driverless technology. More than half (55 percent) marked safety technology as the most important aspect of the autonomous vehicle that they believe needs to be enhanced before these cars become accepted to the general public. The survey results are timely given the U.S. Department of Transportation’s recently announced guidelines concerning autonomous vehicle
testing and safety. “Signiﬁcant progress already has been made in developing autonomous and semi-autonomous sa fet y f unctions,” said Steven Merkt, President, Transportation Solutions for TE Connectivity. “With consumers citing safety as their top concern for getting comfortable with the idea of driverless vehicles, it’s clear that the industry is moving in the right long-term direction and that consumer education on safety features will play an important part in adoption of the technology.” Respondents overwhelmingly prioritized safety features (55 percent) over more sophisticated “info-tainment” systems (4 percent) when asked which aspect of vehicle technology they would like improved before autonomous vehicles become widely available. Consumers noted that innovation in safety features, including lane control, automatic emergency braking and sensors to detect objects or people near the vehicle, were more important than upgraded infotainment systems. “Autonomous vehicles will
require more robust and innovative connectivity solutions to enhance performance and safety. Ensuring the functionality of the critical electronic connections in navigation, advanced safety systems, and highly integrated engine controls and power management systems will be essential as vehicles become more autonomous,” Merkt added. In response to the autonomous vehicle feature that consumers were most concerned about, the majority of respondents (76 percent) said relinquishing full control, higher speed capacity or the ability of the car to navigate and reach destinations without driver input. Sixty percent of consumers noted they were reluctant to give up full control. In contrast, signiﬁcantly more males (25 percent) than females (13 percent) said they were not concerned about any features of the autonomous vehicle. Improved fuel efﬁciency was noted by 22 percent of respondents as the single-biggest beneﬁt of autonomous vehicles. Other beneﬁts such as less trafﬁc congestion (21 percent), relief of
How safe is it?
vehicle occupants from driving and navigation responsibilities (13 percent), enhanced productivity (11 percent), and higher speed limit (4 percent) also were selected by respondents. Those participants between the ages of 18-54 noted enhanced productivity (i.e. being able to multi-task without having the responsibility of driving) as a more signiﬁcant beneﬁt to the autonomous vehicle compared to those 65 or older.
Additionally, more men (34 percent) than women (24 percent) stated they would be comfortable in a car with driverless technology. The results also indicated a variation in age with 18-34 year olds (38 percent) being more comfortable than 55-64 year olds (20 percent) and those 65 or older (18 percent). Interestingly, 70 percent of those with children of driving age (13-17 years old) said they were uncomfortable with autonomous vehicles.
19 AUGUST 2013
Altium gives 3D PCB Explore India’s Bending complex tubes ﬂexibly History with the ECAD and MCAD here must be enough room processes tubes in all current matefor the broadest range rials, such as aluminium, titanium, ANS Navigator App integration of pipes such as exhaust copper, steel and stainless steel with gas return tubes, injeca diameter from six to 40 millimefor iPhone tion and cooling water lines in the ltium and Desktop EDA partner to protres. Even tubes with preformed
vide PCB designers improved ECAD and MCAD integration with Dassault SolidWorks, Siemens Solid Edge and Autodesk Inventor Altium Limited, a global leader in Smart System Design Automation and provider of advanced 3D PCB design solutions (Altium Designer) and embedded software development (TASKING), has partnered with Desktop EDA to provide designers with advanced ECAD and MCAD integration. The new add-on application, Desktop EDA Solidworks Modeler and the IDF Modelers, is currently available for Altium Designer. “By partnering with Desktop EDA, we’re extending Altium’s market-leading position as a native 3D PCB design system provider” said Daniel Fernsebner, Director of Technical Partnerships for Altium. “Desktop EDA apps for Altium Designer focus on bringing greater productivity to mechanical designers working with PCB designs.” The extension apps for Altium Designer and their companion plug-ins form a bridge between the ECAD and MCAD design worlds. Productivity is greatly increased through the full synchronization capabilities between the target applications. This goes much further than simply eliminating the requirement to recreate MCAD assemblies each time, allowing the modeling of Altium Designerspeciﬁc features in the target MCAD system.
TVS Logistics bags HM warehousing contract
o manage aftermarket parts distribution for Lancer, Cedia, Pajero, Montero, Outlander, etc. across India for Hindustan Motors. TVS Logistics Services Limited (TVS LSL), India’s leading end-to-end supply chain solutions provider, has bagged the spare parts warehousing contract from Hindustan Motors Limited. With this contract, TVS Logistics will be responsible for managing the end-to-end warehousing solutions in parts distribution centre (PDC) for Hindustan Motors Limited at its Tiruvallur plant near Chennai. The outsourcing of warehousing activity will allow Hindustan Motors to focus on service quality, product management, reduction in lead time of order execution and improving stock accuracy. TVS LSL’s customized fulﬁllment of end-to-end solutions will ensure uninterrupted availability of spare parts across the country for Lancer, Pajero, Cedia, Montero, Outlander and Lancer Evolution (Evo X) range of vehicles from PDC - Hindustan Motors’ Tiruvallur plant. Commenting on the occasion, Mr. P. Vijayan, Chief Operating Ofﬁcer of Hindustan Motors’ Chennai car plant, said, “We are glad to have the services of TVS Logistics for our warehousing solutions and for distributing spare parts and tools across the nation for our key products. With their high level of expertise at the automobile logistics sector, we are conﬁdent that TVS LSL will add value to our business. We are looking forward to building a long working relationship between the organizations.”
Rane Holdings quarterly report
ane Holdings Limited, holding company of the Rane Group and leading Indian auto component manufacturer, has announced its unaudited consolidated ﬁnancial results for the quarter ended 30 June, 2013. The Company registered a Consolidated Sales & Operating Income of Rs 460.23 crore for the current quarter, as against Rs 490.75 crore for the same quarter of the previous year. Rane Group companies’ sales during the current quarter were affected due to overall slowdown in the automobile markets.
ith this application upgrade, the ANS Navigator enables you to explore India like never before. The Historical Monuments database with more than 3,700 items not only unfolds the vast cultural heritage of India at your ﬁngertips, but also allows you to visualize & understand the signiﬁcance of the monuments by means of richer content such as descriptions, pictures and visiting times. Built from authentic sources such as the Archaeological Survey of India, Historical Monuments is the virtual passport to almost 3700 historical sites that constitute India’s rich heritage. If you’re looking for a taste of India’s world class highlights, and want to explore some of its hidden gems, this app will lead the way and eliminate the hassle associated with travelling so that you can experience incredible India. The ANS Navigator App, which is designed to guide users to their destination faster and safer by offering a set of advanced and location-speciﬁc features, runs on NNG’s renowned iGO Navigation Engine which has proven to be one of the most popular navigation applications globally.
most conﬁned installation spaces in aeroplanes and cars. To make production of these complex curve contours with the smallest bending radii easier as well as more time and cost effective, German tube bending machine manufacturer Schwarze-Robitec has developed the fully electric CNC 40 Rotary. This machine is also excellently suited to the tubular steel furniture industry. At this year’s FABTECH, which takes place from 18th to 21st November in Chicago, the company will present the machine together with North American distributor Trilogy achinery, Inc. Machinery, In just one operion, the ation, NC CNC 40 tary tube Rotary ld bendcold g machine ing
contours on the straight tube can be bent ﬂexibly to the right and left. “With the bend former return integrated as standard, complex bend contours can be removed from the interfering contour areas with no problem after bending,” Bert Zorn explains. The result is a reduced cycle time with no loss of bending freedom and avoidance of damage to the tube surface. The machine works with up to 13 CNC axes. “In the development, we have been more mindful of ergonomic design and a high level of user friendliness,” Bert Zorn clariﬁes.
19 AUGUST 2013
Fiat introduces limited edition Punto
Ford India appoints Raj Sarkar as VP of its newlook marketing division
iat India have rolled out a limited edition Punto Sport 2013. The car features a 1.3L 93 PS advanced multijet diesel engine. The “sporty” features include sport pedals, sport decals, chrome exhaust pipe, roof spoiler, black painted roof, contrast colour exterior mirrors, and sport carpet ﬂoor mats. The sporty version will be made available in two colours – white and red, both with black roof and contrasting side ORVMs. These features are in addition to the features available in previous editions of the Fiat Punto such as Dual Stage Front Airbags with Early Crash Sensors, Fi re Prevent ion System (FPS), Immobilizer Wit h Rolling code (FCS), Blue & Me technolog y, Auto A/C, ABS and Speed Sensitive
Volume Adjuster for Audio with remote control. The car is priced at Rs 7,60,048 (ex-showroom Delhi), Rs 7,74,089 (ex-show room
Company in 1996. Back in North America, he was also one of the brains behind the product and consumer marketing of the F-150, Ford’s highly successful truck line-up. Prior to assuming his new role, Sarkar was manager at global business strategy for Lincoln, a luxury vehicles brand owned by Ford.
Nagesh Basavanahalli with the limited edition Punto Sport 2013.
Ssangyong Motor Reports Proﬁt in Q2 2013 sangyong Motor, part of the Mahindra Group, announced that it sold 29,286 units in the Korean market and exported 40,174 units (including CKD), selling a total of 69,460 units in the ﬁrst half (January to June) of 2013. It reported revenue of 1,660.6 billion won, operating loss of 14.3 billion won and a net loss of 3 billion won. The operating loss of 14.3 billion won is 70% less than the previous year’s H1 loss of 48.6 billion won. Ssangyong Motor’s ﬁrst half sales volume and revenue grew by over 22% compared to the same period last year, resulting in another record performance since H1 of 2007 when the company sold 69,755 units. Commenting on the results, Dr. Pawan Goenka, Chairman of the Board, Ssangyong Motor said, ““The ﬁnancial performance of Ssangyong for the second quarter of this year is another signiﬁcant step forward for the company. This turnaround is being driven by the increasing appeal of its new and refreshed product line-up coupled with an intense focus on greater operational efﬁciencies.”
ord India has added muscle to its marketing, sales and service wing and appointed Raj Sarkar as the new vice-president of marketing. Sarkar, who has over 17 years of experience in product as well as consumer marketing for Ford models in North America, will now hold responsibility for overall brand building at Ford India. He will report to Vinay Piparsania, executive director for marketing, sales and service division. “We are pleased to welcome Raj to Ford India. His extensive marketing experience along with the rich global perspective that he has gained over the years with Ford will surely help us go further with our brand and business in India,” said Piparsania. Sarkar joined Ford Motor
According to Lee Yoo-il, CEO, Ssangyong Motor, “the combined effort to increase sales of our face-lifted models and ensure proﬁtability, coupled with synergies derived from the Mahindra Group has helped turn around the company in the second quarter.” He added “we will continue to further increase our sales with the introduction of improved models such as the New Korando C in the second half which will help improve our proﬁtability.” Ssangyong Motor was the only automotive company that recorded growth among the Korean automakers despite the sluggish domestic automotive market in the ﬁrst half. During this period, the market saw a 2.6% decline in demand compared to the previous year. Ssangyong was able to increase sales with the newly launched Korando Turismo and other brands in the Korando family recording a growth of over 34% in the Korean market. In exports, Ssangyong was able to continue with the sales growth trend by recording a 15.4% increase over the same period last year due to increased volume in overseas markets including Russia, Latin America
and India. In the second quarter, Ssangyong recorded sales volumes of more than 12,000 units for three consecutive months largely due to the success of the Korando Turismo, to record sales of 38,195 units. As a result, the company recorded a net proﬁt of 6.2 billion won in the second quarter, compared to a loss of 21.5 billion won in Q2 of the previous year, signaling a steady improvement in the company’s performance. Ssangyong reported a quarterly proﬁt for the ﬁrst time in six years since the third quarter of 2007 except for the third quarter of 2010, when there was a proﬁt on account of gain from disposal of idle assets of 112.5 billion won during the rehabilitation process. Ssangyong Motor also started a two-shift system at its Korean plant in May to actively meet growing demand for SUVs, and it successfully concluded its wage negotiations on July 25th without strike for the fourth consecutive year, demonstrating stable labor-management relations in the company, based on which Ssangyong is fully concentrating on production and sales to achieve a turn around.
Polaris inaugurates dealership at Lucknow
olaris India Pvt. Ltd, a wholly owned subsidiary of Polaris Industries Inc., the world leader in offroad and All-Terrain vehicles has forayed into Uttar Pradesh with inauguration of its dealership in Lucknow. All products of Polaris will be available in Lucknow through Beekay Motors. This is the 14th dealership that Polaris India has opened since its inception in India on 24th August 2011. Prior to Lucknow, Polaris had opened dealerships at Ahmedabad, Bangalore, Chennai, Cochin, Dehradun, Jaipur, Jammu, Kolkata, Mumbai, New Delhi, Ludhiana, Indore and Hyderabad. “We are happy to have opened a dealership in Lucknow as this would help us to strengthen our reach in the Northern region of the Hindi heartland. Uttar Pradesh is an important market for us in terms of size and target customers. It also happens to be my home state. This new dealership underlines the importance we attach to the Indian market and growth prospects in the country,” said, Pankaj Dubey, MD, Polaris India. Uttar Pradesh has more metropolitan cities than any other state in India. The absolute urban population of the state is 44.4 million, which constitutes 11.8% of the total urban population of India, the second highest of any state. “We now have 14 dealer points
in the country. With this development, we aim to optimize the reach and spread of Polaris and availability of our products to our customers. This dealership is state of the art and offers post sales service at par with international standards,” added Mr Dubey. “All Terrain Vehicles are creating a niche segment in India. We are very happy to associate with Polaris as it is a great brand known world-wide for its innovative off-road vehicles. We will provide world class off-roading experience to our customers in Lucknow said, Bhavnish Mediratta, Managing Director, Beekay Motors. Off Road Vehicles are specially engineered to travel on rough and uneven roads, where other vehicles fail to run. Off Road Vehicles are widely used in sectors such as defence, paramilitary forces, agriculture, entertainment and tourism and others. These vehicles are capable of providing a smooth drive even in rocky, slushy and muddy surfaces. Besides these 14 dealerships, we also have 16 Polaris Experience Zones spread across the nation that enable them to reach out to more people and in turn give the participants a chance to experience the off road racing experience within their city. We already have a Polaris Experience Zone in Greater Noida and shall open another shortly in Lucknow and eastern UP as well.
Bhavnish Mediratta (Beekay Motors MD) and cricketer Bhuvneshwar Kumar along with Pankaj Dubey (Polaris India MD).
19 AUGUST 2013
What’s the next ‘Swift’ code? Manoj Kothari
nce someone told me that amongst the cars we see on Indian roads today, the car that will be remembered as a ‘the archetypical car of our times’ - means something that stood out from other cars due to its styling and popularity - is Maruti-Suzuki-SWIFT. Undoubtedly, SWIFT is one of the legends on Indian roads. Though Maruti Alto one of the most popular vehicle in India for the 9th year straight, with 137,406 units selling last year and 10.7 percent share and Maruti Swift remains number two, with 106,236 sales and 8.3 percent. From the sheer styling perspective if we combine the sales ﬁgures of Dzire also, which is a Sedan based on Swift platform then it reaches the more than 210,000 cars a year and approximately 16 percent of the Indian market. Swift was launched in 2004. More than three million Swifts are on roads today around the world, as several Suzuki factories across the world produce it. Yes, the engine is reliable, dealerships and after-sales service accessible and spares are relatively inexpensive. Yet many of these facts were with several other brands also. Logan from Renault was launched with much fanfare as a global car for middle-class. I remember talking to one of the Renault ofﬁcial then, who vouched for its roaring success as it was running in several months’ waiting in the initial few months of launch. However, it fell through very soon. Similar story was with much hyped Toyota Etios and Liva. When it was launched, Etios was promoted as ‘designed for India’ car and with the hefty weight of the brand ‘Toyota’ behind it. It started with a monthly sale of around 8000 a month and gave an impression that it might be the Dzire-breaker. But soon it fell to number three. Toyota reliability, big interior space, more rearseat leg space and fuel economy together was unable to woo the Indian buyers. Logan and Etios, both had one thing common- below average interiors and below average styling. Both did appear to have taken the Indian consumer for granted with an underlined thinking that ‘Indian consumer does not really bother about Styling- as long as car is really economical and reliable’. NO- Swift has broken that myth. Indian consumer is as much a consumer as anyone else in the world. Aesthetic preferences come in play very quickly after the market matures a bit. After an initial dating with new concept of mass cars, when Maruti 800 ruled and later Indica did to some extent, middle-class consumer is now more mature and discerning in very product category. So it appears that Swift got some things right in its favour when it comes to styling, which others did not. If we analyse that, it can set the tone for the next Swift Code.
Gender Balanced: From Ambassador to Indica to Swift, the styling has one thing common- a sort of ‘tomboy’ look. Curves suggest that it might be feminine and then you come across the size, muscle or chisel cuts in the body styling that suggest otherwise. India does not seem to like the CUTENESS of Nano or earlier Matiz or current Maruti Zen. Neither does it like the macho appeal of SX4 (Men were back only for a short while) or angry look of Logan/Verito. Too soft or too hard is not for India- it is the middle path. Volkswagen Polo, Fiat Palio (not Punto), and Chevrolet cars in India fall in this segment. Bonnet and hatch curves enhance the feminine character while the chiselled shoulder line does otherwise.
Muted Animation: Animated faces create strong likes and dislikes. Matiz was surly more animated than current Nano and Maruti Zen, in the same ‘cute’ look category. Round headlights remind us of ‘baby’ eyes psychologically. Animation industry has enhanced and crystallized the image of a baby face with big eyes in our head. Similarly, archetype of a ‘rogue’ with big shoulders, menacing eyes and broad jaw and small head has been created by the American animation industry. No more ‘open jaws’ or drooping nose-line (which Toyota Etios brazenly tried to push as ‘smile’ and consumers did not take it kindly). Anything with strong archetype connection does not ﬁt well with ‘middle-path’ seeker Indian consumers.
RETRO-WIND: Retro has been a rage in the west. Revival of the Beetle and the Mini has been the case in point. India’s bone of contention in the retro-rage has
been ‘Ambassador’. It is retro, but it is on road ever since. We must see the ‘retro’ not in the sense of India or the West, but rather ‘human life-cycle’. What our parent’s generation saw on road or in movies, IS retro for us. In the times of socio-economic instability, anything that creates nostalgia creates an emotional pull. Premier Padmini or erstwhile Fiat, still has some steam left, as far as inspiration is concerned.
tion is growing up consuming smart phones, apps and digital gimmickry in everyday living including interiors. I also remember watching an old work of Steven Spielberg called ‘Batteries Not Included’, in which an alien visits the earth in a UFO like objects with lights emanating from the small holes. This mix of mystery, magic and technology is a compelling inspiration for the next Swift code.
Looking forward, entire genera-
No, it is not about kitsch selling in
the up market stores with Bollywood posters on pillowcovers and t-shirts. On one side we know that truck-wallahs decorate their trucks in an ‘Indian’ sensibility. There is a tremendous pressure from both sides of the consumer segments to trickle in some Indian decorations into everyday objects. It is about accent, not the ground. Cars, for a change need to belong to the land they are being driven. The author can be reached at firstname.lastname@example.org
19 AUGUST 2013
Bulk Head Systems
How much wire? For long bulk head systems have been posing some problems out of creating connections between cabin, chassis and engine.
Manjunath R S
very once in a while, there comes a design solution which can be customized to meet a specific vehicle platform and functionality. Bulkhead connector system is a classic example of such systems where connections between cabin, chassis and engine are made to fulﬁll various functionalities required in vehicles. The bulk of wire connections between chassis and truck-cabin or bus-interior are mostly located on the ﬁrewall. This still remains the most logical and ideal location that also meets the environmental conditions that the vehicles are exposed to. For most vehicles the interior, chassis and engine harnesses come together and this is where the bulk head systems help organize and these connections is a systematic manner and provides required assurance from harsh environmental conditions inﬂuenced by water, splash and dust. Depending on the situation and available space, sealed connectors in panel mount version or unsealed connectors under a sealed frame and cover units are commonly used. This solution, besides trucks and buses also ﬁnd applications in off-road vehicles like the ones used for construction, mining, and agriculture. These kinds of design solutions involve high degree of involvement and early engagement with the customers from the Engineering and product development groups. Increase in functionality coming from communication, driver convenience and comfort, which have inﬂuence on on-road safety, is increasing the complexity to manage the electrical connections in this area. The amount of wires / connections that need to be managed are going up to 400500 lines, which include – data lines, twisted pairs, shielded cables, power and ground in varied sizes and construction types. The harness for engine bay areas often contains high temperature range types, like cross linked
Increase in functionality coming from communication, driver convenience and comfort, which have influence on on-road safety, is increasing the complexity to manage the electrical connections in this area, with up to 400-500 lines or connections. stabilized or similar PTFE-types insulation. Exhaust or turbo areas are classic examples that may require a high temperature insulation. In the chassis area less tough and lower temperature range wires are used, like PP or common PVC. The cabin area mostly uses PCV insulation. For mechanical protection, several types of hoses or tubing’s are available. The two methods that are most
commonly used for bulkhead applications are sealed panel mount connectors and unsealed connectors encased in a sealed panel mount box. Key design considerations that have an impact are - number of connections, available mounting area / volume, entry and exit considerations of various bun-
dles of cables / harness reach out to their destinations. The sealed connector solution works well in limited number of wires and interconnection needs. This also puts a limitation to the possibilities of expansion or addition of functionalities. Standard sealed connectors are rated according to IP classiﬁcation at IP67K and IP69K depending on connector, and backshell cover design .
What’s easy However in reality the ﬂexibility needed to manage additional functionality easily, can only be provided by using unsealed connectors encased in sealed enclosures. The unsealed connectors in a sealed enclosure,
has the advantage to be modular, lends itself to add / modify the connections. It becomes easy to make harness modiﬁcation without having to deal with the system sealing, ﬂexibility to number of wires. It allows easy vehicle harness variations, and is ﬂexible for options. Another advantage of this solution is having grounding lead-frames integrated into the enclosure. The harnesses can be connected to the lead-frame thus reducing the need for additional grounding lines. The grounding lead frame also offers the options for attaching ring-tongues under the enclosure’s mounting bolts. The cover of the enclosure can be attached, and removed within seconds, using the quick snap or release clips that attaches to the base on the ﬁre wall. It also allows easy access to the back of the contacts at the open connectors for service needs. Unsealed connectors in 3 and 4 rows are available in different positions with different mechanical and color coding options can be designed to be placed in speciﬁc color rows. Hybrid connector versions are also available with signal and power combinations. The multiple row connectors are based majorly on the AMP MCP contact system. Inclusion of other contact systems is also a possibility. The outlet of the modular bulkhead enclosure can be shaped to follow the vehicle line, and provide the harnesses with extra protection against ﬂuids and solid objects that could cause damage in the ﬁeld. For the modular solution using a sealed enclosure, an IP rating up to IP69K can be achieved. This classiﬁcation will be determined by the customer’s ﬁnal design requirements. Values regarding vibration- proﬁle(s) in general follow speciﬁcations like ISO 16750-3 (x) depending on the chosen connector system(s), and location of application in the vehicle. TE offers full variety of available solutions, including custom design and off-the shelf products. TE in India with established design centers in Bangalore and Pune, having worked for supporting similar projects to TE in European locations, is well positioned to address these Design Solutions needs of India based customers. The author is Director, Engineering – Automotive, TE Connectivity.
19 AUGUST 2013
Social media usage: customer insights Capgemini, one of the world’s foremost providers of consulting, technology and outsourcing services, launched the ﬁndings of its 14th annual global automotive study, CarsOnline 12/13. The study surveyed more than 8,000 consumers in Brazil, China, France, Germany, India, Russia, the UK and US, and provides a detailed analysis of consumer vehicle buying and ownership behavior around the world, including research and buying patterns, social media usage, online buying, green vehicles, smart phone applications, connected car services and aftersales. This extract deals with the “social media usage” section of the study.
ver the last ﬁve years, con su mer s have turned increasingly to social networking to stay in touch with friends and family, share videos, and plan events. Social networking sites such as Facebook, Twitter and LinkedIn have become a vital source for trading information on everything from debt reduction strategies to which restaurants are best. Checking out these social media channels is a common practice among today’s passenger vehicle and two-wheeler shoppers. Shoppers are responding less to traditional media and advertising, and are moving towards consumer-to-consumer communication such as blogging, mobile messaging, comparison shopping sites, word-of-mouth marketing, and peer-to-peer networks. Customers use social media to seek more information about the auto companies, vehicles and customer service to get most value for their purchase. Customers also use social media to communicate directly with the auto makers about their requirements, suggestions and feedback. It is easy to understand why OEMs and dealerships are entering the social media world, such as creating a Facebook page or Twitter feed, to stay in touch with customers. Social media inf luences the conversations about the dealership as well as the brand, and clearly, people are reading online reviews and taking those recommendations seriously. Social media conversations about brands have the potential to make or break their reputation, and these need to be continuously tracked and responded to, whenever required.
Social media influence greater among younger buyers, in developing markets
There is a clear gap between the value younger consumers (18-34) place on social media content, in comparison to older consumers (50+). Younger consumers in developing markets value user-generated content more than older customers. About 85 percent rate user-generated content as “important” or “very important” as compared to 76 percent of older consumers (Figure 1). 71 percent of consumers surveyed across all markets rate user-generated content as “important” or “very important”. But there is greater enthusiasm for user-generated content among buyers in developing markets in comparison to mature markets (Figure 1, 2). Only 59 percent consumers rate user-generated content as “important” or “very important” as compared to 83 percent in developing markets and 86 percent in India. The reason is threefold: (1) the car buying population in developing markets is relatively inexperienced and, therefore, more likely to gather as much information, from as many sources, as possible; (2) the car buying population in developing markets is younger and, hence, more likely to value user-generated content; and (3) in these markets, buyers of all ages rely on the Web for information. OEMs and dealers need to have greater social media focus in more receptive regions (developing countries including India) of the world and make sure they inf luence online behavior —and ultimately the buying decisions—rather than permitting their competitors inﬂuence this process. OEMs and dealers operating in the Indian market need to integratetheir social media strategy in the overall CRM construct as well as consider proactive analysis and management of user-generated content.
Online Information Sources Although, automotive consumers are increasingly relying on user-generated content distributed by social media for their purchase decision, Vehicle Manufacturer website (51%) and Search Engines (48%) remain the primary online source for most consumers in India, followed by Independent car valuation websites (38%) and Dealer websites (37%).Among consumers in other developing markets, Search Engine is the #1 online information source followed by OEM websites, dealer websites and independent car valuation websites.
Figure 1: Importance of user-generated content by age and market
Importance of user-generated content by age and market Age in
)LJXUH,PSRUWDQFHDQGLQÀXHQFHRIXVHUJHQHUDWHGFRQWHQWDFURVVJHRJUDSKLHV Importance of user-Generated Content (% saying important/very important)
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Source: Capgemini Social media pages of dealers and OEMs(29%) are the most important social media source in India, while Web forums, blogs or Internet discussion groups (32%) are the most important media source in other developing markets (Figure 4). The disperse nature of online inﬂuences necessitates that content on third-party or personal social media sites,whichcannot be controlled, must be monitored and analyzed.
Need for Social CRM
not contain a great deal of helpful information. He/ she visits other social media websites and the comments from users are mostly negative – criticizing the company for not working out the issues on the new model. The prospectdecides not to buy the car, and try a competitor’s product instead. The prospect updates his/her own Facebook page: “Passed on the XYZ car. I hear it has lot of issues.” As a result, the company just lost a sale and missed an opportunity to turn the consumer into a buyer and a potential
Figure 3: Likelihood to purchase based on internet comments Likelihood to purchase based on internet comments % saying likely/ very likely Positive comments Total (Mature & Developing Markets Developing Markets) (excluding India)
% saying less likely/ much less likely Negative comments Developing Markets Total (Mature & Developing Markets) (excluding India) 2010
In the past, consumers learned about cars in what was essentially a ﬁnite universe - theirfriends and colleagues, paid advertising (print, radio, TV, direct mail, billboards) and the news media. Today, consumers are ﬂooded with information about products from an unlimited number of peer consumers across an unlimited number of channels - company sites, online forums, Facebook posts and tweets. In today’s environmenta prospecthears about a new car model and most likely visits Google. He/she does a fast search of the vehicle and visits the company’s ofﬁcial website, product website and skims a wide menu of content about the car – media reviews, bulletin board comments in car forums, blog posts, etc. The prospecthears the good but also the bad about the product.He/ she logs on to Facebook and posts a status update, “Thinking of buying the new XYZ car. Any advice?” Within minutes, a friend suggestschecking out the OEM’s Facebook page. The prospectdoes, but the OEM’s page does
brand advocate. Even worse, everyone on his/her friends list, and everyone he/she talks to hears negative buzz about the vehicle. The above story is not an unusual case. Customers have access to huge amounts of online reviews and hence unprecedented power and companies have to play by customers’ rules. In such a situation, an automotive company needs to leverage Social CRMto enhance its customer service and build customer engagement (Figure 5). Socia l CRM is about mon itor i ng, engag i nga nd managingconversations and relationships with existing and prospective customers and inﬂuencers across the Internet, social networks and digital channels. Comprehending what people are saying about a particular brand, along with monitoring the brand’s popularity, are the minimum requirements in a company’s approach to social media. As part of social CRM, companies can integrate their traditional lead management capabilities with social CRM solutions to enhance the quan-
tity and quality of leads. Using a new generation of Internet listening tools, companies can understand and respond to what prospects and customers are saying about their brand. Getting an idea about the number of mentions on various social media outlets as well as the percentage of all posts that were positive or negative about each automotive brand is the starting point for a company in achieving these goals.Sentiment Analysis is one of the effective ways to scan the web to collect, analyze, and display the overall mood and feelings toward a brand. Results can be collated to understand the high-level sentiment (i.e., positive, neutral, negative and ambivalent) as well as capture the most inﬂuential posts for review by the company. Obtaining an overall view of how people perceive the brand, as well as drilling down into specific customer experience themes such as “performance” or “spare parts availability” can help a company determine what it is doing well and where there is scope for further improvement. Analytical tools can also be combined with sentiment monitoring tools for identifying brand advocates. When identifying brand advocates for launching its new Fiesta car in India, Ford vetted the candidates’ social media proﬁles, ensuring they ﬁt the brand and also have a good social media reach.
The Path Forward Though automobile manufacturers have been using social media extensively today, there remains a lot of scope for further improvement. There is little point in gathering online prospect and customer information unless it can be integrated into a company’s CRM applications and subsequently used by sales &marketing teams. Social CRM toolscan be leveraged by OEMs to collect data when customers participate in social media and route important insights out of those conversations to sales for outreach and engagement. The social platform helps increase cross-sell, lead generation, and conversion rate and decrease cycle time.Dealers should be more proactive while using social media platforms, as these can be a good database for poten-
Figure 4: Preferred online information sources Online information sources
Manufacturer sites are most important for consumers Vehicle manufacturer ZHEVLWHV
tial leads and can help them get new customers. Social CRM can be used to optimize lead routing as it provides an additional layer of intelligence for sales reps and an opportunity to connect via social channels. However, unless the organization makes the cultural and operational shifts to become a truly social organization, it will have lots of new data but it would not see a lasting return on investment.Social CRM provides powerful data, but companies must have a strategy to use it effectively. Like social media, social CRM shifts the way in which a company does business; this shift in strategy requires new skills and work habits. Hence, companies should integrate social CRM into the business with a clear mission. Social CRM will also lead to realignment of roles, leading to a change in job descriptions, which in turnleads to changes in compensation arrangements. For instance, wherever a social CRM strategy is deployed, a dedicated social customer care team is needed as customer interaction is more ďŹ‚uid and progressive;unlike a typical call center which focuses on first-time conf lict resolution. Therefore, these Social CRM agents must have the skill sets needed to communicate with customers in a public channel.
19 AUGUST 2013
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The leadership team of the company is just the ďŹ rst checkpoint in convincing the company to integrate a social CRM strategy. Each business unit in the company will have its own goals for engaging socially across multiple channels.Thus, it is important to understand the beneďŹ ts for each department when implementing
Developing markets (Excluding India)
a social CRM ecosystem within the company. Social CRM works best in a collaborative organization where data about customers is shared and not kept in departmental silos. Also, branding and marketing campaigns need to be more comprehensive and holistic in approach to realize the full
Still reeling Near-term outlook remains subdued; proďŹ tability metrics of OEMs to remain under pressure bore the brunt of slowing industrial activity, weak investment sentiment and the impact of signiďŹ cant ďŹ‚eet capacity addition over the past three years.
Grim picture for near-term
fter experiencing a growth of over 30% during 2009-10 and 2010-11, the buoyancy in domestic CV industry has been on a wane since then. Slowing industrial growth and weakening investment sentiment across sectors has had a signiďŹ cant adverse impact on CV demand since the second half of 2011-12. While in 2011-12, the growth in the domestic CV industry slowed down to 18.2% vis-Ă -vis the prior year, the industry volume growth entered into the negative territory in 2012-13 as macro-economic environment continued to remain weak which coupled with highbase led to contraction of 2% in new CV sales. While in 2012-13, segment-wise performance was characterized by a wide dispersion in growth rates with the LCV segment witnessing a growth of 14.0% and M&HCVs declining by a sharp 23.2%, the current year has begun with broad base slowdown. In Q1 2013-14, LCV sales declined by 3.9% on a YoY basis largely led by slowdown creeping into the SCV segment, which has been bellwether for the industry for the past few years. The M&HCV also continues to
Our reality check with a host of dealers, transporters and ďŹ nancing institutions suggest that there no signs of revival yet with weak visibility on cargo availability being the key factor. From transporterâ€™s viability standpoint, the current CV cycle has been characterized by reduced cargo volumes, stiff competition owing to surplus capacities (M&HCV sales doubled from the lows of 2008-09, bringing down the average age of M&HCV population to a 10 year low) and rising operating costs, especially in wake of the recent hike in diesel prices. Although the freight rates have inched upwards following hike in diesel prices, the extent of rise in freight rates has not been adequate (on an aggregate basis) as it continues to be inďŹ‚uenced by demand-supply dynamics in each market. As a result, capacity deferment and implementation of cost rationalization measures have been at the forefront for even the organized ďŹ‚eet transporters. That apart, high level of discounts, which have been steadily rising and now covering even the LCVs have also not been able to stimulate demand in a meaningful manner. The only silver lining so far has been that credit availability continues to remain stable.
Some OEMs gain The ďŹ scal 2012-13 was marked
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Social media pages of dealers/ manufacturers
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by a market share loss for industry leader, Tata Motors, especially in the M&HCV segment as some of the other OEMs have managed to offset the impact of slowdown to an extent with expanded dealership network and wider model offerings. More, speciďŹ cally, Volvo Eicher JV gained market share (albeit on a low base) on back of increasing acceptability in the heavy-duty trucks segment, while Mahindra (erstwhile Mahindra Navistar) also performed better than the industry though on low volumes. Ashok Leylandâ€™s expanding market coverage outside the Southern region also helped in countering the impact of slowdown to an extent. Along expected lines, Ashok LeylandNissan JV made a good head start in the LCV segment with its ďŹ rst product offering â€“ â€˜Dostâ€™. With more models planned for launch and plans to set-up a GreenďŹ eld facility, we expect the JV to build upon its 7-8% market share in the LCV segment. In Q1 2013-14, Tata Motors however managed to recover some of its market loss of the prior year. While quarterly trends may be inďŹ‚uenced by multiple factors like production trends, dealer inventory levels etc, we believe that competitive pressures are likely to increase going forward as some of the new OEMs scale-up their distribution reach.
Profitability pressures With weak M&HCV sales and high levels of discounts being offered by OEMs, the profitability indicators of industry participants came under pressure in 2012-13. In our estimates, the EBITDA margins of key CV
Content on third-party or personal social media sites that FDQQRWEHFRQWUROOHGPXVWEH monitored and analyzed
potential of social media. There must be an effort on the part of the dealers/manufacturers to engage the public by participating in public conversations. Automobiles fall into the highinvolvement product category with a large number of buyers being Internet savvy. The use of social media, hence, will only rise
OEMs dropped by almost 300 bps to 8.4% in 2012-13. Although the trend was homogenous in nature, the extent of contraction varied across OEMs primarily reďŹ‚ecting the difference in product-mix, discounting strategies and share of other businesses. As operating cash ďŹ‚ows came under pressure, credit metrics of some of the OEMs also deteriorated over the prior year. Compared to the prior slowdown, the industry participants however managed their inventory levels in a much better fashion as reďŹ‚ected by only a marginal rise in working capital intensity during 2012-13. To withstand the ongoing headwinds, OEMs have also resorted to production cuts in sporadic intervals and cost rationalization measures over the past few quarters. In our view, a meaningful recovery in the margins will however only be driven by gradual recovery in M&HCV sales accompanied with better pricing power. Having concluded capacity expansion plans over the past couple of years, CV OEMs are currently investing in developing new products, engine technologies and even pursuing diversiďŹ cation plans in other sectors.
expectations of improvement in economic environment. ICRA also expects GDP growth to gradually improve in 2013-14e compared to the previous year, which along with potential for further interest rate cuts would be positive for the CV industry. Additionally, revival in capex cycle and infrastructure development will be critical to sustain demand for CVs over the medium. The bus segment, which in general is not inďŹ‚uenced by industrial environment could grow at a faster pace as it will start seeing beneďŹ ts of the budgetary allocation towards JNNURM with speciďŹ c plan to add 10,000 buses. In ICRAâ€™s view, the proposed order will be spread over the next two years and contribute signiďŹ cantly (~8%) to M&HCV bus sales in each of the next two years. Since the beginning of current ďŹ nancial year, the demand for LCVs has also started showing signs of fatigue largely on back of high-base effect and overall slowdown. Notwithstanding, the moderation in growth over the past few months, we expect the demand for LCVs would however continue to grow above industry average over the medium-term as it would need to match the extent of capacity added by M&HCVs trucks over the past few years. The growth will be led by SCVs, which are increasingly being favored over their three-wheeler counterparts and costlier LCVs on grounds of better power, maneuverability and cost economics. We also expect that replacement demand will also start contributing to the overall growth in LCVs. Assuming an average age for SCVs to be around seven years, many of the SCVs bought during 2005-06 period would get replaced with newer vehicles. Overall, while in the current year, LCV demand is likely to suffer some de-growth, ICRA expects growth momentum in the LCVs to remain strong over the medium term at around 11-13% CAGR.
Recovery in M&HCVs expected With weak macro-economic indicators and currently stretched viability for ďŹ‚eet operators, we expect M&HCV sales to remain weak in the near-term. The recovery prospects also appear to be gradual during the current down cycle given the surplus ďŹ‚eet capacity on ground which may put pressure on new CV sales even as freight availability improves. In our view, pick-up in cargo volumes and improvement in freight rates would be the key indicators to gauge early signs of improvement. So far, such a trend remains elusive. Accordingly, we expect M&HCV volumes to decline by around 5% in 2013-14 and start witnessing growth from 2014-15 onwards on back of low-base and
The author of this article, Vikas Kumar, is the National Automotive Leader for Capgemini Consulting in India. He can be reached at vikas.g.kumar@ capgemini.com. The survey was done as part of Capgemini report Cars Online 12/13.
19 AUGUST 2013
G L O B A L WAT C H
Why Oregon Lawmakers Think We Need a GPS-Tracking Mileage Tax Doug Newcomb
s cars get more fuelefﬁcient and as more hybrids and electric vehicles become available, drivers will be spending less money at the pump. For states, that means a drop in gas-tax revenue, which goes to fund road construction, repair and other car-centric infrastructure. With the federal government’s push for higher fuel efﬁciency via CAFE regulations that propose passenger vehicles achieve an adjusted ﬂeet average of 54.5 mpg by 2025, the gas-tax cash crunch will only get worse. That’s why more states are considering a “vehicle miles traveled” tax to make up for gastax revenue shortfalls. The logic is that under the current gas-tax system, drivers in highly fuelefﬁcient vehicles pay much less than vehicles that aren’t as fuel efﬁcient – an EV driver can effectively pay nothing – even though they use the same roads. A VMT tax is seen as more equitable since it’s based on actual road use instead of fuel burned. But implementing a VMT tax involves hurdles ranging from mileage veriﬁcation to privacy issues. That’s why VMT advocates will be closely watching a pilot program in Oregon scheduled to
kick off in 2015 that includes 5,000 volunteer drivers and is designed to prove to the public and reluctant lawmakers that a VMT tax can work. Lawmakers also hope to prove that the mileage-tracking technology won’t be used by the government to keep tabs on you. USA Today ran a comprehensive story last week on the details of the Oregon program. But we had a chance to talk with the author of the Oregon bill, state Rep. Vicki Berger of Salem, the ranking Republican on the House Revenue Committee, to get her thoughts on why she’s pushing for a VMT tax in the state and her experience with her own mileage being tracked. Berger said she believes that since vehicles are only going to get more fuel-efﬁcient, her bill and advocacy for a VMT tax are an attempt to get in front of the problem of dropping gas-tax revenues. “I worry that if you wait very long, you’ll have a bunch of these highly fuel-efﬁcient vehicles on the road,” she told MSN Autos. “And you’ll either have to grandfather them in or you surprise people: ‘I bought this car to save money on gas and now you’re taxing me?’ “I don’t like either of those scenarios,” she said. “And the fact is, if you pay for your roads through gas taxes and you have a signiﬁcant group of people who aren’t
paying it, you have a problem.” The Congressional Budget Ofﬁce estimates that the tougher fuel-economy mandates will cause gas-tax revenue to fall ”gradually” by as much as 21 percent by 2040. But no state can really say exactly how much of a hit it will take. “The amount of revenue ‘lost’ is tough to calculate,” Jaime Rall, a senior policy specialist at the National Conference of State Legislatures, told MSN Autos in an email. “There are many variables, including state gas-tax rates, how many fuel-efﬁcient vehicles are being driven in each state, how much they’re being driven, what vehicles they’re replacing and so on.” At least eight states have tried to introduce VMT legislation this year. In total, 18 states have tried VMT pilot programs but none as comprehensive as in Oregon, Rall said. “There’s no question about it: States want to know if this is going to be a viable way to fund transportation into the future,” she said. Berger noted that the pilot program includes a variety of vehicles to get a sense of how a VMT tax would affect various car owners. “What we’re trying to see is how this would work with an electric vehicle, with a Toyota Prius or other hybrid, with a standard gaspowered sedan or a pickup truck,” she said. “At the end of the study,
Marketers work to dispel ‘smoky and loud’ The allusion is to the image of diesel engines Julie Halpert
ebraska dealer Brian Hamilton still has ﬂashbacks to the 1982 energy crisis, when half the Cadillacs on his lot came standard with General Motors’ illmannered diesel engine. In cold weather, the fuel would become so thick that the engines wouldn’t run, making the diesel vehicles a tough sell for Nebraska winters. Now, Hamilton is gearing up to sell GM’s newest diesel model, the 2014 Cruze, at his Chevrolet stores. With a peppy turbocharged engine, clean emissions and a heater to keep the fuel from congealing, the Cruze diesel is nothing like its dyspeptic ancestor. But Hamilton knows he still has a tough sales job ahead. Even with today’s cleaner diesels, he says, “there’s a misunderstanding that they’re smoky and loud.” He expects to sell only a few of the vehicles at each of his dealerships. The future of clean diesels may be here, but memories of diesel engines’ unsavory past haven’t gone away. Reshaping perceptions has become a key marketing challenge for automakers and dealers
as they prepare to unleash a new crop of diesel-powered vehicles on a public that still associates the fuel with a clattering motor, oily odors and tailpipe smoke. Marketers are divided on how to get buyers to consider a switch. Some are focusing ﬁrst on debunking stereotypes of diesels, while others are addressing performance, extended range or fuel efﬁciency. Clean-diesel vehicles represent a critical component of many automakers’ product plans. That’s because automakers -- especially those that haven’t invested as much in hybrids and electric vehicles -- need the efﬁciency gains from diesels to stay on pace to meet new federal fuel economy standards that take effect for the 2025 model year. Diesels get roughly one-third better fuel economy than gasoline-powered cars but deliver more power than most hybrids. But a report by Maritz Research found that only 1.2 percent of U.S. buyers this year switched from a gasoline-powered car to a diesel car, a ﬁgure that has remained roughly constant over the past few years. “The stereotypical image consumers have of diesel as smelly and noisy needs to be overcome,” says Chris Travell, Maritz’s vice
president for strategic consulting. It doesn’t help that diesel fuel is available at only half of U.S. gas stations, according to the U.S. Energy Department, and usually costs more than gasoline, or that diesel cars are priced at a premium. The Cruze diesel, for example, costs roughly $2,000 more than a comparably equipped gasoline model, a Chevy spokeswoman says. Then there’s the challenge of promoting diesel as eco-friendly, amid broadening competition from hybrids, electric vehicles and higher efﬁciency gasoline engines. Chevy is tackling the perception of the dirty diesel through a Cruze TV commercial called “The Cleanest Dirty Car,” now running in 13 markets. It shows a mudsplattered car pulling into a test lab, where its exhaust comes out clean, with a voiceover saying, “It’s good, clean fun.” Otherwise, Chevy is playing it safe by strategically targeting buyers of the Volkswagen Jetta TDI, which has had a near monopoly in compact diesels in the United States. Later this summer, Chevy will send an invitation to Jetta TDI owners to try the new Cruze. In addition, Chevy is reaching out to the 6 percent of its truck buyers who own a diesel, playing
we’ll have very good data on how this would work with different vehicles.” Berger took part in a smaller pilot program last year driving her own Volvo. She acknowledged that some participants, as well as some lawmakers, are wary of having state-installed GPS tracking devices in private vehicles as part of the program. For the upcoming VMT pilot, Oregon will use private companies to provide two different mileage-tracking technologies: basic meters that use a vehicle’s odometer to log miles driven and more advanced meters that use GPS to track where cars travel and how far. Oregon ofﬁcials also hope to develop a smartphone application to augment the basic meters. USA Today noted that Berger’s bill limits who can access the mileage information and stipulates that the state and its
afﬁliates have to destroy any location information within 30 days after using it for billing. It added that Oregon and other states already use mileage meters to track trucks and tax them by the number of miles driven and based on their weight. And some drivers now allow insurance companies to track their driving in exchange for a discount. “It’s pretty clear to me that this technology is here,” Berger said. While some people will be concerned about privacy, “you can track miles without tracking where you go. It’s not that complicated.” Berger said that while we don’t know “what’s coming in terms of [fuel-efﬁciency] technology, we do know that gas mileage is getting better and better. And what that means for highway construction and repair is that the funding is getting smaller and smaller.”
up the Cruze’s torque, fuel efﬁciency and durability, perks for those who drive long distances in rural areas. Ed Kim, vice president of industry analysis for Auto Paciﬁc, cautions that targeting diesel fans will go only so far. Many diesels are bought by those who prefer European products, he says, and persuading them to buy American may be difﬁcult. What marketers such as Chevy need to communicate, he says, is the long-term value proposition for mainstream buyers, who want justiﬁcation for paying thousands more upfront for a diesel engine. Steve Wilhite, former COO of Hyundai Motor America and former global marketing vice president at Nissan, says Chevy’s TV spot, with its focus on dirt and tailpipes, only reminds potential customers of diesel’s onetime drawbacks. A self-described diesel enthusiast, Wilhite argues that likely diesel buyers tend to be more informed about improvements in the fuel over the years, so marketers should exclusively play up the positives. Indeed, for the VW brand, which has long been identiﬁed with diesels, future advertising will focus “purely on the beneﬁts,” says Justin Osborne, GM of brand marketing for Volkswagen of America. He says VW will be using owner testimonials. The company also will be monitoring the Cruze’s social networks for chatter about diesels vs. hybrids. “We’re wondering if we will see an uptick in diesel discussions and if those discussions outnumber those focusing on hybrids,” Osborne says.
But at VW’s sibling brand, Audi, which brought its ﬁrst clean-diesel passenger car to the United States in 2008, the focus remains on shedding old baggage. Loren Angelo, director of marketing for Audi of America, says that buyers of its pricier vehicles -- its A8 TDI luxury sedan goes for nearly $80,000 -- tend to be older, part of a generation that lived through diesel’s dark period, and they may need to be re-educated. Audi’s upcoming campaign will allude to “what you thought diesel was: dirty and smoky, and show it’s cleaner,” Angelo says. “You can do everything right in your advertising and Web sites, but if the salesperson is uneducated and unenthusiastic, the whole thing breaks down,” Wilhite says. Since many dealers have had little experience with the new diesels, “the more money they invest in dealer training, the greater probability of success for them.” As it returns to diesel after three decades, GM is providing face-to-face training as well as video and online training to show its 3,000 dealers how diesel today differs from the old technology. “We have classes over the Internet, and salespeople and managers must pass tests in order to be certiﬁed,” says Hamilton, who owns Chevy stores in Kearney and Bellevue, Neb. Miles Brandon, owner of Capistrano V W in Capistrano, Calif., runs contests for a couple of months to spotlight diesel’s mileage and range, each day putting a different customer behind the wheel of a clean-diesel car to see which one can rack up the best mileage. The leader so far got 61.5 mpg.
Next Green Car 2013 awards
Some of the winners include: Supermini Award – BMW i3 electric. NGC verdict: The BMW i3 is set to change what we expect and demand of an electric urban vehicle; one that maximises electriﬁcation, connectivity, quality and driving performance. Executive Award – Tesla Model S electric. NGC verdict: The pin-up of the electric vehicle world, the Tesla Model S combines a ladlefull of executive gadgeted luxury with a futuristic electric driving experience.
quarter of 2012. “The statistics speak for themselves,” said Roelant de Waard, vice president, Marketing, Sales and Service, Ford of Europe. “Our global Focus has struck a chord
items, including ﬂuid levels, brakes and tyre tread, promising customers complete peace of mind. Kevin Rendell, Head of Service and Parts for Volkswagen Commercial Vehicles in the UK, said, “The operational safety of your vehicle begins with the brakes. Healthy brake ﬂuid is vital to ensure your vehicle’s braking system is in perfect working order. This nationwide offer is a perfect demonstration of the way we are working with our customers to deliver outstanding service and exceptional value for money.”
Next Generation Award – Volkswagen e-Up! Electric. NGC verdict: A high quality but affordable electric city car, the all new e-Up! offers compact comfort with zero emissions. With VW’s brand and backing, the e-Up! could be the catalyst for a stepchange in urban electric car adoption. Other award categories included Small Family Award, Large Family Award, Family Estate Award, MPV and Crossover. Volkswagen Commercial Vehicles offers customers free brake fluid change and visual health check.
Ford Focus is best-selling vehicle nameplate in the world ord Focus, the best-selling vehicle nameplate in the world last year, retains that ranking through the ﬁrst quarter of 2013 with global vehicle registrations up 18 per cent compared to the same period in 2012. Based on analysis of Polk’s latest global registration data, 288,724 Focus vehicles were registered in the quarter ending March 31 - the most recent ﬁgures available. Cementing Focus’ grip on the best-selling passenger vehicle title was strong demand in key markets such as the U.K., Brazil and China. Focus registrations in the U.K. for the quarter totalled 25,081 vehicles. Brazil experienced an increase of 18 per cent with 7,227 Focus vehicles registered during the period. In China, 104,065 Focus vehicles were registered in ﬁrst quarter 2013, representing an increase of 153 per cent compared to the ﬁrst
Volkswagen UK freebie offers olkswagen Commercial Vehicles is offering customers a free brake ﬂuid change, worth £40, when they replace their vehicle’s brakes. The offer, available as part of Volkswagen’s ﬁxed-price brake campaign, will run until 30th September 2013 and is valid on pad and disc replacements. As well as having the brake ﬂuid replaced, customers will receive a 28-point vehicle health check completely free of charge. VW Technicians will carry out checks on the vehicle’s main wear and tear
ext Green Car has announced the winners of the Next Green Car Awards 2013, said to be the most scientiﬁcally-based Green Car Awards in the UK. Next Green Car has made awards across eight vehicle categories including the ‘Next Generation’ Award, which includes new technology models close to market launch. The eight winners are selected from shortlists of 26 of the UK’s greenest new cars of 2013, all selected for their environmental Green Car Rating (GCR), level of innovation, value, drive experience and design. As noted by Dr. Ben Lane, Managing Editor of Next Green Car, “The 2013 winners reﬂect two key elements underlying current green car development: drive-train electriﬁcation and continuing improvements in fuel efﬁciency. While all the winners are highly distinctive in the innovations they employ, they all excel at using new technologies to enhance the driver experience.”
19 AUGUST 2013
G L O B A L WAT C H
with customers around the world because it offers remarkable technologies, excellent fuel economy and performance, super driving dynamics and all at a very competitive price.”
New penalties for careless driving come into force
ew penalties giving the police powers to issue fixed penalty notices for careless or inconsiderate driving came into effect in the UK on 16 August 2013. Careless drivers who put other road users at risk by committing offences such as tailgating or poor lane discipline will face on-the-spot penalties. The changes give the police greater f lexibility in dealing with less serious careless driving offences, freeing them from resource-intensive court processes. Existing ﬁxed penalty levels for most motoring offences - including using a mobile phone at the wheel and not wearing a seatbelt - rise to £100, bringing them into line with penalties for similar non-motoring ﬁxed penalties. Road Safety Minister Stephen Hammond said, “Careless driving puts innocent people’s lives at risk - that is why we have
made it easier for the police to tackle problem drivers by allowing them to immediately issue a ﬁxed penalty notice for low level offending rather than taking these offenders to court. We have also increased penalties for a range of driving offences to a level which reﬂects their seriousness and which will ensure that they are consistent with other similar penalty offences.” The ﬁxed penalty for careless driving is now £100 with three points on the driver’s licence. The most serious examples will continue to go through court, where offenders may face higher penalties. The police will also be able to offer educational training as an alternative to endorsement. Drivers will still be able to appeal any decision in court. Fixed penalty levels for most of these motoring offences have not increased since 2000, making them lower than other penalties of a similar severity.
BCA announces weekly sale of quality FTA Ireland calls to used prestige cars for London buyers combat illegal diesel
restige dealer group, Harwoods, has signed an exclusive deal with BCA, the UK’s leading vehicle remarketing company, for a weekly sale of high-quality prestige part-exchange cars. From Aston Martins and Audis
to MINIs and Jaguars, motorists looking for a luxury or sports model will be able to browse a range of high-end vehicles every week at BCA’s London centre. The new programme of sales kicked off at the beginning of August, with the ﬁrst sale featuring over sixty vehicles, including a 2011 MINI Countryman, 2008 Bent ley Continental GT 6.0 Coupe and 2006 Audi A4 2.0 TDI S Line Multitronic Saloon. Around 3,0 0 0 pr e stige cars a year will be offered for sa le by
Harwoods at BCA. Early sales have been exceptionally successful, attracting hundreds of buyers with nearly every car sold. Tim Naylor, Editor of the BCA Used Car Market Report, believes the choice of quality vehicles from Harwoods will continue to attract buyers over the coming months. “The BCA London centre provides a convenient and accessible location for buyers from all over London to choose from the fantastic selection of cars on offer from Harwoods. All the cars are prepared to a very high standard and come with a BCA Assured Report which provides an independent multi-point vehicle check for extra peace of mind for the buyer.”
he Freight Transport Associat ion Irela nd (FTAI) has called on the government to take immediate action in order to combat the issue which has seen millions being made from illegal sales. FTAI has outlined the enormous ﬁnancial loss to the Irish Revenue through the use of illicit and washed diesel, saying that as a result the issue is causing huge damage to compliant operators. During a meeting with the Minister for Transport, Tourism and Sport - Leo Varadkar, FTAI, highlighted the enormity of the problem of the sale of illegal fuel in the Republic of Ireland, asking for the issue to be addressed by government and attention in particular, be drawn to the issue
by Minister Noonan the Minister for Finance.
Non-dyed fuel Attending the meeting (on behalf of FTAI and its members), were Tom Wilson, FTA Ireland’s General Manager and Niall Cotton, FTAI President, who both outlined to Minister Varadkar the on-going problem of illegal fuel sales, and asking for an immediate resolution. The Minister in-turn acknowledged the points raised by the FTAI representatives, who informed him of the growing support from a number of major business organisations calling for rebated diesel (Gas Oil) to remain unmarked which would immediately take away the attraction of removing the dye.
19 AUGUST 2013
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19 AUGUST 2013
Getting Personal with Arun Dey, Chief Executive-Automotive, Reliance Retail Limited If not in the auto industry, where would you be? I would be pursuing a career in retail. What car do you drive? What do you dream of driving? I currently drive a Honda City. My dream drive right now is the Toyota Fortuner. What are you currently reading? Iâ€™m reading a book about the success story of the Reliance group. What do you do when not talking auto? I enjoy going on vacation or an outing with friends. I like to catch up with friends and have a good chat and basically unwind while having a good time. An activity you would miss ofďŹ ce for? I would like to go and attend a good seminar on current and upcoming industry trends, especially on business development. I would like to attend a seminar which would update me on the next generation business drivers which would eventually drive change. You get angry when... People do not honour their commitments and do not deliver on a promise they made. What is the one thing you would like to change about yourself? I would like to bond more with the younger generation and dissolve the age barrier between my generation and them. I would like to act and feel younger and gel along with my younger sub-ordinates at work for it is important to bond with them. Bonding with the next gen colleagues is important for it will ensure overall growth of the company. The best thing to have happened to you... The opportunity I got to start this venture with Reliance Retail-Automotive, which is a big and reputed organization. I got to test my skills by going off the beaten track and create new avenues by making new investments on behalf of the company and being accountable.
Illustration: Sachin Pandit Compiled by: Pradeb Biswas
In Real Life Arun Dey holds an MBA from XLRI, Jamshedpur and a B.Tech. from IIT-Madras. He has earlier worked with Escorts, Asian Paints, and Maruti Suzuki.
Regn. No. MH/MR/WEST/20/2012-2014. RNI No. MAHENG/2000/11414 Licenced to post at Mumbai patrika channel sorting office G.P.O. Mumbai 400 001. Date Of Mailing: 1st & 2nd Fortnightly Issue. Date Of Publication: 28th of Every Month