Global private equity firm Actis PE has picked up 10-13% stake in Indian auto component makerEndurance Technologies for $71 million (Rs 372.50 crore), said people close to the deal.
"Actis has a deep understanding of the automotive component industry through its investments in Avtec and Sandhar as well as Punjab tractors...Endurance as a company has a strong potential with a very high quality management team running the show, so we see an attractive prospect for this company," JM Trivedi, head of Actis South Asia, said.
Actis PE declined to comment on the exact stake purchase and Endurance Technologies was not available to comment on the same. Kotak Investment Bank was advisor to Endurance Technologies for the deal, said sources.
In 2010-11, Standard Chartered PE, with 13.7% stake in Endurance Technologies, had reportedly planned to sell its stake in the auto component maker through a proposed initial public offering. But, the company did not go ahead with the IPO due to rough market condition. However, it is unclear whether Actis bought the stake from Standard Chartered PE.
Endurance Technologies, a part of the Rs 3,200-crore automotive component major Endurance Group, has clients like Bajaj, Yamaha, Suzuki, Honda Motorcycles and Scooters and Royal Enfield. In passenger car segment, the company counts global car makers such as Daimler, Audi, Fiat and Porsche as customers.
Endurance Technologies manufactures aluminium die castings, suspensions, transmissions and brakes for motorcycles and high-end engine and transmission components for passenger and commercial vehicles. "I look forward to partnering with Actis. Their track record in emerging markets and the sector gives me a lot of confidence.
Endurance now has the opportunity to continue to build on its achievements with Actis, and as an investor I am sure we will," Anurang Jain, founder and managing director, Endurance Technologies, said in a press statement.
The company has a turnover close to Rs 2,100 crore and it has been growing at a compounded annual growth rate of more than 25-30% in the past few years.
Bajaj Auto - Q3 results on Jan 19, 2011
Bajaj Auto Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on January 19, 2011, inter alia, to consider, the unaudited financial results for the quarter and nine months ending December 31, 2010 (Q3).
KTM ups the ante
Europe’s second largest motorcycle manufacturer will debut in India shortly, with an offering that will ‘gear-up’ the enthusiast with left-foot-itch aplenty.
Its specifications alone should be more than enough to warrant some rowdy queues for orders, let alone test rides. Rather impressive case in point, the KTM Duke 200, just around the local corner.
Bajaj has a rather large 38 per cent stake in KTM, which means plenty of component sharing gestures with the Pulsar. Don’t groan too loud though, because it translates into one thing: value.
The Duke 200 is expected to be priced below Rs1.5 lakh, pretty reasonable considering the performance it promises to deliver.
A fuel-injected, liquid-cooled 200 cc engine with 25 bhp on tap is mated to a claw-shift six-speeder that should pip practically every segment rival.
The real secret to this ability is the Duke’s low-calorie construction that keeps power-to-weight analysts grinning, with a total mass of only 137 kg. Since the Duke will handle great too (owing in part to specially-developed MRF rubber), clipping those apexes will be truly rewarding.
This new KTM is brutally handsome, especially with regard to its powder-coated exposed frame and a gorgeous cross-detail rear swingarm. You can buy the Duke with your eyes closed, no worries. Just ensure the eyelids aren’t touching when you pass that green-faced CBR 250 owner.
Its specifications alone should be more than enough to warrant some rowdy queues for orders, let alone test rides. Rather impressive case in point, the KTM Duke 200, just around the local corner.
Bajaj has a rather large 38 per cent stake in KTM, which means plenty of component sharing gestures with the Pulsar. Don’t groan too loud though, because it translates into one thing: value.
The Duke 200 is expected to be priced below Rs1.5 lakh, pretty reasonable considering the performance it promises to deliver.
A fuel-injected, liquid-cooled 200 cc engine with 25 bhp on tap is mated to a claw-shift six-speeder that should pip practically every segment rival.
The real secret to this ability is the Duke’s low-calorie construction that keeps power-to-weight analysts grinning, with a total mass of only 137 kg. Since the Duke will handle great too (owing in part to specially-developed MRF rubber), clipping those apexes will be truly rewarding.
This new KTM is brutally handsome, especially with regard to its powder-coated exposed frame and a gorgeous cross-detail rear swingarm. You can buy the Duke with your eyes closed, no worries. Just ensure the eyelids aren’t touching when you pass that green-faced CBR 250 owner.
Secuirity curbs may cut Auto Expo visitors by 50%
Auto Expo 2012 is likely to have 50 per cent lesser visitors than the last edition with the organisers setting a limit of 1,00,000 people per day owing to safety considerations.
Only 70,000 general visitors would be allowed to enter the Pragati Maidan premises on first come first serve basis on each day of the Auto Expo, to be held from Jan 5 to Jan 11. About 30,000 slots are already reserved for the exhibitors.
The 2010 edition of Auto Expo saw 1.2 million visitors excluding exhibitors, translating into a daily footfall of about 171,000 people. “We have to make the Auto Expo more convenient for those interested and make it less chaotic, unlike the previous one. On any given day, a total of only one lakh people will be inside the Pragati Maidan,” said Rajive Kaul, head of the Auto Expo steering committee.
The previous edition of Auto Expo drew flak for chaos and poor management. Industry lobbies CII (confederation of Indian industry), Siam (society of Indian automobile manufacturers) and Acma (automotive component manufacturers association) are the organisers for the auto expo.
Siam said the auto show would see around 50 launches, including 32 cars, nine two-wheelers and six commercial vehicles. About eight models will mark their global debut at the expo.
Tickets have been priced at Rs 150 for general public and Rs 500 for business visitors per person. The Auto Expo will have around 1,500 participants from 24 countries with exhibitor presence in 16 halls.
Only 70,000 general visitors would be allowed to enter the Pragati Maidan premises on first come first serve basis on each day of the Auto Expo, to be held from Jan 5 to Jan 11. About 30,000 slots are already reserved for the exhibitors.
The 2010 edition of Auto Expo saw 1.2 million visitors excluding exhibitors, translating into a daily footfall of about 171,000 people. “We have to make the Auto Expo more convenient for those interested and make it less chaotic, unlike the previous one. On any given day, a total of only one lakh people will be inside the Pragati Maidan,” said Rajive Kaul, head of the Auto Expo steering committee.
The previous edition of Auto Expo drew flak for chaos and poor management. Industry lobbies CII (confederation of Indian industry), Siam (society of Indian automobile manufacturers) and Acma (automotive component manufacturers association) are the organisers for the auto expo.
Siam said the auto show would see around 50 launches, including 32 cars, nine two-wheelers and six commercial vehicles. About eight models will mark their global debut at the expo.
Tickets have been priced at Rs 150 for general public and Rs 500 for business visitors per person. The Auto Expo will have around 1,500 participants from 24 countries with exhibitor presence in 16 halls.
Street fighter - Hyosung GT 650
In this new avatar, the Hyosung GT650N promises to be more of an everyday bike than before
At first glance, the GT650N benefits from its strong street presence and the large, macho-looking motorcycle is quite a head-turner wherever you go. There's a generous helping of dark black parts, with the lower half of the bike liberally smothered in this smart, contrasting shade including its alloy wheels, mudguards, engine bay, exposed frame and massive exhaust.
The family look is shared with its sibling, the GT650R, but the N replaces the vertically stacked headlights of that sportier bike with a tapered headlight, crowned by a set of aerodynamic and petite floating instruments. This modern console is comprehensive enough, displaying all essential information including a bold tachometer. However, it lacks finesse. Likewise, the rearview mirrors show off nice form but fail to impart clear rear vision. Hyosung would also have done well to provide the GT650N with better quality palm grips, levers and switches. At present, the push-to-cancel indicators demand far too much effort to operate and also lack good feel.
A voluminous, 17-litre fuel tank with smart indents and smoothly sculpted knee recess grooves sits over the motorcycle's exposed-frame twin tubes. And a split seat lends the GT a sporty air, providing a storage facility under the pillion. The tail section is similar to the 650R, with a pair of large, split grab handles.
The GT650N shares its engine platform with the GT650R — a Hyosung V-twin, four-stroke cycle engine with liquid cooling and a displacement of 647cc. It is a fuel-injected powerhouse with short stroke (81.5mm x 62mm) dimensions and a bank of eight-valve equipped cylinders set 90 degrees apart. Compression ratio is 11.5:1 and maximum claimed power output at the crankshaft is a healthy 72.6bhp at 9000rpm, with peak torque of 6.2kgm delivered at 7500rpm.
Packing a punch
On the positive side, the GT650N packs a punch mighty enough for even the best Indian roads, and you will never be left high and dry, asking for more power or performance. Low- and mid-range grunt are impressive, as expected from a V-twin and the GT650N zips from 0-100kph in a scant 4.65 seconds, still accelerating seamlessly as it clobbers the 160kph mark in 12.78sec. Top whack is pretty respectable too, the 650 running out of steam only over a true 200kph.
However, much of the excitement starts fading fast when you come to terms with the chinks in this bike's armour. The GT650N suffers — as does the GT650R — from a really heavy clutch that uncomfortably impinges riding pleasure from almost the moment you get off the starting blocks. The six-speed gearbox fails to shift with the positive and light feel typical of modern-day motorcycles. Worse still, the GT650N is plagued by a really disappointing fuel-injection system, due to which the bike idles erratically and outputs an under-par power delivery. Jerky throttle response is often experienced at low to mid-engine speeds and vibrations build up to go beyond acceptable levels when pushing this bike hard.
All this means Hyosung has much ground to cover before it can match any of its refined Japanese or European rivals.
The GT650N deploys a tube-type all-steel frame spine with trendy looking, adjustable upside-down telescopic forks in front, allied to a monoshock and rectangle-section swingarm at the back.
A big advantage, especially in Indian urban road conditions, is the more relaxed, comfortable and upright riding position that is absent on the sportier GT650R. However, despite that bonus, the GT650N's suspension and riding saddle fail to deliver adequate comfort. Ride quality feels too stiff, often allowing potholes and road undulations to attack the rider's spine, the seat padding leaving you sore and unhappy over even reasonably long-distance rides.
Straightline stability
Excellent Bridgestone tyres at both ends are standard kit, with good traction being a 650N forte. The GT650N provides good straightline stability but handling is still only average, calling upon heavier than expected inputs. Cornering manners are up to the job, provided you stick to riding over smooth road surfaces.
Twin hydraulic disc brakes up front and a single rear disc unit combine to provide solid anchorage for the quick GT650N. The bike performed well during our brake test session to stop from 100kph in 47.58 metres, and 15.73 metres, coming to a halt from 60kph.
Fuel economy should rank lower than crucial to GT650N buyers (Rs. 4,39,000 - ex-showroom, Delhi). However, having put this latest Hyosung through a thorough test, we know that it returns 18.4kpl in crowded city traffic, and 27.4kpl cruising at close to 100kph on the highway.
At first glance, the GT650N benefits from its strong street presence and the large, macho-looking motorcycle is quite a head-turner wherever you go. There's a generous helping of dark black parts, with the lower half of the bike liberally smothered in this smart, contrasting shade including its alloy wheels, mudguards, engine bay, exposed frame and massive exhaust.
The family look is shared with its sibling, the GT650R, but the N replaces the vertically stacked headlights of that sportier bike with a tapered headlight, crowned by a set of aerodynamic and petite floating instruments. This modern console is comprehensive enough, displaying all essential information including a bold tachometer. However, it lacks finesse. Likewise, the rearview mirrors show off nice form but fail to impart clear rear vision. Hyosung would also have done well to provide the GT650N with better quality palm grips, levers and switches. At present, the push-to-cancel indicators demand far too much effort to operate and also lack good feel.
A voluminous, 17-litre fuel tank with smart indents and smoothly sculpted knee recess grooves sits over the motorcycle's exposed-frame twin tubes. And a split seat lends the GT a sporty air, providing a storage facility under the pillion. The tail section is similar to the 650R, with a pair of large, split grab handles.
The GT650N shares its engine platform with the GT650R — a Hyosung V-twin, four-stroke cycle engine with liquid cooling and a displacement of 647cc. It is a fuel-injected powerhouse with short stroke (81.5mm x 62mm) dimensions and a bank of eight-valve equipped cylinders set 90 degrees apart. Compression ratio is 11.5:1 and maximum claimed power output at the crankshaft is a healthy 72.6bhp at 9000rpm, with peak torque of 6.2kgm delivered at 7500rpm.
Packing a punch
On the positive side, the GT650N packs a punch mighty enough for even the best Indian roads, and you will never be left high and dry, asking for more power or performance. Low- and mid-range grunt are impressive, as expected from a V-twin and the GT650N zips from 0-100kph in a scant 4.65 seconds, still accelerating seamlessly as it clobbers the 160kph mark in 12.78sec. Top whack is pretty respectable too, the 650 running out of steam only over a true 200kph.
However, much of the excitement starts fading fast when you come to terms with the chinks in this bike's armour. The GT650N suffers — as does the GT650R — from a really heavy clutch that uncomfortably impinges riding pleasure from almost the moment you get off the starting blocks. The six-speed gearbox fails to shift with the positive and light feel typical of modern-day motorcycles. Worse still, the GT650N is plagued by a really disappointing fuel-injection system, due to which the bike idles erratically and outputs an under-par power delivery. Jerky throttle response is often experienced at low to mid-engine speeds and vibrations build up to go beyond acceptable levels when pushing this bike hard.
All this means Hyosung has much ground to cover before it can match any of its refined Japanese or European rivals.
The GT650N deploys a tube-type all-steel frame spine with trendy looking, adjustable upside-down telescopic forks in front, allied to a monoshock and rectangle-section swingarm at the back.
A big advantage, especially in Indian urban road conditions, is the more relaxed, comfortable and upright riding position that is absent on the sportier GT650R. However, despite that bonus, the GT650N's suspension and riding saddle fail to deliver adequate comfort. Ride quality feels too stiff, often allowing potholes and road undulations to attack the rider's spine, the seat padding leaving you sore and unhappy over even reasonably long-distance rides.
Straightline stability
Excellent Bridgestone tyres at both ends are standard kit, with good traction being a 650N forte. The GT650N provides good straightline stability but handling is still only average, calling upon heavier than expected inputs. Cornering manners are up to the job, provided you stick to riding over smooth road surfaces.
Twin hydraulic disc brakes up front and a single rear disc unit combine to provide solid anchorage for the quick GT650N. The bike performed well during our brake test session to stop from 100kph in 47.58 metres, and 15.73 metres, coming to a halt from 60kph.
Fuel economy should rank lower than crucial to GT650N buyers (Rs. 4,39,000 - ex-showroom, Delhi). However, having put this latest Hyosung through a thorough test, we know that it returns 18.4kpl in crowded city traffic, and 27.4kpl cruising at close to 100kph on the highway.
The crisis now is worse than in 2008: India Inc
Some still hopeful, most say lack of confidence has made the difference.
Corporate India has added a new word to its jargon: the C-word. Ask any CEO or banker about the difference between the slowdown in 2008 and now, the answer is almost repetitive: “We can still live with the S-word, but the C-word has made all the difference this time”.
What it means is simple. The deteriorating macro numbers (see chart) tell only half the story. While the slowdown has been a common factor in both 2008 and 2011, what makes it worse this time is that confidence has taken several hard knocks, courtesy an “almost lame duck” government, an unreasonable Opposition, which has gone for the kill, and a global crisis yet to unfold fully.
Marico Chairman Harsh Mariwala says, “Business confidence has never been so low — not even in 2008. There is a real crisis on the policy front and there is complete frustration, unlike in 2008.”
The consensus is that last time, the government was quick in announcing a stimulus package; this time it neither has the money nor the inclination to do anything fruitful. TVS Managing Director Venu Srinivasan says in 2008, fiscal deficit and inflation were in control, which is not the case now. But, the government is barking up the wrong tree by still looking at populist measures (with an eye on the state elections) like clearing the Food Security Bill, which will only add to expenditure and impact the fiscal deficit.
The lack of confidence has meant the industry is sitting on cash and is reluctant to make fresh commitments, as a result of which fresh project proposals for loans have come down to zero, bankers say. The capital goods industry has already started feeling the tremors. L&T Chairman A M Naik is blunt: Order flow growth will be at best 0-5 per cent in FY12 and FY13 will be very challenging.
Thermax MD M S Unnikrishnan sums up the mood in the capital goods industry. “In 2008, capital goods companies were sitting on huge order books, which were intact. But now, for the past nine months we have not seen major orders. Added to that, most of us have more capacities than in 2008 as everyone expanded for a growing India,” he says, adding the second half of the financial year may see a further fall in profitability for the entire capital goods industry.
The steel industry is not far behind. In 2008, says the JSW Steel joint MD, the slowdown was only for a quarter and there was a quick demand recovery. This time, there it is much broader, and has been continuing for the entire financial year.
There are other worrying signals, too. Compared to 2008, margins are much more under pressure due to high inflation. “As far as input costs are concerned, the primary difference is that in 2008, both input and output prices had crashed. But this time around, input prices have remained high and led to margin pressure though raw material prices have started coming down now,” adds Rao.
Cement manufacturers say their hopes of rural demand perking up are over. Shailendra Chouksey, whole-time director, JK Lakshmi Cement, feels the current slowdown is worse than that of 2008-09. “At least in 2008, we had hopes from the rural segment of the economy, which contributed to higher sales growth. This time, there are signs that funding through rural schemes like NREGS is drying up.”
Even services industries are feeling the pinch. The TV broadcasting industry was expecting advertising revenues to rise 20 per cent but they are virtually flat this year. Says Uday Shankar, CEO of Star India, the country’s largest broadcaster, “Multinationals in India have targets pegged to the dollar. With the sudden depreciation, they are finding it difficult to achieve them. So, they are cutting down on advertising.”
There are some who point out some critical differences between the crisis now and in 2008. Maruti Suzuki Chairman R C Bhargava says, “In 2008, the banking system had collapsed and banks were not willing to lend either to corporates or to individuals, to buy a car for instance. In 2011, banks have cash but consumers are not buying because of high interest costs, high fuel costs and inflation — problems the government can easily resolve.”
That makes Maruti, which has seen its sales growth in reverse gear, hopeful the current crisis won’t be that harsh. Bhargava is, however, quick to add the government “should have the mindset to take decisions to reverse the trend”. And that, everyone agrees, is a big 'if’.
Some bankers point out a critical difference between the two crises — and that is companies are much better equipped to face the current challenge than in 2008. Srinivasan Varadarajan, Executive Director (Corporate Banking), Axis Bank, says 2008 was more a liquidity shock.
In 2011, there is an extent of over-leveraging, which has been aggravated by the growth slowdown. But, corporate entities have become more cost-efficient in the years following the onset of the 2008 crisis. “They have managed the slowdown through efficient rationalisation of business. However, some capex decisions are being delayed,” he adds.
Godrej Group Chairman Adi Godrej thinks everything will be back on track if the Reserve Bank cuts rates. “The current environment is not as bad as 2008. At that time, banks were collapsing. I don't see a slowdown on the consumption front at least,” Godrej says, a sentiment shared by ITC Chairman Y C Deveshwar who says the FMCG business growth has been very good and so has rural demand.
In consumer durables, no one is really cutting down on investments, at least till now. For instance, Korean major LG Electronics had earmarked a capex of Rs 800 crore for this calendar year and is committed to it. But LG Chief Operating Officer Y V Verma says the company will wait and watch before committing fresh investments for the next year.
Videocon Chairman Venugopal Dhoot thinks the crisis is being “exaggerated”. In consumer electronics, he says, the problem was the expectation of the industry had gone up. So, it was pitching for 40 per cent growth.
It’s clear now that growth won’t be more than 15-20 per cent, which is not bad at all coming on the back of high growth last year. “The sudden depreciation of the rupee has forced us to increase prices, but consumers are still coming. Rural demand is intact,” Dhoot says.
But what Dhoot and others are not saying is even rural demand is shrinking. For example, rural sales growth for India’s FMCG and consumer durables industry has dipped to only 10 per cent in the April-September period.
As Dabur India CEO Sunil Duggal says, “The reduction in offtake as a result of successive price hikes has been more in rural India than urban markets.” And, that will only add to the loss of confidence. For, it will hit the industry where it hurts the most as rural India has been the main engine of the Indian consumption story. The impact of the C-word is looking quite real indeed.
Corporate India has added a new word to its jargon: the C-word. Ask any CEO or banker about the difference between the slowdown in 2008 and now, the answer is almost repetitive: “We can still live with the S-word, but the C-word has made all the difference this time”.
What it means is simple. The deteriorating macro numbers (see chart) tell only half the story. While the slowdown has been a common factor in both 2008 and 2011, what makes it worse this time is that confidence has taken several hard knocks, courtesy an “almost lame duck” government, an unreasonable Opposition, which has gone for the kill, and a global crisis yet to unfold fully.
Marico Chairman Harsh Mariwala says, “Business confidence has never been so low — not even in 2008. There is a real crisis on the policy front and there is complete frustration, unlike in 2008.”
The consensus is that last time, the government was quick in announcing a stimulus package; this time it neither has the money nor the inclination to do anything fruitful. TVS Managing Director Venu Srinivasan says in 2008, fiscal deficit and inflation were in control, which is not the case now. But, the government is barking up the wrong tree by still looking at populist measures (with an eye on the state elections) like clearing the Food Security Bill, which will only add to expenditure and impact the fiscal deficit.
The lack of confidence has meant the industry is sitting on cash and is reluctant to make fresh commitments, as a result of which fresh project proposals for loans have come down to zero, bankers say. The capital goods industry has already started feeling the tremors. L&T Chairman A M Naik is blunt: Order flow growth will be at best 0-5 per cent in FY12 and FY13 will be very challenging.
Thermax MD M S Unnikrishnan sums up the mood in the capital goods industry. “In 2008, capital goods companies were sitting on huge order books, which were intact. But now, for the past nine months we have not seen major orders. Added to that, most of us have more capacities than in 2008 as everyone expanded for a growing India,” he says, adding the second half of the financial year may see a further fall in profitability for the entire capital goods industry.
The steel industry is not far behind. In 2008, says the JSW Steel joint MD, the slowdown was only for a quarter and there was a quick demand recovery. This time, there it is much broader, and has been continuing for the entire financial year.
There are other worrying signals, too. Compared to 2008, margins are much more under pressure due to high inflation. “As far as input costs are concerned, the primary difference is that in 2008, both input and output prices had crashed. But this time around, input prices have remained high and led to margin pressure though raw material prices have started coming down now,” adds Rao.
Cement manufacturers say their hopes of rural demand perking up are over. Shailendra Chouksey, whole-time director, JK Lakshmi Cement, feels the current slowdown is worse than that of 2008-09. “At least in 2008, we had hopes from the rural segment of the economy, which contributed to higher sales growth. This time, there are signs that funding through rural schemes like NREGS is drying up.”
Even services industries are feeling the pinch. The TV broadcasting industry was expecting advertising revenues to rise 20 per cent but they are virtually flat this year. Says Uday Shankar, CEO of Star India, the country’s largest broadcaster, “Multinationals in India have targets pegged to the dollar. With the sudden depreciation, they are finding it difficult to achieve them. So, they are cutting down on advertising.”
There are some who point out some critical differences between the crisis now and in 2008. Maruti Suzuki Chairman R C Bhargava says, “In 2008, the banking system had collapsed and banks were not willing to lend either to corporates or to individuals, to buy a car for instance. In 2011, banks have cash but consumers are not buying because of high interest costs, high fuel costs and inflation — problems the government can easily resolve.”
That makes Maruti, which has seen its sales growth in reverse gear, hopeful the current crisis won’t be that harsh. Bhargava is, however, quick to add the government “should have the mindset to take decisions to reverse the trend”. And that, everyone agrees, is a big 'if’.
Some bankers point out a critical difference between the two crises — and that is companies are much better equipped to face the current challenge than in 2008. Srinivasan Varadarajan, Executive Director (Corporate Banking), Axis Bank, says 2008 was more a liquidity shock.
In 2011, there is an extent of over-leveraging, which has been aggravated by the growth slowdown. But, corporate entities have become more cost-efficient in the years following the onset of the 2008 crisis. “They have managed the slowdown through efficient rationalisation of business. However, some capex decisions are being delayed,” he adds.
Godrej Group Chairman Adi Godrej thinks everything will be back on track if the Reserve Bank cuts rates. “The current environment is not as bad as 2008. At that time, banks were collapsing. I don't see a slowdown on the consumption front at least,” Godrej says, a sentiment shared by ITC Chairman Y C Deveshwar who says the FMCG business growth has been very good and so has rural demand.
In consumer durables, no one is really cutting down on investments, at least till now. For instance, Korean major LG Electronics had earmarked a capex of Rs 800 crore for this calendar year and is committed to it. But LG Chief Operating Officer Y V Verma says the company will wait and watch before committing fresh investments for the next year.
Videocon Chairman Venugopal Dhoot thinks the crisis is being “exaggerated”. In consumer electronics, he says, the problem was the expectation of the industry had gone up. So, it was pitching for 40 per cent growth.
It’s clear now that growth won’t be more than 15-20 per cent, which is not bad at all coming on the back of high growth last year. “The sudden depreciation of the rupee has forced us to increase prices, but consumers are still coming. Rural demand is intact,” Dhoot says.
But what Dhoot and others are not saying is even rural demand is shrinking. For example, rural sales growth for India’s FMCG and consumer durables industry has dipped to only 10 per cent in the April-September period.
As Dabur India CEO Sunil Duggal says, “The reduction in offtake as a result of successive price hikes has been more in rural India than urban markets.” And, that will only add to the loss of confidence. For, it will hit the industry where it hurts the most as rural India has been the main engine of the Indian consumption story. The impact of the C-word is looking quite real indeed.
One Lakh Visitors- a - day limit set for Auto Expo
Organisers of the upcoming Auto Expo have decided to restrict entry at India's largest automotive show to 100,000 visitors a day to prevent a repeat of the chaos seen during the earlier exhibitions. The Auto Expo 2012 will be a week-long affair, beginning January 5 in Delhi's Pragati Maidan, making it a smaller show than the previous edition when 1.2 million visitors turned up over 10 days.
The exhibition area will be reduced to 1.15 lakh square metres with 16 permanent halls from the 1.25 lakh sq metre spread in 2010.
The exhibition area will be reduced to 1.15 lakh square metres with 16 permanent halls from the 1.25 lakh sq metre spread in 2010.
Honda calls back 10,000 CBR 250 RS
Bikes made during April-Aug recalled to replace nuts & bolts
Honda Motorcycle and Scooter India have recalled around 10,000 CBR 250R motorcycles to replace
•
nuts and bolts fitted alongside the mirror housing, grab-rail fitting and side fairing. These nuts and bolts could tend to rust but not pose any safety hazard.
The premium motorcycles manufactured in the first five months during April-August 2011 have been recalled. The models manufactured since September 2011 have not been affected by the recall, Honda dealers confirmed.
Honda Motorcycle and Scooter India manufactured 9,175 units of 250 cc motorcycles between April and August 2011, according to Siam (society of Indian automobile manufacturers) data. The company refused to term it as a recall.
“There is no recall of CBR 250R. The company is now stepping towards further improvement in aesthetic area of the vehicle. As a normal approach, the benefit is given to existing customers of CBR 250R,” Honda Motorcycle and Scooter India claimed in an e-mail response.
Analysts stressed that public announcement of recalls was not a practice in India due to absence of formal recall policy. “India (auto industry) has no formal mechanism for recalls. Even if (the problem) is not a safety issue, a better thing for manufacturers is to formally announce a recall and reach customers rather than not doing so,” said Abdul Majeed, auto practice leader, PricewaterhouseCoopers.
Mahindra & Mahindra also refrained from making public announcement of its recall of around 5,000 units of its first motorcycle model Stallio earlier this year. The 110 cc Stallio’s clutch and gear levers were replaced, as they were found faulty in motorcycles manufactured between October 2010 and June 2011. The company’s two-wheeler division Mahindra two-wheelers plans to re-launch the Stallio minus the glitches in second half of current financial year.
Honda sold 14,030 units of the Rs 1.68 lakh CBR250R motorcycle between April and November 2011, far outselling rivals such as Bajaj’s Ninja 250 and Hero MotoCorp’s Karizma.
Honda Motorcycle and Scooter India have recalled around 10,000 CBR 250R motorcycles to replace
•
nuts and bolts fitted alongside the mirror housing, grab-rail fitting and side fairing. These nuts and bolts could tend to rust but not pose any safety hazard.
The premium motorcycles manufactured in the first five months during April-August 2011 have been recalled. The models manufactured since September 2011 have not been affected by the recall, Honda dealers confirmed.
Honda Motorcycle and Scooter India manufactured 9,175 units of 250 cc motorcycles between April and August 2011, according to Siam (society of Indian automobile manufacturers) data. The company refused to term it as a recall.
“There is no recall of CBR 250R. The company is now stepping towards further improvement in aesthetic area of the vehicle. As a normal approach, the benefit is given to existing customers of CBR 250R,” Honda Motorcycle and Scooter India claimed in an e-mail response.
Analysts stressed that public announcement of recalls was not a practice in India due to absence of formal recall policy. “India (auto industry) has no formal mechanism for recalls. Even if (the problem) is not a safety issue, a better thing for manufacturers is to formally announce a recall and reach customers rather than not doing so,” said Abdul Majeed, auto practice leader, PricewaterhouseCoopers.
Mahindra & Mahindra also refrained from making public announcement of its recall of around 5,000 units of its first motorcycle model Stallio earlier this year. The 110 cc Stallio’s clutch and gear levers were replaced, as they were found faulty in motorcycles manufactured between October 2010 and June 2011. The company’s two-wheeler division Mahindra two-wheelers plans to re-launch the Stallio minus the glitches in second half of current financial year.
Honda sold 14,030 units of the Rs 1.68 lakh CBR250R motorcycle between April and November 2011, far outselling rivals such as Bajaj’s Ninja 250 and Hero MotoCorp’s Karizma.
Power punch - Boxer 150
The Boxer BM 150 has a robust and functional look. The classic circular headlight has a translucent wind deflector that gives it flair. While most bikes have graduated to digital instruments, the BM 150 uses a simple twin-pod, analogue cluster with a fuel gauge and speedometer. At the rear, the carrier made from steel tubes is clearly capable of carrier heavy loads. At the heart of the Boxer BM 150 lies a kick or button –started, four-stroke, air-cooled, 144.8cc engine that is based on the Discover 150 DTS-i. Here, this alloy-encased engine lacks Bajaj’s dual-plug, DTS-I technology. While maximum power delivered is 12bhp at 7,500rpm, the BM musters 1.25kgm of torque at 5,000rpm. The clutch has a smooth, light feel and the four-down gearbox shifts with precision. The rider sits upright in a commuter-friendly riding position, reaching out to tall handlebars and well supported on a wide riding seat.
Ride quality is plush , keeping the rider isolated from rough road conditions. Though the tyres are a letdown, theBoxer BM 150 is effectively a 150cc bike for 100cc money. It returned 46.3 kpl in the city and 50.6 kpl on the highway which is decent.
Ride quality is plush , keeping the rider isolated from rough road conditions. Though the tyres are a letdown, theBoxer BM 150 is effectively a 150cc bike for 100cc money. It returned 46.3 kpl in the city and 50.6 kpl on the highway which is decent.
TVS has started their production, will manufacture motorcar too
A new chapter opens in the resurgent Bengal. World’s third large automobile manufacturing company TVS along with Mahabharat of Uluberia, Howrah has taken the first steps . The flood has started towards the production of Motorbikes, where TVS is not just helping Mahabharat with technology but also has joined it as a partner. The credit for bringing TVS to Bengal goes to Prasun Moukhopadhyay a non-residential Indian, the head honcho of Universal Success. On Wednesday with a religious ceremony TVS has started this new journey. This new venture of TVS and Universal Success is going to give a new direction to the Industry and opportunity said TVS and NKID officials. Along with this, they are also planning to make an Auto hub and other ancillary industries in Uluberia. TVS and NKID officials also said that there is a possibility of manufacturing of four wheelers In future
During the left regime, Mahabharat factory at Birshibpur, Uluberia was built, but the production was very slow. After the formation of the new government under the leadership of Mamata Bandopadhayay, Uluberia Mahabharat has seen renewed vigor. Due to the efforts of Industrialist Prasun Mukhapadhayay ,TVS,one of the biggest automobile companies has agreed to invest directly in the State. The whole demerger process is on. On Wednesday from morning, 6 am to 10 pm Bhoomi Puja was performed in south Indian style.During the press conference TVS officials , who came from Hosur said that presently they are producing one thousand motorbikes, but they aim to manufacture three lacs motorbikes per year. They also said that in next five years they will invest Rs 300 to 400 crores. The vice president of the TVS Company Mr.S.G Murali said that the new state is encouraging industry that will ensure a bright future. NKID CEO Prasun Sengupta said that in next 2years there will be an auto hub and TVS retail park. In the mean time, 80 crores has already been invested .
In the year 2006, 15th February the then chief minister Buddhadeb Bhattacharya had inaugurated the factory, but it took 4 and half years to start the production. In 2010 September, manufacturing started but it stopped abruptly. Though, Both Salim group and Universal success had joined hands with TVS for technical support but still the production was insignificant. With the change in the government and effort s of Prasun Mukhapadhyay of Universal success, TVS signed a new agreement. Bike Manufacturer TVS became one of the partners of Mahabharat Motors .with the help if TVS it will be easy for Mahabharat to capture eastern India. Significantly ,production of one bike in Mahabharat factory takes only 11 minutes to finish a marketable bike with ultramodern technology involving 28 workers.
65 acres of the factory is divided between TVS bike and Arjun auto, but for now, there would be no production of auto. Mahabharat Factory is right now serving as the store room for the incoming Arjun autos from Hosur, Tamilnadu. Future plans include use of 35 acres of land for auto hub and Retail Park. There are also plans for ancillary industry development. TVS official said that Bengal needs a success story , if that comes along with TVS; other industries will also follow . He also hoped that Mamata Bandhapadhayay would bring industrial revolution in Bengal.
During the left regime, Mahabharat factory at Birshibpur, Uluberia was built, but the production was very slow. After the formation of the new government under the leadership of Mamata Bandopadhayay, Uluberia Mahabharat has seen renewed vigor. Due to the efforts of Industrialist Prasun Mukhapadhayay ,TVS,one of the biggest automobile companies has agreed to invest directly in the State. The whole demerger process is on. On Wednesday from morning, 6 am to 10 pm Bhoomi Puja was performed in south Indian style.During the press conference TVS officials , who came from Hosur said that presently they are producing one thousand motorbikes, but they aim to manufacture three lacs motorbikes per year. They also said that in next five years they will invest Rs 300 to 400 crores. The vice president of the TVS Company Mr.S.G Murali said that the new state is encouraging industry that will ensure a bright future. NKID CEO Prasun Sengupta said that in next 2years there will be an auto hub and TVS retail park. In the mean time, 80 crores has already been invested .
In the year 2006, 15th February the then chief minister Buddhadeb Bhattacharya had inaugurated the factory, but it took 4 and half years to start the production. In 2010 September, manufacturing started but it stopped abruptly. Though, Both Salim group and Universal success had joined hands with TVS for technical support but still the production was insignificant. With the change in the government and effort s of Prasun Mukhapadhyay of Universal success, TVS signed a new agreement. Bike Manufacturer TVS became one of the partners of Mahabharat Motors .with the help if TVS it will be easy for Mahabharat to capture eastern India. Significantly ,production of one bike in Mahabharat factory takes only 11 minutes to finish a marketable bike with ultramodern technology involving 28 workers.
65 acres of the factory is divided between TVS bike and Arjun auto, but for now, there would be no production of auto. Mahabharat Factory is right now serving as the store room for the incoming Arjun autos from Hosur, Tamilnadu. Future plans include use of 35 acres of land for auto hub and Retail Park. There are also plans for ancillary industry development. TVS official said that Bengal needs a success story , if that comes along with TVS; other industries will also follow . He also hoped that Mamata Bandhapadhayay would bring industrial revolution in Bengal.
Scooter India divestment shelved
Amid volatile market conditions, the government has put on hold the strategic sale of sick PSU Scooters India Ltd (SIL) and will review the proposal "holistically" before taking a final decision.
"We have taken the decision to put disinvestment on hold and we will look at it holistically before we take a final decision," Heavy Industries and Public Enterprises Minister Praful Patel told reporters on the sidelines of an Assocham event here.
The Union Cabinet had earlier this year cleared the proposal to divest the government's entire 95.38 per cent stake in Scooters India to a private player through the strategic route (outright sale). As the company was formed through a parliamentary Act, Parliament's nod was required for the disinvestment to go through.
Sources in-the-know, however, said that with Assembly elections scheduled in five states next year -- including UP and Punjab -- Congress leaders in the state are understood to have sought the postponement of the sale of Lucknow-based SIL.
The state Congress leaders do not want it to be an election issue, they said.
Following a recommendation by the Board for Reconstruction of Public Sector Enterprises (BRPSE) to revive Scooters India through disinvestment or a joint venture, several private firms are being viewed as possible suitors.
There was speculation that auto majors such as Bajaj Auto, Atul Auto, Mahindra & Mahindra and Piaggio were eyeing a stake in the company.
Asked if any auto company has shown interest in buying SIL, Patel said, "There is no proposal floated to invite somebody to invest in this, but the decision per se at the moment is not to proceed on that..."
He, however, said, "We intend to have a fresh relook before we take a final decision."
The automobile company -- which has about 1,200 regular employees -- has been incurring losses since 2002-03. In March, 2009, the company was declared sick and referred to the Board for Reconstruction of Public Sector Enterprises (BRPSE).
Incorporated in 1972, SIL initially manufactured scooters under the brand name Vijai Super for the domestic market and Lambretta for overseas markets.
Later, it ventured into the three-wheeler segment with the Vikram brand. In 1997, it stopped two-wheeler production and is now engaged in the manufacture and marketing of only three-wheelers.
SIL's net loss stood at Rs 18.4 crore during the 2010-11 fiscal.
Shares of Scooters India were trading flat at Rs 32 apiece on the BSE today.
"We have taken the decision to put disinvestment on hold and we will look at it holistically before we take a final decision," Heavy Industries and Public Enterprises Minister Praful Patel told reporters on the sidelines of an Assocham event here.
The Union Cabinet had earlier this year cleared the proposal to divest the government's entire 95.38 per cent stake in Scooters India to a private player through the strategic route (outright sale). As the company was formed through a parliamentary Act, Parliament's nod was required for the disinvestment to go through.
Sources in-the-know, however, said that with Assembly elections scheduled in five states next year -- including UP and Punjab -- Congress leaders in the state are understood to have sought the postponement of the sale of Lucknow-based SIL.
The state Congress leaders do not want it to be an election issue, they said.
Following a recommendation by the Board for Reconstruction of Public Sector Enterprises (BRPSE) to revive Scooters India through disinvestment or a joint venture, several private firms are being viewed as possible suitors.
There was speculation that auto majors such as Bajaj Auto, Atul Auto, Mahindra & Mahindra and Piaggio were eyeing a stake in the company.
Asked if any auto company has shown interest in buying SIL, Patel said, "There is no proposal floated to invite somebody to invest in this, but the decision per se at the moment is not to proceed on that..."
He, however, said, "We intend to have a fresh relook before we take a final decision."
The automobile company -- which has about 1,200 regular employees -- has been incurring losses since 2002-03. In March, 2009, the company was declared sick and referred to the Board for Reconstruction of Public Sector Enterprises (BRPSE).
Incorporated in 1972, SIL initially manufactured scooters under the brand name Vijai Super for the domestic market and Lambretta for overseas markets.
Later, it ventured into the three-wheeler segment with the Vikram brand. In 1997, it stopped two-wheeler production and is now engaged in the manufacture and marketing of only three-wheelers.
SIL's net loss stood at Rs 18.4 crore during the 2010-11 fiscal.
Shares of Scooters India were trading flat at Rs 32 apiece on the BSE today.
Women driving the scooter's second coming
Category posts highest sales growth in last eight months
Scooters are making a big comeback on Indian roads, riding on rising demand from women and students, especially in the smaller towns and cities.
In the personal mobility segment, which includes scooters, cars and motorcycles, it is scooters that posted the highest sales growth in the April-November 2011 period at 23.4 per cent. Of course, it was on a smaller base of 1.62 million units compared to motorcycles (6.77 million units), according to data from Society of Indian Automobile Manufacturers (SIAM).
Sales up 15%
Motorcycle sales rose 15 per cent in the eight months, while the entire two-wheeler segment grew 16 per cent (8.90 million units). In the same period, car sales dipped four per cent (1.21 million), while total auto sales rose 13 per cent to 11.33 million units.
This shows a clear reversal of trends from a few years back when scooter sales had shrunk badly. Now, the category is bouncing back led by women on the move. Mr Abdul Majeed, partner and auto practice leader at PricewaterhouseCoopers says, “Before the motorcycle era in the 80s, scooters were popular with men. Older professionals in their 30s and 40s have now moved on to cars, which are now more affordable. Today two wheelers are used more by students in their 20s and women.” With more women driving, the scooter has seen product alteration with the market shifting towards gearless and light scooters that are easier to handle.
“I don't think there is a large market for big powerful scooters anymore. That customer has shifted to motorbikes,” Mr Majeed said.
A relatively new entrant in the market, Honda Motorcycle and Scooters India, already leads the segment with the ‘Activa' model commanding a waiting period of around 4-6 months.
Hero MotoCorp's only scooter model — Pleasure — is also targeted at women. So much so that it has set up a parallel sales network for its scooter product, with special stores that have women attendants.
It plans to add more products to this segment. TVS also has a strong scooter portfolio.
Smaller towns
More than the large cities, scooter sales are growing faster in the smaller towns and cities where traffic is lesser and it is often convenient for short trips, says an industry expert.
Scooters are making a big comeback on Indian roads, riding on rising demand from women and students, especially in the smaller towns and cities.
In the personal mobility segment, which includes scooters, cars and motorcycles, it is scooters that posted the highest sales growth in the April-November 2011 period at 23.4 per cent. Of course, it was on a smaller base of 1.62 million units compared to motorcycles (6.77 million units), according to data from Society of Indian Automobile Manufacturers (SIAM).
Sales up 15%
Motorcycle sales rose 15 per cent in the eight months, while the entire two-wheeler segment grew 16 per cent (8.90 million units). In the same period, car sales dipped four per cent (1.21 million), while total auto sales rose 13 per cent to 11.33 million units.
This shows a clear reversal of trends from a few years back when scooter sales had shrunk badly. Now, the category is bouncing back led by women on the move. Mr Abdul Majeed, partner and auto practice leader at PricewaterhouseCoopers says, “Before the motorcycle era in the 80s, scooters were popular with men. Older professionals in their 30s and 40s have now moved on to cars, which are now more affordable. Today two wheelers are used more by students in their 20s and women.” With more women driving, the scooter has seen product alteration with the market shifting towards gearless and light scooters that are easier to handle.
“I don't think there is a large market for big powerful scooters anymore. That customer has shifted to motorbikes,” Mr Majeed said.
A relatively new entrant in the market, Honda Motorcycle and Scooters India, already leads the segment with the ‘Activa' model commanding a waiting period of around 4-6 months.
Hero MotoCorp's only scooter model — Pleasure — is also targeted at women. So much so that it has set up a parallel sales network for its scooter product, with special stores that have women attendants.
It plans to add more products to this segment. TVS also has a strong scooter portfolio.
Smaller towns
More than the large cities, scooter sales are growing faster in the smaller towns and cities where traffic is lesser and it is often convenient for short trips, says an industry expert.
Piaggio to position Vespa as 'iconic, timelss'
Italian automaker, Piaggio plans to position the Vespa in India as a ‘lifestyle, iconic, timeless and ageless product' when the first 125cc gearless scooter is launched in April 2012. This is part of its effort to create an exclusive premium segment for the brand.
In his presentation in Milan on Wednesday, Mr Ravi Chopra, Chairman and Managing Director of Piaggio India, said it was important to sustain Vespa's brand image through an appropriate positioning and communication strategy. The key was to focus on its ‘heritage and unique values'.
Piaggio will produce the Vespa scooters at a new plant in Baramati, Maharashtra, which is already home to its commercial vehicle range. The company has earmarked initial production of 1,50,000 units annually which could include exports.
The Vespa will be targeted at 35 top Indian cities with exclusive dealer networks. Going forward, Mr Chopra said in his presentation that Piaggio would need to expand the scooter range while identifying customised products for India.
Honda is the clear leader in the gearless scooter segment with its Activa model head and shoulders over competition. The other prominent players are TVS Motor Company, Hero Honda and Suzuki with Yamaha expected to join the parade soon. Even though motorcycles account for a lion's share of India's two-wheeler production (estimated to close at 15 million units this fiscal), scooters have been growing briskly at over 20 per cent.
Ease of travel has become top priority among the country's young workforce which includes a growing number of women professionals. This makes gearless scooters the most viable option especially when public transport is scarce, uncomfortable and even unsafe.
Piaggio will count on Vespa's decades-long association with the country as an obvious recall advantage which could help it get off to a quick start. However, today's customer is a lot younger who is more familiar with home-grown and Japanese brands in the two-wheeler segment.
Piaggio's alliance with LML which ended in the late 1990s will only make some kind of a connect with the 30-plus age group which, in any case, is not the target customer base for a gearless scooter today. To that extent, the company will have to pull out all stops and ensure that its brand positioning is absolutely clear.
Asia-Pacific strategy
Scooters will also be a critical component of Piaggio's strategy for the Asia-Pacific region. Over the next three years, it has targeted eight countries as its growth levers. While Vietnam, Thailand, Malaysia, Korea, Indonesia and Taiwan are already part of the roadmap, Cambodia and the Philippines will join the list by 2014.
Production of bikes in Asia-Pacific is estimated to touch 19 million units over the next three years from the present level of 16.5 million units. Vietnam is expected to be the key hub for Piaggio which means components will be shipped out from here to other parts of the region.
It will be interesting to see if the Indian operations at Baramati play a role too given the top quality and cost-competitiveness of the local vendor base.
In his presentation in Milan on Wednesday, Mr Ravi Chopra, Chairman and Managing Director of Piaggio India, said it was important to sustain Vespa's brand image through an appropriate positioning and communication strategy. The key was to focus on its ‘heritage and unique values'.
Piaggio will produce the Vespa scooters at a new plant in Baramati, Maharashtra, which is already home to its commercial vehicle range. The company has earmarked initial production of 1,50,000 units annually which could include exports.
The Vespa will be targeted at 35 top Indian cities with exclusive dealer networks. Going forward, Mr Chopra said in his presentation that Piaggio would need to expand the scooter range while identifying customised products for India.
Honda is the clear leader in the gearless scooter segment with its Activa model head and shoulders over competition. The other prominent players are TVS Motor Company, Hero Honda and Suzuki with Yamaha expected to join the parade soon. Even though motorcycles account for a lion's share of India's two-wheeler production (estimated to close at 15 million units this fiscal), scooters have been growing briskly at over 20 per cent.
Ease of travel has become top priority among the country's young workforce which includes a growing number of women professionals. This makes gearless scooters the most viable option especially when public transport is scarce, uncomfortable and even unsafe.
Piaggio will count on Vespa's decades-long association with the country as an obvious recall advantage which could help it get off to a quick start. However, today's customer is a lot younger who is more familiar with home-grown and Japanese brands in the two-wheeler segment.
Piaggio's alliance with LML which ended in the late 1990s will only make some kind of a connect with the 30-plus age group which, in any case, is not the target customer base for a gearless scooter today. To that extent, the company will have to pull out all stops and ensure that its brand positioning is absolutely clear.
Asia-Pacific strategy
Scooters will also be a critical component of Piaggio's strategy for the Asia-Pacific region. Over the next three years, it has targeted eight countries as its growth levers. While Vietnam, Thailand, Malaysia, Korea, Indonesia and Taiwan are already part of the roadmap, Cambodia and the Philippines will join the list by 2014.
Production of bikes in Asia-Pacific is estimated to touch 19 million units over the next three years from the present level of 16.5 million units. Vietnam is expected to be the key hub for Piaggio which means components will be shipped out from here to other parts of the region.
It will be interesting to see if the Indian operations at Baramati play a role too given the top quality and cost-competitiveness of the local vendor base.
Honda revs up to take on Hero
Honda embarks on an expansion drive to take on a tough adversary.
November was not just another month for Honda's two-wheeler business in India. It saw the company's wholly-owned subsidiary report sales of nearly two lakh bikes and scooters, its highest ever in the country since it first set up shop a decade ago. In the process, Honda Motorcycle & Scooter India (HMSI) replaced TVS Motor as the third-highest manufacturer, with its former ally, Hero MotoCorp, and Bajaj Auto in the top two slots.
EXPANSION SPREE
By the beginning of 2012-13, Honda will have commissioned the second production line at its new plant in Rajasthan, which will see monthly output from its two facilities go up to nearly 2.5 lakh units. The Japanese automaker is also working on its third plant in Karnataka which, like the Manesar and Rajasthan units, will have an annual capacity of 1.2 million units. From Honda's viewpoint, the ideal situation would be to have all three plants producing four million bikes and scooters every year by 2014-15.
According to industry grapevine, this is only the beginning of an aggressive journey for the company, which is determined to recover the top slot it ceded to the Hero group after the duo parted ways recently. Apparently, Honda is keen on setting up two more plants in the Western region (most probably Gujarat and Maharashtra) which will mirror the 1.2-million unit annual capacities of the other three units. If the script runs according to plan, it will have more than six million two-wheelers rolling out of its facilities by 2017.
Will this marathon effort be adequate to take over the leadership mantle from Hero MotoCorp? The company has made it clear that it will play the pricing game aggressively for its India strategy. This was apparent from what its global President & CEO, Takanobu Ito, said at a presentation on Honda's strategy for the next decade. “Today, key competitors in those (emerging) markets are Chinese and Indian makers. In order for Honda to remain a market leader, it must not only maintain the high attractiveness and quality of products, but also further improve cost-competitiveness to match the low prices of these competitors,” he had remarked.
TOUGH RIVAL
Clearly, the company is only too aware of the fact that the Indian landscape has changed considerably since the 1980s, when it had forged two independent joint ventures with the Hero and Kinetic groups for motorcycles and gearless scooters.
Both products caught the attention of the market and marked the beginning of an interesting saga in the Indian two-wheeler segment. Women made a beeline for the gearless scooter and it was only a matter of time before men, who first considered it too sissy, followed suit.
Though it broke up with Kinetic earlier, Honda took little time to make up lost ground by setting up its 100 per cent arm, HMSI, which is now the market leader in gearless scooters, thanks largely to the hugely popular Activa.
The alliance with the Hero group lasted a lot longer and Honda is only too aware that it is up against a far tougher adversary compared to Kinetic, which just lost its way in the scooter arena after the divorce. The Munjals of the Hero group played a key role in the joint venture even though the products were from the stables of their Japanese ally. They helped grow the market for the bikes through a carefully-plotted retail strategy which ensured that virtually every nook and cranny of India was covered.
As a result, Hero Honda made such an incredible connect with the masses that it became the most trusted and reliable two-wheeler brand in the country. The Splendor and Passion, in particular, emerged the monarchs of the commuter motorcycle segment and continue to hold their sway on the market. Hero MotoCorp knows this only too well and will continue to nurture these two brands in the future.
LEADERSHIP GAME
It is here that Honda faces its biggest challenge in the leadership game. “It can pull it off if it launches a better motorcycle than the top-selling Splendor at a lower price. This is the only way to wean the next generation of customers away,” an industry veteran said. The Japanese automaker will have no problems playing the price game because of its sheer size. It can afford to take a beating on its bottomline if this means taking the numero uno slot from its erstwhile partner.
However, HMSI continues to be associated with the Activa scooter even while it has a clutch of motorcycles like the Unicorn, Shine and Twister in its portfolio. Clearly, scooters have been the greater success story, and Honda would be desperately looking for the big break in motorcycles, which will help shed the Activa-led image. It also makes greater business sense, since the market is still heavily loaded in favour of bikes, a fact that Bajaj Auto quickly grasped, which spurred its move to exit the scooter business completely.
In the meantime, Hero MotoCorp will just not sit still and watch the party. It has already indicated its intent of setting up a fourth plant, expected to be commissioned in the South, which will see its overall annual output inch towards the ten million mark. Likewise, Bajaj Auto has made it known that it will be doubling production, again to ten million units, during the next 3-4 years. However, its business model will see a greater focus on exports, which means Honda and the Hero group will battle it out on the local turf.
It remains to be seen if the slowdown will dampen sentiment in the coming months. For the moment, two-wheeler sales continue to be buoyant, quite unlike cars which are sputtering. While a whole lot of companies are going slow on their expansion plans, Honda is unlikely to hit the brakes. After all, it intends to eventually make India its largest two-wheeler base, ahead of Indonesia and Vietnam, during the next 5-6 years. Market leadership, though, could take a while longer.
November was not just another month for Honda's two-wheeler business in India. It saw the company's wholly-owned subsidiary report sales of nearly two lakh bikes and scooters, its highest ever in the country since it first set up shop a decade ago. In the process, Honda Motorcycle & Scooter India (HMSI) replaced TVS Motor as the third-highest manufacturer, with its former ally, Hero MotoCorp, and Bajaj Auto in the top two slots.
EXPANSION SPREE
By the beginning of 2012-13, Honda will have commissioned the second production line at its new plant in Rajasthan, which will see monthly output from its two facilities go up to nearly 2.5 lakh units. The Japanese automaker is also working on its third plant in Karnataka which, like the Manesar and Rajasthan units, will have an annual capacity of 1.2 million units. From Honda's viewpoint, the ideal situation would be to have all three plants producing four million bikes and scooters every year by 2014-15.
According to industry grapevine, this is only the beginning of an aggressive journey for the company, which is determined to recover the top slot it ceded to the Hero group after the duo parted ways recently. Apparently, Honda is keen on setting up two more plants in the Western region (most probably Gujarat and Maharashtra) which will mirror the 1.2-million unit annual capacities of the other three units. If the script runs according to plan, it will have more than six million two-wheelers rolling out of its facilities by 2017.
Will this marathon effort be adequate to take over the leadership mantle from Hero MotoCorp? The company has made it clear that it will play the pricing game aggressively for its India strategy. This was apparent from what its global President & CEO, Takanobu Ito, said at a presentation on Honda's strategy for the next decade. “Today, key competitors in those (emerging) markets are Chinese and Indian makers. In order for Honda to remain a market leader, it must not only maintain the high attractiveness and quality of products, but also further improve cost-competitiveness to match the low prices of these competitors,” he had remarked.
TOUGH RIVAL
Clearly, the company is only too aware of the fact that the Indian landscape has changed considerably since the 1980s, when it had forged two independent joint ventures with the Hero and Kinetic groups for motorcycles and gearless scooters.
Both products caught the attention of the market and marked the beginning of an interesting saga in the Indian two-wheeler segment. Women made a beeline for the gearless scooter and it was only a matter of time before men, who first considered it too sissy, followed suit.
Though it broke up with Kinetic earlier, Honda took little time to make up lost ground by setting up its 100 per cent arm, HMSI, which is now the market leader in gearless scooters, thanks largely to the hugely popular Activa.
The alliance with the Hero group lasted a lot longer and Honda is only too aware that it is up against a far tougher adversary compared to Kinetic, which just lost its way in the scooter arena after the divorce. The Munjals of the Hero group played a key role in the joint venture even though the products were from the stables of their Japanese ally. They helped grow the market for the bikes through a carefully-plotted retail strategy which ensured that virtually every nook and cranny of India was covered.
As a result, Hero Honda made such an incredible connect with the masses that it became the most trusted and reliable two-wheeler brand in the country. The Splendor and Passion, in particular, emerged the monarchs of the commuter motorcycle segment and continue to hold their sway on the market. Hero MotoCorp knows this only too well and will continue to nurture these two brands in the future.
LEADERSHIP GAME
It is here that Honda faces its biggest challenge in the leadership game. “It can pull it off if it launches a better motorcycle than the top-selling Splendor at a lower price. This is the only way to wean the next generation of customers away,” an industry veteran said. The Japanese automaker will have no problems playing the price game because of its sheer size. It can afford to take a beating on its bottomline if this means taking the numero uno slot from its erstwhile partner.
However, HMSI continues to be associated with the Activa scooter even while it has a clutch of motorcycles like the Unicorn, Shine and Twister in its portfolio. Clearly, scooters have been the greater success story, and Honda would be desperately looking for the big break in motorcycles, which will help shed the Activa-led image. It also makes greater business sense, since the market is still heavily loaded in favour of bikes, a fact that Bajaj Auto quickly grasped, which spurred its move to exit the scooter business completely.
In the meantime, Hero MotoCorp will just not sit still and watch the party. It has already indicated its intent of setting up a fourth plant, expected to be commissioned in the South, which will see its overall annual output inch towards the ten million mark. Likewise, Bajaj Auto has made it known that it will be doubling production, again to ten million units, during the next 3-4 years. However, its business model will see a greater focus on exports, which means Honda and the Hero group will battle it out on the local turf.
It remains to be seen if the slowdown will dampen sentiment in the coming months. For the moment, two-wheeler sales continue to be buoyant, quite unlike cars which are sputtering. While a whole lot of companies are going slow on their expansion plans, Honda is unlikely to hit the brakes. After all, it intends to eventually make India its largest two-wheeler base, ahead of Indonesia and Vietnam, during the next 5-6 years. Market leadership, though, could take a while longer.
Auto cos may scout for cheap Europe assests
The slowdown in Europe may give another chance to Indian automobile firms to hunt for cheaper acquisitions or joint ventures for better technologies and market expansions, say analysts.
“We expect more mergers and acquisitions in two-wheelers and trucks than in cars in the Indian automotive industry in the coming decade,” said Vikas Sehgal, global head of automotive and MD, Rothschild, a global financial M&A advisory. “One would not be surprised if TVS Motor Company, Bajaj Auto or Hero MotoCorp go out to buy a global two-wheeler maker. We cannot say now if it’s American, Korean, Japanese or Chinese, but the segment will see some big ticket buyouts by Indian makers,” he added.
The signs are already visible. India’s largest two-wheeler maker Hero MotoCorp, which broke its venture with Japanese Honda Motor in December 2010, has begun investing in new technologies and R&D to sell bikes in the overseas market. The Munjals-owned firm needs to speed up as it can sell products with Honda technology only until June 2014.
“Hero is building their technology know-how and reach in the overseas market,” Chandresh Ruparel, MD, Rothschild (India), said. “It may look at technology buyouts and acquisitions in the global space,” Rothschild’s Sehgal said, adding the company has deep pockets to do so. The company has a cash balance of R1,907.12 crore until March 2011.
Some of the global targets for Indian two-wheeler players include Ducati and Harley-Davidson, Sehgal added, since these are niche players in the sports and touring bike categories, respectively.
Weakening economy and falling asset prices attract Indian buyers. “Asset prices have seen a fall in Europe in the auto parts segment, too, as demand from major markets remain muted and capacities lie under utilised,” Kumar Kandaswami, a senior director at Deloitte Touche Tohmatsu India, said, “There are many small and medium auto component makers in Europe which are private equity-owned and they may look at exiting. Technology and customer base of these companies would be attractive for Indian firms.” Some consultants say the target will be mid-level auto part makers.
“European auto parts companies with sales anywhere between R140 crore and R1,070 crore are targets,” said an auto consultant, who did not wish to be identified, as he is not authorised to speak to the media.
“For auto companies, it would be all about the right target, while for parts makers, small and medium in specific, it would be about how would they finance the deals,” Kandaswami of Deloitte said.
Indian companies have spent less on purchases. Companies spent $352.38 million for M&As between calendar January and now, one fourth of 2010, data collected by VCCEdge, the financial research platform of VCCircle.com, shows.
Smaller truck and bus makers such as Iveco and Paccar, compared to giants Volvo, Scania and Daimler, would be open for tie ups or buyouts in India, Seghal of Rothschild said.
“Indian and Chinese players will consolidate and define the automotive industry worldwide,” Sehgal said. Rothschild estimates that by 2030, India will be the second largest automotive market in the world by sales, overtaking the US. India will add over 20% of the global capacity in the next 10 years. Indian domestic automakers sold 11.3 million units between April and November 2011, data from the Society of Indian Automobile Manufacturers’ report released on December 8 showed.
But the ability of parts makers to fund buyouts will be critical, experts say. Private equity funds can help fund Indian companies’ purchases. “Private equity transactions in the last five years in auto component firms have given them the muscle to look at acquisitions,” said Harish HV, partner, Indian leadership team, Grant Thornton, India.
“We expect M&As to be focused on the auto component segment with small and medium component makers wanting to become tier-I suppliers to global auto companies.”
According to him, the current scenario is no different from what happened in 2008-09 in terms of M&A. “Instead, the situation is better as we have had a good run last year. Talking about certain hiccups faced by auto component makers who went out for acquisitions in Europe and had to change their strategy, Harish said, “There are certain deals that work and certain that do not. It’s part of the game.” Bharat Forge had acquired European forging companies in early 2000, but was hit later as global auto makers cut production in 2008-09 responding to a slowing economy.
“Acquisitions made in the forging business during 2003-2005 were doing well till 2007, but then collapse of the investment bank Lehman Brothers changed everything,” said Amit Kasat, an analyst with Standard Chartered Research in Mumbai. “These companies did not look at bringing down cost and streamlining operations and that’s what happened to Bharat Forge.”
“We expect more mergers and acquisitions in two-wheelers and trucks than in cars in the Indian automotive industry in the coming decade,” said Vikas Sehgal, global head of automotive and MD, Rothschild, a global financial M&A advisory. “One would not be surprised if TVS Motor Company, Bajaj Auto or Hero MotoCorp go out to buy a global two-wheeler maker. We cannot say now if it’s American, Korean, Japanese or Chinese, but the segment will see some big ticket buyouts by Indian makers,” he added.
The signs are already visible. India’s largest two-wheeler maker Hero MotoCorp, which broke its venture with Japanese Honda Motor in December 2010, has begun investing in new technologies and R&D to sell bikes in the overseas market. The Munjals-owned firm needs to speed up as it can sell products with Honda technology only until June 2014.
“Hero is building their technology know-how and reach in the overseas market,” Chandresh Ruparel, MD, Rothschild (India), said. “It may look at technology buyouts and acquisitions in the global space,” Rothschild’s Sehgal said, adding the company has deep pockets to do so. The company has a cash balance of R1,907.12 crore until March 2011.
Some of the global targets for Indian two-wheeler players include Ducati and Harley-Davidson, Sehgal added, since these are niche players in the sports and touring bike categories, respectively.
Weakening economy and falling asset prices attract Indian buyers. “Asset prices have seen a fall in Europe in the auto parts segment, too, as demand from major markets remain muted and capacities lie under utilised,” Kumar Kandaswami, a senior director at Deloitte Touche Tohmatsu India, said, “There are many small and medium auto component makers in Europe which are private equity-owned and they may look at exiting. Technology and customer base of these companies would be attractive for Indian firms.” Some consultants say the target will be mid-level auto part makers.
“European auto parts companies with sales anywhere between R140 crore and R1,070 crore are targets,” said an auto consultant, who did not wish to be identified, as he is not authorised to speak to the media.
“For auto companies, it would be all about the right target, while for parts makers, small and medium in specific, it would be about how would they finance the deals,” Kandaswami of Deloitte said.
Indian companies have spent less on purchases. Companies spent $352.38 million for M&As between calendar January and now, one fourth of 2010, data collected by VCCEdge, the financial research platform of VCCircle.com, shows.
Smaller truck and bus makers such as Iveco and Paccar, compared to giants Volvo, Scania and Daimler, would be open for tie ups or buyouts in India, Seghal of Rothschild said.
“Indian and Chinese players will consolidate and define the automotive industry worldwide,” Sehgal said. Rothschild estimates that by 2030, India will be the second largest automotive market in the world by sales, overtaking the US. India will add over 20% of the global capacity in the next 10 years. Indian domestic automakers sold 11.3 million units between April and November 2011, data from the Society of Indian Automobile Manufacturers’ report released on December 8 showed.
But the ability of parts makers to fund buyouts will be critical, experts say. Private equity funds can help fund Indian companies’ purchases. “Private equity transactions in the last five years in auto component firms have given them the muscle to look at acquisitions,” said Harish HV, partner, Indian leadership team, Grant Thornton, India.
“We expect M&As to be focused on the auto component segment with small and medium component makers wanting to become tier-I suppliers to global auto companies.”
According to him, the current scenario is no different from what happened in 2008-09 in terms of M&A. “Instead, the situation is better as we have had a good run last year. Talking about certain hiccups faced by auto component makers who went out for acquisitions in Europe and had to change their strategy, Harish said, “There are certain deals that work and certain that do not. It’s part of the game.” Bharat Forge had acquired European forging companies in early 2000, but was hit later as global auto makers cut production in 2008-09 responding to a slowing economy.
“Acquisitions made in the forging business during 2003-2005 were doing well till 2007, but then collapse of the investment bank Lehman Brothers changed everything,” said Amit Kasat, an analyst with Standard Chartered Research in Mumbai. “These companies did not look at bringing down cost and streamlining operations and that’s what happened to Bharat Forge.”
Weak Re to Force Price Rise to Protect Margins
Investors appear bullish on the two-wheeler sector and the stocks of the two leading players,Hero MotoCorp and Bajaj Auto,ended Wednesdays trade,not too far away from their respective recent 52-week highs.And thats largely attributed to domestic two-wheeler sales in units that have grown 16.1% YoY during April-November of FY12,according to data from industry body SIAM,at a time when auto finance rates that have not yet shown any signs of easing.Analysts point out that these leading two-wheeler players have benefited from their rural marketing expansion strategy and introduction of new models and variants,over the past several quarters.
Bajaj Auto however,enjoys superior operating profit margins vis-vis its nearest rivals in the twowheeler segment Bajaj Auto ended Wednesdays trade 0.75% lower at.1,648,and it had reached its 52-week high in late October.Also,Hero MotoCorp ended the days trade at.1,966.6.In contrast,domestic passenger car sales in units during April- November of FY12 declined 0.5% YoY,according to industry data.And that was partly due to the earlier strike at Maruti Suzukis facilities,which curtailed output at this leading player in the fourwheeler sector.Analysts highlight that consumers have also shown signs of delaying their four-wheeler purchase and its impact on sales volume of this segment of the auto segment.The Maruti Suzuki stock ended Wednesday trade at.947,and not far from its recent 52-week low.However,a concern for the broader auto sector is the near 21% depreciation of the rupee over the past few months,at a time when global commodity input prices have shown some signs of easing.It is understood that several players in the auto sector are looking to raise their product prices in the new calendar year,to protect their operating margins.
Besides,media reports indicate that a Planning Commission working group has suggested a green surcharge on petrol,and an urban transport tax on purchase of new cars and two-wheelers.And with little clarity on implementation,analysts are still waiting to assess the potential impact of these measures on the broader auto sector.Bajaj Auto trades at a P/E of 13.6 times on a trailing fourquarter basis while Hero MotoCorp trades at a P/E of 18.8 times.
Bajaj Auto however,enjoys superior operating profit margins vis-vis its nearest rivals in the twowheeler segment Bajaj Auto ended Wednesdays trade 0.75% lower at.1,648,and it had reached its 52-week high in late October.Also,Hero MotoCorp ended the days trade at.1,966.6.In contrast,domestic passenger car sales in units during April- November of FY12 declined 0.5% YoY,according to industry data.And that was partly due to the earlier strike at Maruti Suzukis facilities,which curtailed output at this leading player in the fourwheeler sector.Analysts highlight that consumers have also shown signs of delaying their four-wheeler purchase and its impact on sales volume of this segment of the auto segment.The Maruti Suzuki stock ended Wednesday trade at.947,and not far from its recent 52-week low.However,a concern for the broader auto sector is the near 21% depreciation of the rupee over the past few months,at a time when global commodity input prices have shown some signs of easing.It is understood that several players in the auto sector are looking to raise their product prices in the new calendar year,to protect their operating margins.
Besides,media reports indicate that a Planning Commission working group has suggested a green surcharge on petrol,and an urban transport tax on purchase of new cars and two-wheelers.And with little clarity on implementation,analysts are still waiting to assess the potential impact of these measures on the broader auto sector.Bajaj Auto trades at a P/E of 13.6 times on a trailing fourquarter basis while Hero MotoCorp trades at a P/E of 18.8 times.
Harley COO: Bikes will get more accessible
Harley Davidson's chief operating officer Matt Levatich said the company will offer motor bikes that are more "physically and financially accessible" to buyers both in the United States and abroad, but it will continue to keep its manufacturing operations almost entirely in the country.
Levatich said at the Reuters Global Manufacturing and Transportation Summit that the company is striving to appeal to a broader array of buyers, from women and minorities in the US to those in emerging markets. While volume and market share for several of its bikes have grown in 2011, the company's products still appeal to a narrow band of buyers. "In the past, our market was predominantly core customers in the US," Levatich said. "We see an opportunity, not to make (scooter-sized) bikes by any stretch, but to make Harley-Davidsons that are physically and financially accessible for emerging markets, for international markets, for the US, for that matter."
The least expensive bike Harley-Davidson offers is priced at about $8,000. Levatich said the company may consider making smaller and less expensive bikes.
However, he said the company will continue to do the bulk of its manufacturing in the United States, where it assembles nearly all the bikes it sells in the world. It also does some "complete-knock-down" assembly of motorcycles in Brazil and India due to tariff issues in those countries.
To date, Harley-Davidson has taken a largely go-it-alone strategy in places such as China and India, instead of finding a partner to develop or sell bikes. That is part ly because the company has been held back by international partnerships before, Levatich said, citing the example of a former Italian distributor that promoted lower-cost Harley sportster bikes over its upper-end models.
Levatich said if the company should some day sell a bike that appeals only to emerging markets, it would keep its options open on where to build it. But for now, it has no plans to open production plants outside the US. He said India represents a considerable opportunity for Harley-Davidson bikes — which he considers to be strictly a "leisure" product — given the acceptance of bikes in that market.
Levatich said at the Reuters Global Manufacturing and Transportation Summit that the company is striving to appeal to a broader array of buyers, from women and minorities in the US to those in emerging markets. While volume and market share for several of its bikes have grown in 2011, the company's products still appeal to a narrow band of buyers. "In the past, our market was predominantly core customers in the US," Levatich said. "We see an opportunity, not to make (scooter-sized) bikes by any stretch, but to make Harley-Davidsons that are physically and financially accessible for emerging markets, for international markets, for the US, for that matter."
The least expensive bike Harley-Davidson offers is priced at about $8,000. Levatich said the company may consider making smaller and less expensive bikes.
However, he said the company will continue to do the bulk of its manufacturing in the United States, where it assembles nearly all the bikes it sells in the world. It also does some "complete-knock-down" assembly of motorcycles in Brazil and India due to tariff issues in those countries.
To date, Harley-Davidson has taken a largely go-it-alone strategy in places such as China and India, instead of finding a partner to develop or sell bikes. That is part ly because the company has been held back by international partnerships before, Levatich said, citing the example of a former Italian distributor that promoted lower-cost Harley sportster bikes over its upper-end models.
Levatich said if the company should some day sell a bike that appeals only to emerging markets, it would keep its options open on where to build it. But for now, it has no plans to open production plants outside the US. He said India represents a considerable opportunity for Harley-Davidson bikes — which he considers to be strictly a "leisure" product — given the acceptance of bikes in that market.
Hero, Bajaj take battle of bikes to Africa & LatAm
The battle for two-wheelers market share is crossing Indian boundaries to Africa and Latin America, which give better margins.
Bajaj Auto, which is an early mover in these markets, in September built an assembling unit in Tanzania, and plans to sell bikes in Brazil. Its rival Hero MotoCorp is keen to sell its products in these markets, and consultants say its largest-selling Indian bike Splendor will be sold there by mid-2012. Its joint venture with Honda Motor, broken in December last year, allowed the company to sell its bikes to neighbours Bangladesh and Sri Lanka and was barred in countries the Japanese company sold its bikes.
“Latin America and Africa are the next markets of growth for two-wheeler makers,” says Abdul Majeed, auto practice leader, PricewaterhouseCoopers India. “Indian companies are looking for a niche presence in these markets.”
Analysts say it will be no cakewalk for the two companies in these markets as Japanese bike makers Honda and Yamaha have a formidable market share and network in Latin America. They will also face tough competition from cheaper bikes from Chinese firms.
“Hero will have to set up a small operation unit to assemble its motorcycles and appoint distributors, but all this will take time,” said Amit Kasat, an analyst with Standard Chartered Research in Mumbai. “Hero, known for its 100cc range, would find it tough selling against the Chinese makers in African market.”
“Bajaj is looking at creating a cult brand with its focus more on more powerful bikes,” he added.
“There were certain parts of Latin America where Honda was sourcing Splendor bikes from the erstwhile Hero Honda and selling under its brand. Hero is more or less unknown in the export market,” said Mahantesh Sabard, auto analyst with domestic brokerage Fortune Broking Services.
Bajaj will have to leverage its partnership with Austria's KTM and Japan's Kawasaki to sell bikes in Africa and Latin America as it lacks products for first-time buyers or at the entry level, unlike its rival Hero, the largest bike maker in the entry-level segment in India.
“Bajaj Auto is looking at profitable growth and is not running behind volumes alone,” said Standard Chartered Research's Kasat.
Companies earn anywhere between 3% and 5% more margins by selling bikes abroad than in India. Bajaj Auto reported operating margins of 20.19% in the September quarter against 19.1% in the preceding June quarter as its sold more bikes abroad, improved operating efficiencies and reduced advertising spend. Hero reported 15.8% operating margins in the three months to September against 13.6% in the June quarter.
Exports for Hero are anywhere between 3% and 4% of the company's total sales of 5.4 million units for 2010-11. “The company plans to expand this to 10% in the next five to six years,” Pawan Munjal, managing director and chief executive officer, Hero MotoCorp, had said early this year.
“Our exports have grown five times in the past six years," Rajiv Bajaj, managing director, Bajaj Auto, said in an earlier interaction. Exports now make up 36% of total sales from 5% few years back. Bajaj expects exports to outstrip domestic growth this year, at over 1.5 million units as against 1.2 million sold last year.
Bajaj had also spelt out the company's focus on fewer products but with a wider market reach. “We have kept scooters on the back burner because we want to focus on one product, that is, motorcycles,” Bajaj said “We want to be a branded company and not a commoditised company.”
“When we looked around, we saw that companies that choose one thing are more successful than ones that are into too many things – you become a jack of all trades but not an expert,” Bajaj said. “People who make everything do not make money.” he added.
Southeast Asian markets are also on the radar of the two companies. While Hero is looking to enter these markets, Bajaj Auto is looking at further expanding its presence in Thailand and Vietnam.
But again, selling bikes in South Asian markets will be tough as the markets are dominated by Japanese bike makers. Bajaj Auto and TVS Motor have earlier burnt their fingers there,” said a Mumbai-based consultant. “The product line up needed for these markets is completely different, and the Indian companies don't have it.”
"These markets have huge demand for mopeds, something like the TVS Stroke and Neo,” he added.
Bajaj Auto, which is an early mover in these markets, in September built an assembling unit in Tanzania, and plans to sell bikes in Brazil. Its rival Hero MotoCorp is keen to sell its products in these markets, and consultants say its largest-selling Indian bike Splendor will be sold there by mid-2012. Its joint venture with Honda Motor, broken in December last year, allowed the company to sell its bikes to neighbours Bangladesh and Sri Lanka and was barred in countries the Japanese company sold its bikes.
“Latin America and Africa are the next markets of growth for two-wheeler makers,” says Abdul Majeed, auto practice leader, PricewaterhouseCoopers India. “Indian companies are looking for a niche presence in these markets.”
Analysts say it will be no cakewalk for the two companies in these markets as Japanese bike makers Honda and Yamaha have a formidable market share and network in Latin America. They will also face tough competition from cheaper bikes from Chinese firms.
“Hero will have to set up a small operation unit to assemble its motorcycles and appoint distributors, but all this will take time,” said Amit Kasat, an analyst with Standard Chartered Research in Mumbai. “Hero, known for its 100cc range, would find it tough selling against the Chinese makers in African market.”
“Bajaj is looking at creating a cult brand with its focus more on more powerful bikes,” he added.
“There were certain parts of Latin America where Honda was sourcing Splendor bikes from the erstwhile Hero Honda and selling under its brand. Hero is more or less unknown in the export market,” said Mahantesh Sabard, auto analyst with domestic brokerage Fortune Broking Services.
Bajaj will have to leverage its partnership with Austria's KTM and Japan's Kawasaki to sell bikes in Africa and Latin America as it lacks products for first-time buyers or at the entry level, unlike its rival Hero, the largest bike maker in the entry-level segment in India.
“Bajaj Auto is looking at profitable growth and is not running behind volumes alone,” said Standard Chartered Research's Kasat.
Companies earn anywhere between 3% and 5% more margins by selling bikes abroad than in India. Bajaj Auto reported operating margins of 20.19% in the September quarter against 19.1% in the preceding June quarter as its sold more bikes abroad, improved operating efficiencies and reduced advertising spend. Hero reported 15.8% operating margins in the three months to September against 13.6% in the June quarter.
Exports for Hero are anywhere between 3% and 4% of the company's total sales of 5.4 million units for 2010-11. “The company plans to expand this to 10% in the next five to six years,” Pawan Munjal, managing director and chief executive officer, Hero MotoCorp, had said early this year.
“Our exports have grown five times in the past six years," Rajiv Bajaj, managing director, Bajaj Auto, said in an earlier interaction. Exports now make up 36% of total sales from 5% few years back. Bajaj expects exports to outstrip domestic growth this year, at over 1.5 million units as against 1.2 million sold last year.
Bajaj had also spelt out the company's focus on fewer products but with a wider market reach. “We have kept scooters on the back burner because we want to focus on one product, that is, motorcycles,” Bajaj said “We want to be a branded company and not a commoditised company.”
“When we looked around, we saw that companies that choose one thing are more successful than ones that are into too many things – you become a jack of all trades but not an expert,” Bajaj said. “People who make everything do not make money.” he added.
Southeast Asian markets are also on the radar of the two companies. While Hero is looking to enter these markets, Bajaj Auto is looking at further expanding its presence in Thailand and Vietnam.
But again, selling bikes in South Asian markets will be tough as the markets are dominated by Japanese bike makers. Bajaj Auto and TVS Motor have earlier burnt their fingers there,” said a Mumbai-based consultant. “The product line up needed for these markets is completely different, and the Indian companies don't have it.”
"These markets have huge demand for mopeds, something like the TVS Stroke and Neo,” he added.
Highway on his plate - Anoop Prakash
The ex-marine is on a mission to capture the Indian market for heavyweight bikes.
I’m on the Gurgaon expressway, going at a relatively sedate 90 kmph considering I’m on Harley-Davidson’s XL 883 cc Roadster (Price tag: Rs 7.5 lakh, but around Rs 13,861 a month on an EMI for five years after a 15 per cent down payment, which is perhaps a much less traumatic way to look at it). It is one of 12 types of motorcycles that the iconic American company has brought to India in a no-holds-barred decision to dominate the market for heavyweight bikes here. Harley’s motorcycles are generally around 50 per cent more than what they cost in the US thanks to import duties, but its recently-built Haryana plant has started assembling three lines (Super Low, Iron, Forty-Eight), effectively bringing that import duty down to anywhere from 30 to 10 per cent, writes Rajiv Rao.
Following me, some 20 paces behind, is the managing director of Harley’s India ops, Anoop Prakash, who is riding a Super Low with the same 883 engine. The highway is packed with fast-moving, anarchic traffic, which is not the greatest of riding experiences. While it’s all right for me who’s ridden bikes on and off while growing up in India and living abroad, it’s an incredible accomplishment for Prakash, who learnt how to ride only two years ago when he joined Harley, and that too on sedate American highways.
Yet, Prakash looks as cool as a hippo in a watering hole but that shouldn’t surprise me. He’s an ex-marine after all, and flirting with death used to be his bread and butter. The Indian road, like war, is probably just another thing to prepare and strategise for. The traffic gets more bunched up and I flick the throttle up a few notches. The famous air-cooled, V-Twin engines set at 45 degree angles for which Harley is famous (and has patented) rocket the bike to 130 kmph and into the fast lane accompanied by that distinctive Harley rumble. I race past everything else just so I can ultimately slow back down and cruise comfortably. These V-Twins are what make Harleys so special, spreading an even displacement of torque (70 Nm @ 3750 Rpm) across gears, allowing you, even in fifth, to still lunge ahead like an excitable race horse, which is quite unusual for a motorcycle.
And yet there is something very comforting about the bike. Heavy as they are, these Harleys make you feel secure and safe even at high speeds. Which is great for anyone who’s watched the beginning of Lawrence of Arabia one too many times, as I have.
“In business – even in the motorcycle business – all I see is people in suits,” says Prakash. We are sitting in Amaranta, a seafood restaurant at the new Oberoi in Gurgaon — a striking, modernist, glass-entombed hotel whose blood-red carpeted lobby looks like it could belong in a David Lynch set. We’re munching Tawa prawns with coconut feni and coriander and some grilled pomfret, which are delightfully fresh and delicately cooked. Prakash may seem like he’s got all the time in the world, riding around rural Haryana with the likes of me, but he’s been a very busy man, setting up six dealerships in India, bringing all five families of his motorcycles to the country, and managing to sell 1,200 bikes so far (the most for any heavyweight brand) — all of it in one year. It’s an impressive feat, but will Suzuki and Honda, both of whom are long established players in the country with solid distribution channels, or even equally legendary bike makers BMW or Ducati going to allow Harley to continue its run?
“Look, we’re in the heavyweight motorcycle business,” says Prakash. “It’s what we do, every day, all day. As a result, we’re not distracted by other segments,” he adds. Prakash says India is in a unique place — with a confluence of wealth, global aspiration and a demand for quality and this makes Harley the ideal contender for the title of king amongst serious motorcycle enthusiasts. Prakash points to BMW’s false start and exit from the country as well as Ducati’s dealership hiccups. This is where Harley rules, says Prakash. “Our customised experience is hard to match,” he says. “The moment you buy a Harley, you belong to one of the most exclusive, and one of the biggest, clubs in the world. It’s a badge of honour,” he says, whipping out his Harley owner’s card and handing it to me for a peek.
A Harley customer first goes through a boot camp, where he or she may get to try out all the different models available before settling on one. “Everyone has a different need and we try to fit the right need for the right rider,” says Prakash. Then, there’s the one thing where all bike makers tend to trip up — after-sales service. “We don’t open a facility until we can guarantee top notch after sales service. We’ve been training technicians all over India. Our head of Service, John McEnaney, has been riding Harleys longer than I’ve been alive,” he adds.
Prakash and I are now on a country road somewhere in Haryana that snakes by the foothills of the Aravallis. The air is wonderfully clean and crisp, and yellow blankets of mustard flowers flank the road. It is a superb riding experience. What makes it even more enjoyable is the terrible shape of the road, dotted with craters, some of them the size of sedans. We open up the bikes wherever we can, braking hard for the big bumps and flying through the smaller ditches. I come out of a corner and gun it — and fail to see an enormous crater. The Harley screams through it, juddering mightily because of its hard suspension, rattling my teeth, but the bike is solidly planted on ground thanks to its heavy frame and fat tyres and it shakes off the encounter as if it were a minor annoyance. In my rear view mirror, I can see Prakash giggling. “Our bikes are built for Indian roads,” he had told me during lunch. It looks that way, although I suspect that after-sales service is probably going to be an overworked department.
Harley, located in Milwaukee, Wisconsin, probably couldn’t land a better candidate to lead its India ops considering Prakash’s credentials. He’s a Minnesota native, a Stanford (undergrad) product and a Harvard Business School graduate with a public policy background, who helped build new business lines for clients while at McKinsey. He also worked as a deputy chief of staff at the office of Housing and Urban Development during the Bush era and is a Republican and good buddy of once-Presidential hopeful Bobby Jindal.
Hanging out in front of the Harley’s sleek office in Gurgaon with the company’s technicians, marketing guys and service personnel allows for a few laughs and a walk down motorcycle memory lane: old habits of pumping the back brakes on a bike (because our front ones were non-existent, in general), the glory days of Yamaha’s nippy RX 100, the ongoing debate about the old Bullets versus the new ones with fuel injection engines (and a more modulated “thump”) and so on. Clearly, these guys love bikes, and riding, and Prakash allows anyone working for the company to check a bike out for a spin over the weekend. It feels like a family and that’s a tough act to beat.
I’m on the Gurgaon expressway, going at a relatively sedate 90 kmph considering I’m on Harley-Davidson’s XL 883 cc Roadster (Price tag: Rs 7.5 lakh, but around Rs 13,861 a month on an EMI for five years after a 15 per cent down payment, which is perhaps a much less traumatic way to look at it). It is one of 12 types of motorcycles that the iconic American company has brought to India in a no-holds-barred decision to dominate the market for heavyweight bikes here. Harley’s motorcycles are generally around 50 per cent more than what they cost in the US thanks to import duties, but its recently-built Haryana plant has started assembling three lines (Super Low, Iron, Forty-Eight), effectively bringing that import duty down to anywhere from 30 to 10 per cent, writes Rajiv Rao.
Following me, some 20 paces behind, is the managing director of Harley’s India ops, Anoop Prakash, who is riding a Super Low with the same 883 engine. The highway is packed with fast-moving, anarchic traffic, which is not the greatest of riding experiences. While it’s all right for me who’s ridden bikes on and off while growing up in India and living abroad, it’s an incredible accomplishment for Prakash, who learnt how to ride only two years ago when he joined Harley, and that too on sedate American highways.
Yet, Prakash looks as cool as a hippo in a watering hole but that shouldn’t surprise me. He’s an ex-marine after all, and flirting with death used to be his bread and butter. The Indian road, like war, is probably just another thing to prepare and strategise for. The traffic gets more bunched up and I flick the throttle up a few notches. The famous air-cooled, V-Twin engines set at 45 degree angles for which Harley is famous (and has patented) rocket the bike to 130 kmph and into the fast lane accompanied by that distinctive Harley rumble. I race past everything else just so I can ultimately slow back down and cruise comfortably. These V-Twins are what make Harleys so special, spreading an even displacement of torque (70 Nm @ 3750 Rpm) across gears, allowing you, even in fifth, to still lunge ahead like an excitable race horse, which is quite unusual for a motorcycle.
And yet there is something very comforting about the bike. Heavy as they are, these Harleys make you feel secure and safe even at high speeds. Which is great for anyone who’s watched the beginning of Lawrence of Arabia one too many times, as I have.
“In business – even in the motorcycle business – all I see is people in suits,” says Prakash. We are sitting in Amaranta, a seafood restaurant at the new Oberoi in Gurgaon — a striking, modernist, glass-entombed hotel whose blood-red carpeted lobby looks like it could belong in a David Lynch set. We’re munching Tawa prawns with coconut feni and coriander and some grilled pomfret, which are delightfully fresh and delicately cooked. Prakash may seem like he’s got all the time in the world, riding around rural Haryana with the likes of me, but he’s been a very busy man, setting up six dealerships in India, bringing all five families of his motorcycles to the country, and managing to sell 1,200 bikes so far (the most for any heavyweight brand) — all of it in one year. It’s an impressive feat, but will Suzuki and Honda, both of whom are long established players in the country with solid distribution channels, or even equally legendary bike makers BMW or Ducati going to allow Harley to continue its run?
“Look, we’re in the heavyweight motorcycle business,” says Prakash. “It’s what we do, every day, all day. As a result, we’re not distracted by other segments,” he adds. Prakash says India is in a unique place — with a confluence of wealth, global aspiration and a demand for quality and this makes Harley the ideal contender for the title of king amongst serious motorcycle enthusiasts. Prakash points to BMW’s false start and exit from the country as well as Ducati’s dealership hiccups. This is where Harley rules, says Prakash. “Our customised experience is hard to match,” he says. “The moment you buy a Harley, you belong to one of the most exclusive, and one of the biggest, clubs in the world. It’s a badge of honour,” he says, whipping out his Harley owner’s card and handing it to me for a peek.
A Harley customer first goes through a boot camp, where he or she may get to try out all the different models available before settling on one. “Everyone has a different need and we try to fit the right need for the right rider,” says Prakash. Then, there’s the one thing where all bike makers tend to trip up — after-sales service. “We don’t open a facility until we can guarantee top notch after sales service. We’ve been training technicians all over India. Our head of Service, John McEnaney, has been riding Harleys longer than I’ve been alive,” he adds.
Prakash and I are now on a country road somewhere in Haryana that snakes by the foothills of the Aravallis. The air is wonderfully clean and crisp, and yellow blankets of mustard flowers flank the road. It is a superb riding experience. What makes it even more enjoyable is the terrible shape of the road, dotted with craters, some of them the size of sedans. We open up the bikes wherever we can, braking hard for the big bumps and flying through the smaller ditches. I come out of a corner and gun it — and fail to see an enormous crater. The Harley screams through it, juddering mightily because of its hard suspension, rattling my teeth, but the bike is solidly planted on ground thanks to its heavy frame and fat tyres and it shakes off the encounter as if it were a minor annoyance. In my rear view mirror, I can see Prakash giggling. “Our bikes are built for Indian roads,” he had told me during lunch. It looks that way, although I suspect that after-sales service is probably going to be an overworked department.
Harley, located in Milwaukee, Wisconsin, probably couldn’t land a better candidate to lead its India ops considering Prakash’s credentials. He’s a Minnesota native, a Stanford (undergrad) product and a Harvard Business School graduate with a public policy background, who helped build new business lines for clients while at McKinsey. He also worked as a deputy chief of staff at the office of Housing and Urban Development during the Bush era and is a Republican and good buddy of once-Presidential hopeful Bobby Jindal.
Hanging out in front of the Harley’s sleek office in Gurgaon with the company’s technicians, marketing guys and service personnel allows for a few laughs and a walk down motorcycle memory lane: old habits of pumping the back brakes on a bike (because our front ones were non-existent, in general), the glory days of Yamaha’s nippy RX 100, the ongoing debate about the old Bullets versus the new ones with fuel injection engines (and a more modulated “thump”) and so on. Clearly, these guys love bikes, and riding, and Prakash allows anyone working for the company to check a bike out for a spin over the weekend. It feels like a family and that’s a tough act to beat.
Royal Enfield keen to hire young talent pool for it's upcoming plant
‘Catch them young' is the new hiring mantra at Royal Enfield, the Chennai-based motorcycle manufacturer.
“We want to attract youngsters who are passionate about biking and understand what it is all about,” Dr Venki Padmanabhan, Chief Executive Officer, told Business Line.
As Royal Enfield gears up to commission its new plant in one of the city's growing auto hubs, its top priority is to get the right talent. “People are coming from all over the country to work in this part of Chennai.
The challenge is to get this talent pool to think beyond the big fish and come to us,” he said.
In fact, the location of the new plant is critical to the hiring process.
For decades, Royal Enfield has operated out of the northern part of Chennai which is not exactly the most attractive location for an auto company.
In comparison, the new site has the likes of Renault-Nissan and Daimler Commercial Vehicles as neighbours.
This is expected to make up for Royal Enfield's relatively smaller size.
“If we are small fish in a big pond, we have to position ourselves accurately in the job market because that is the only way we will get what we need,” Dr Padmanabhan said.
The company also believes that there are advantages in being small, especially when it comes to career planning and growth.
As Mr Siddhartha Lal, Managing Director & CEO of Eicher Motors (which owns Royal Enfield) added, “When a youngster comes into our organisation, he discovers that it is flat and gets areas of responsibilities assigned to him soon. We are not as straitjacketed as other multinationals where the road is narrow.”
Order backlog
The new plant is equally critical from the viewpoint of reducing the waiting list for the company's motorcycles which is as long as eight months.
Its actual commissioning is still sometime away which means the order backlog will continue for a while.
This is becoming a cause for concern, especially when the present facility is already bursting at its seams. “We want to be a paranoid company, at least internally, even though it is a cool image to the outside world.
“As much as it is great to have more customers today, we cannot take this for granted as nobody can wait forever,” Dr Padmanabhan said.
The best part about the new plant is that it will have a state-of-the-art paint shop quite unlike the present one which the company “is barely holding together” as it is obsolete technology with capacity issues.
There will also be a lot of focus on the engine, frame, tank and other sheet metal parts.
Issues relating to people, training and systems are as critical because, for all practical purposes, the new facility marks the beginning of a fresh innings at Royal Enfield.
“We want to attract youngsters who are passionate about biking and understand what it is all about,” Dr Venki Padmanabhan, Chief Executive Officer, told Business Line.
As Royal Enfield gears up to commission its new plant in one of the city's growing auto hubs, its top priority is to get the right talent. “People are coming from all over the country to work in this part of Chennai.
The challenge is to get this talent pool to think beyond the big fish and come to us,” he said.
In fact, the location of the new plant is critical to the hiring process.
For decades, Royal Enfield has operated out of the northern part of Chennai which is not exactly the most attractive location for an auto company.
In comparison, the new site has the likes of Renault-Nissan and Daimler Commercial Vehicles as neighbours.
This is expected to make up for Royal Enfield's relatively smaller size.
“If we are small fish in a big pond, we have to position ourselves accurately in the job market because that is the only way we will get what we need,” Dr Padmanabhan said.
The company also believes that there are advantages in being small, especially when it comes to career planning and growth.
As Mr Siddhartha Lal, Managing Director & CEO of Eicher Motors (which owns Royal Enfield) added, “When a youngster comes into our organisation, he discovers that it is flat and gets areas of responsibilities assigned to him soon. We are not as straitjacketed as other multinationals where the road is narrow.”
Order backlog
The new plant is equally critical from the viewpoint of reducing the waiting list for the company's motorcycles which is as long as eight months.
Its actual commissioning is still sometime away which means the order backlog will continue for a while.
This is becoming a cause for concern, especially when the present facility is already bursting at its seams. “We want to be a paranoid company, at least internally, even though it is a cool image to the outside world.
“As much as it is great to have more customers today, we cannot take this for granted as nobody can wait forever,” Dr Padmanabhan said.
The best part about the new plant is that it will have a state-of-the-art paint shop quite unlike the present one which the company “is barely holding together” as it is obsolete technology with capacity issues.
There will also be a lot of focus on the engine, frame, tank and other sheet metal parts.
Issues relating to people, training and systems are as critical because, for all practical purposes, the new facility marks the beginning of a fresh innings at Royal Enfield.
Mahindra to launch Mojo, revamped Stallio
Mahindra 2 Wheelers, part of the Mahindra Group, will relaunch Stallio, its 110 cc motorcycle this fiscal, and follow it up with Mojo, a 300 CC motorcycle.
“We expect to roll out Stallio very soon. This would be followed by the launch of Mojo next year,” said Viren Popli, senior VP - marketing & sales, Mahindra Two Wheelers.
Mahindra launched Stallio in 2010 but discontinued its production in February this year, following complaints from customers. The company admitted that certain parts of the bike required fine-tuning.
The company on Monday launched Duro DZ, a 125 cc scooter, in Andhra Pradesh and Kerala markets. With a design based on customer feedback, the company said, it would suit Indian roads. Duro will have compete with the likes of Activa, Aviator and Access in the segment.
The company has a manufacturing capacity of one million units per year and uses about 30 per cent of it. “We would ramp up the production based on the market response,” said Popli, adding that the company had about eight per cent market share in the two-wheeler segment, which is estimated to be 3,00,000 units a month and growing at around 20 per cent. It is exploring export opportunities for Duro.
“We expect to roll out Stallio very soon. This would be followed by the launch of Mojo next year,” said Viren Popli, senior VP - marketing & sales, Mahindra Two Wheelers.
Mahindra launched Stallio in 2010 but discontinued its production in February this year, following complaints from customers. The company admitted that certain parts of the bike required fine-tuning.
The company on Monday launched Duro DZ, a 125 cc scooter, in Andhra Pradesh and Kerala markets. With a design based on customer feedback, the company said, it would suit Indian roads. Duro will have compete with the likes of Activa, Aviator and Access in the segment.
The company has a manufacturing capacity of one million units per year and uses about 30 per cent of it. “We would ramp up the production based on the market response,” said Popli, adding that the company had about eight per cent market share in the two-wheeler segment, which is estimated to be 3,00,000 units a month and growing at around 20 per cent. It is exploring export opportunities for Duro.
Foreign Firms flock to auto market
Despite high, and almost inevitable, rate of JV separations, attractive dowry prospects keep drawing suitors.
More trucks and buses have been sold this year in India than cars, giving the commercial vehicle (CV) segment a growth that beat forecasts.
Optimism derived from this data gave Munich-headquartered MAN SE the confidence to fork out Rs 1,050 crore to buy the stake held by its partner of five years, Force Motors of Pune, in Man Force Trucks. The decision was announced last month.
The German company will tread solo in the Indian CV market, which, analysts say, is poised to grow at a compound annual rate of 12 per cent. With its technological prowess and vast product range, MAN, one of Europe’s largest CV makers, will expand business while keeping an option to join forces with sister concern Scania, another European truck maker with a small operation in India.
In a similar case of a JV ending but with the Indian partner buying out the foreign one, the Munjals who run the 55-year-old Hero Group bought out Honda Motor Corporation in the sector’s most successful joint venture company, Hero Honda. This paved the way for the Indian group to develop its own research and development (R&D), enter the two-wheeler segment and export market, which were earlier restricted.
Over little more than a decade, 13 foreign automotive companies (see table) have dissolved their partnerships with Indian companies before deciding to venture solo, setting up their own manufacturing, sales and distribution shops.
Despite a spate of failed JVs, more partnerships were formed over the past decade than were broken. New JVs, for development of products and engines in trucks, buses, motorcycles and construction equipment, were formed.
JVS TO GO ON
Analysts say no clear conclusions can be drawn from the data. The Indian market holds significant importance for automotive companies experiencing saturation in Western demand. This means JVs in the automobile sector will continue to be formed. “Foreign companies know the Indian automotive market cannot be counted in the same breath as other international markets, as the demand dynamics is different, owing to different consumer aspects,” said a Mumbai-based analyst. “The key is to bring a local partner on board, understand the market movements and establish the auto component supplier base before you achieve full control of the operations.”
A recent JV break-up that got wide attention was of Mahindra & Mahindra and Renault. The Indian SUV market leader bought Renault’s 49 per cent stake in the JV after its only model, the Logan car, failed to clock encouraging numbers.
RIDING PILLION HAS BEEN TOUGH
How auto joint ventures have fared in the last decade
JVS THAT BROKE PRODUCTS REASON YEAR*
Force Motors MAN Trucks Operational restrictions 2011
Hero Honda Splendor, passion Operational restrictions 2010-11
Mahindra Renault Logan Sliding sales 2010
Bajaj Renault Nissan ULC Change of plans 2009
Swaraj Mazda Trucks Indian partner exits 2009
Mahindra Renault Nissan Change of plans by M&M 2008
Kinetic Hyosung Aquila, Comet Steep pricing 2004
TVS Suzuki Fiero, Shaolin Technology issues 2001
Premier Fiat Padmini, Uno Labour strike 2001
Premier Peugeot Peugeot 309 Mounting losses 2001
GM Hindustan Motors Opel Astra GM buys stake 1999
LML Piaggio Vespa 150NV Ownership issues 1999
Kinetic Honda Zoom, Marvel Ownership issues 1998
Yamaha Escorts RD 350, RX100 Failing demand 1996
Hero BMW F650 Poor consumer response 1995-96
CURRENT PARTNERSHIPS PRODUCTS
Tata Motors Hitachi Construction equipment
Tata Marcopolo Buses
Tata Fiat Cars
Ashok Leyland Nissan LCVs
Ashok Leyland John Deere Construction equipment
Ashok Leyland Continental AG Infotronics
Ashok Leyland Alteams Components
Bajaj Kawasaki Bikes; now in limited form
Bajaj KTM Bikes
Hindustan Motors Mitsubishi Cars
Toyota Kirloskar Cars and SUVs
Honda Siel Cars and SUVs
Mahindra Navistar Trucks
Volvo Eicher Trucks
Automobile Corporation of Goa** Buses
Garware Hyosung Bikes
*Year the JV fell apart; **Tata Motors, Government of Goa
“When perspectives change, initial agreements fail to benefit both companies in an alliance. JVs (eventually) fall apart,” said Abdul Majeed, leader automotive practice, PricewaterhouseCoopers. M&M scrapped the Logan name, made a few changes and launched the Verito, an SUV, which is doing better than its predecessor.
OWN AMBITIONS
Among reasons why partnerships come apart, say experts, are lack of brand exposure and sales growth, insufficient funds, lack of focus on segments, reluctance to part with technology, labour trouble and independent ambitions.
In the Hero Honda case, the partners split to follow individual strategies. While the Munjals have unveiled a new brand identity, Hero MotoCorp, to start establishing the company’s presence abroad, Honda is preparing to corner a larger share in the Indian market, the second biggest in the world for two-wheelers.
The length of a partnership depends, in some cases, on whether both players are willing to dig in their heels and invest money. “Start-ups have long gestation period and require considerable monetary commitment from both partners. Foreign companies entering India have deep pockets, unlike their domestic counterparts,” said Jagdish Khattar, chairman and managing director, Carnation Auto, a car servicing company, and former managing director of Maruti Suzuki.
“How long a JV can sustain depends on how much appetite Indian companies have for burning money. They often decide to sell off their stake.”
The Premier-Fiat JV of the late 1990s illustrates his point. The Indo-Italian JV produced the affordable Uno hatchback from the Kurla plant in Mumbai. However, the car did not sell as much as both companies had hoped for, resulting in under-utilisation of the plant, with Fiat losing money. A labour strike also crippled the factory, shutting production. Fiat’s brand and that of Premier took a hit, inducing the Italian car maker to shift to Pune for a new facility, where it brought Tata Motors on board. The Fiat Tata JV still makes cars.
More trucks and buses have been sold this year in India than cars, giving the commercial vehicle (CV) segment a growth that beat forecasts.
Optimism derived from this data gave Munich-headquartered MAN SE the confidence to fork out Rs 1,050 crore to buy the stake held by its partner of five years, Force Motors of Pune, in Man Force Trucks. The decision was announced last month.
The German company will tread solo in the Indian CV market, which, analysts say, is poised to grow at a compound annual rate of 12 per cent. With its technological prowess and vast product range, MAN, one of Europe’s largest CV makers, will expand business while keeping an option to join forces with sister concern Scania, another European truck maker with a small operation in India.
In a similar case of a JV ending but with the Indian partner buying out the foreign one, the Munjals who run the 55-year-old Hero Group bought out Honda Motor Corporation in the sector’s most successful joint venture company, Hero Honda. This paved the way for the Indian group to develop its own research and development (R&D), enter the two-wheeler segment and export market, which were earlier restricted.
Over little more than a decade, 13 foreign automotive companies (see table) have dissolved their partnerships with Indian companies before deciding to venture solo, setting up their own manufacturing, sales and distribution shops.
Despite a spate of failed JVs, more partnerships were formed over the past decade than were broken. New JVs, for development of products and engines in trucks, buses, motorcycles and construction equipment, were formed.
JVS TO GO ON
Analysts say no clear conclusions can be drawn from the data. The Indian market holds significant importance for automotive companies experiencing saturation in Western demand. This means JVs in the automobile sector will continue to be formed. “Foreign companies know the Indian automotive market cannot be counted in the same breath as other international markets, as the demand dynamics is different, owing to different consumer aspects,” said a Mumbai-based analyst. “The key is to bring a local partner on board, understand the market movements and establish the auto component supplier base before you achieve full control of the operations.”
A recent JV break-up that got wide attention was of Mahindra & Mahindra and Renault. The Indian SUV market leader bought Renault’s 49 per cent stake in the JV after its only model, the Logan car, failed to clock encouraging numbers.
RIDING PILLION HAS BEEN TOUGH
How auto joint ventures have fared in the last decade
JVS THAT BROKE PRODUCTS REASON YEAR*
Force Motors MAN Trucks Operational restrictions 2011
Hero Honda Splendor, passion Operational restrictions 2010-11
Mahindra Renault Logan Sliding sales 2010
Bajaj Renault Nissan ULC Change of plans 2009
Swaraj Mazda Trucks Indian partner exits 2009
Mahindra Renault Nissan Change of plans by M&M 2008
Kinetic Hyosung Aquila, Comet Steep pricing 2004
TVS Suzuki Fiero, Shaolin Technology issues 2001
Premier Fiat Padmini, Uno Labour strike 2001
Premier Peugeot Peugeot 309 Mounting losses 2001
GM Hindustan Motors Opel Astra GM buys stake 1999
LML Piaggio Vespa 150NV Ownership issues 1999
Kinetic Honda Zoom, Marvel Ownership issues 1998
Yamaha Escorts RD 350, RX100 Failing demand 1996
Hero BMW F650 Poor consumer response 1995-96
CURRENT PARTNERSHIPS PRODUCTS
Tata Motors Hitachi Construction equipment
Tata Marcopolo Buses
Tata Fiat Cars
Ashok Leyland Nissan LCVs
Ashok Leyland John Deere Construction equipment
Ashok Leyland Continental AG Infotronics
Ashok Leyland Alteams Components
Bajaj Kawasaki Bikes; now in limited form
Bajaj KTM Bikes
Hindustan Motors Mitsubishi Cars
Toyota Kirloskar Cars and SUVs
Honda Siel Cars and SUVs
Mahindra Navistar Trucks
Volvo Eicher Trucks
Automobile Corporation of Goa** Buses
Garware Hyosung Bikes
*Year the JV fell apart; **Tata Motors, Government of Goa
“When perspectives change, initial agreements fail to benefit both companies in an alliance. JVs (eventually) fall apart,” said Abdul Majeed, leader automotive practice, PricewaterhouseCoopers. M&M scrapped the Logan name, made a few changes and launched the Verito, an SUV, which is doing better than its predecessor.
OWN AMBITIONS
Among reasons why partnerships come apart, say experts, are lack of brand exposure and sales growth, insufficient funds, lack of focus on segments, reluctance to part with technology, labour trouble and independent ambitions.
In the Hero Honda case, the partners split to follow individual strategies. While the Munjals have unveiled a new brand identity, Hero MotoCorp, to start establishing the company’s presence abroad, Honda is preparing to corner a larger share in the Indian market, the second biggest in the world for two-wheelers.
The length of a partnership depends, in some cases, on whether both players are willing to dig in their heels and invest money. “Start-ups have long gestation period and require considerable monetary commitment from both partners. Foreign companies entering India have deep pockets, unlike their domestic counterparts,” said Jagdish Khattar, chairman and managing director, Carnation Auto, a car servicing company, and former managing director of Maruti Suzuki.
“How long a JV can sustain depends on how much appetite Indian companies have for burning money. They often decide to sell off their stake.”
The Premier-Fiat JV of the late 1990s illustrates his point. The Indo-Italian JV produced the affordable Uno hatchback from the Kurla plant in Mumbai. However, the car did not sell as much as both companies had hoped for, resulting in under-utilisation of the plant, with Fiat losing money. A labour strike also crippled the factory, shutting production. Fiat’s brand and that of Premier took a hit, inducing the Italian car maker to shift to Pune for a new facility, where it brought Tata Motors on board. The Fiat Tata JV still makes cars.
Scooter India Plans New launches
Aiming for a bigger market share, public sector auto maker Scooters India is exploring options to launch new products.
"Your company is evaluating various new product development options to cater to various market segments with a view to higher production and sales," Scooters India Ltd (SIL) said in its Annual Report for 2010-11.
It, however, did not share further details such as whether the products will be a three-wheeler or two-wheeler and when it is likely to be introduced in the market.
The company is planning new launches even as it has incurred losses for over nine years. It is also scouting for a buyer.
In the report, the company said it has not paid salaries to the tune of Rs 4.62 crore to its employees during the last financial year. It also defaulted in paying back Rs 14.42 crore of loans and interests to the government as on March 31 this year.
Talking about workers and its salaries, the auditors said in the report, "The company has made statutory contravention by defaulting on salary and wages amounting to Rs 294.45 lakh and therefore not depositing Rs 167.53 lakh of PF/pension to the trust/PF authorities."
The company accepted that its relationship with workers were not cordial during 2010-11 as it "continued to be under stress" due to non-fulfilment of employees' aspirations.
"The aspiration of employees regarding wage revision and retirement age could not be fulfilled due to company's poor financial health," it added.
The retirement age has been increased to 60 years now from 58 years earlier, it said.
Besides, the company has also defaulted in repayment of debt that was taken from the Central government.
"Due to continuing losses, the company has not repaid principal amount of Rs 787.20 lakh and interest of Rs 658.58 lakh as on March 31, 2011," SIL said.
It also defaulted in repaying the instalment of term loan of Rs 37.32 crore and interests of Rs 9.42 crore, payable to Government of India.
Earlier in May this year, the Cabinet had approved divestment of the government's entire 95.38 per cent stake in SIL, which has been suffering losses since 2002-03 and its entire networth completely eroded by 2008-09.
In March 2009, the company was declared sick and went to the Board for Reconstruction of Public Sector Enterprises ( BRPSE). As on 2010-11, it had a net loss of Rs 17.11 crore.
Incorporated in 1972, SIL started commercial production of scooters under the brand name of 'Vijai Super' for domestic market and 'Lambretta' for overseas market.
Later, it ventured into three-wheelers with the 'Vikram' brand. However, in 1997 the firm stopped two-wheeler production and has since been into manufacturing and marketing 3-wheelers only.
"Your company is evaluating various new product development options to cater to various market segments with a view to higher production and sales," Scooters India Ltd (SIL) said in its Annual Report for 2010-11.
It, however, did not share further details such as whether the products will be a three-wheeler or two-wheeler and when it is likely to be introduced in the market.
The company is planning new launches even as it has incurred losses for over nine years. It is also scouting for a buyer.
In the report, the company said it has not paid salaries to the tune of Rs 4.62 crore to its employees during the last financial year. It also defaulted in paying back Rs 14.42 crore of loans and interests to the government as on March 31 this year.
Talking about workers and its salaries, the auditors said in the report, "The company has made statutory contravention by defaulting on salary and wages amounting to Rs 294.45 lakh and therefore not depositing Rs 167.53 lakh of PF/pension to the trust/PF authorities."
The company accepted that its relationship with workers were not cordial during 2010-11 as it "continued to be under stress" due to non-fulfilment of employees' aspirations.
"The aspiration of employees regarding wage revision and retirement age could not be fulfilled due to company's poor financial health," it added.
The retirement age has been increased to 60 years now from 58 years earlier, it said.
Besides, the company has also defaulted in repayment of debt that was taken from the Central government.
"Due to continuing losses, the company has not repaid principal amount of Rs 787.20 lakh and interest of Rs 658.58 lakh as on March 31, 2011," SIL said.
It also defaulted in repaying the instalment of term loan of Rs 37.32 crore and interests of Rs 9.42 crore, payable to Government of India.
Earlier in May this year, the Cabinet had approved divestment of the government's entire 95.38 per cent stake in SIL, which has been suffering losses since 2002-03 and its entire networth completely eroded by 2008-09.
In March 2009, the company was declared sick and went to the Board for Reconstruction of Public Sector Enterprises ( BRPSE). As on 2010-11, it had a net loss of Rs 17.11 crore.
Incorporated in 1972, SIL started commercial production of scooters under the brand name of 'Vijai Super' for domestic market and 'Lambretta' for overseas market.
Later, it ventured into three-wheelers with the 'Vikram' brand. However, in 1997 the firm stopped two-wheeler production and has since been into manufacturing and marketing 3-wheelers only.
Kinetic Motors to merge with Kinetic Engineering
The boards of directors of Kinetic Engineering Ltd (KEL) and Kinetic Motor Company Ltd (KMCL) today approved a scheme of merger of the latter into the former.
The proposed share ratio for the merger is 7.75:1, meaning that KMCL shareholders will receive four shares of the merged entity KEL for every 31 shares of KMCL.
Following this, the promoters' stake in KEL will be diluted to 52.85 per cent, from the present stake of 57.49 per cent.
The balance shareholding will be held by public and financial institutions. Ms Sulajja Firodia Motwani has been appointed Vice-Chairperson of KEL.
The KEL Board has also passed a proposal to seek approval from the Reserve Bank of India for the extension of the FCCBs worth $18 million issued by it, extending the date of conversion/redemption from February 2013 to February 2014.
Today's move marks the culmination of restructuring at the Kinetic Group following which Kinetic Engineering was reorganised to focus on automotive systems and the components business, especially power trains. KMCL's two-wheeler business was hived off to Mahindra Two-Wheeler Ltd (MTWL) in November 2008, for cash and for a 20 per cent stake in the joint venture company.
“The rationalisation will result in one entity in which shareholders' interests will be aligned as it will have both operations (auto systems) as well as the investment business (through the stake in MTWL) leading to better governance, reduced costs and better shareholding,” Ms Motwani said.
The scheme of amalgamation of the two Firodia Group companies will be filed under Sections 391, 394 and 101 of the Companies Act. KEL will move the application to the stock exchanges for their approvals after which an application will be made to the Bombay High Court for the same.
KPMG has been appointed as the tax and structuring advisor to the scheme of amalgamation.
SSPA has been appointed as the valuer to the merger and IDFC Investment Banking arm will be responsible for providing the fairness opinion.
The proposed share ratio for the merger is 7.75:1, meaning that KMCL shareholders will receive four shares of the merged entity KEL for every 31 shares of KMCL.
Following this, the promoters' stake in KEL will be diluted to 52.85 per cent, from the present stake of 57.49 per cent.
The balance shareholding will be held by public and financial institutions. Ms Sulajja Firodia Motwani has been appointed Vice-Chairperson of KEL.
The KEL Board has also passed a proposal to seek approval from the Reserve Bank of India for the extension of the FCCBs worth $18 million issued by it, extending the date of conversion/redemption from February 2013 to February 2014.
Today's move marks the culmination of restructuring at the Kinetic Group following which Kinetic Engineering was reorganised to focus on automotive systems and the components business, especially power trains. KMCL's two-wheeler business was hived off to Mahindra Two-Wheeler Ltd (MTWL) in November 2008, for cash and for a 20 per cent stake in the joint venture company.
“The rationalisation will result in one entity in which shareholders' interests will be aligned as it will have both operations (auto systems) as well as the investment business (through the stake in MTWL) leading to better governance, reduced costs and better shareholding,” Ms Motwani said.
The scheme of amalgamation of the two Firodia Group companies will be filed under Sections 391, 394 and 101 of the Companies Act. KEL will move the application to the stock exchanges for their approvals after which an application will be made to the Bombay High Court for the same.
KPMG has been appointed as the tax and structuring advisor to the scheme of amalgamation.
SSPA has been appointed as the valuer to the merger and IDFC Investment Banking arm will be responsible for providing the fairness opinion.
Munjals tie Up with MIT for ISB Institute
The Munjals of the Hero group have tied up with the MIT Sloan School of Management to develop their Munjal Global Manufacturing Institute (MGMI),one of the four institutes coming up at the Mohali campus of the Indian School of Business (ISB).The business school of the Massachusetts Institute of Technology will support MGMI by providing faculty support and curriculum design in the area of manufacturing,offer joint executive education programmes and facilitate joint action learning projects for management students.In addition,ISB also gets support from its founding associate schools the Wharton School,the Kellogg School of Management and the London Business School.Describing the MGMI as a one-of-its-kind management institutes dedicated to manufacturing excellence in the country,Sunil Kant Munjal,Chairman of Hero Corporate Serve of Hero Group,said there is no such institute in India dedicated to manufacturing management.He said MGMI aims to develop thought leadership,sharing knowledge with SMEs,advocate policy changes and grooming future leaders in the manufacturing sector.He said India lags in manufacturing and the objective of achieving at least 25% of GDP from it could be realized only if we focus on globally competitive manufacturing.We were fortunate to get a partnership with MIT,which is considered the finest institute in the world known for technology and converting technology into manufactured goods, said Munjal.The Munjal family has pumped in Rs 50 crore to help ISB set up the manufacturing institute,which will consider roping in IIT Ropar and other Punjab-based institutes and industrial houses for creating virtual space for young entrepreneurs.We hope MGMI will offer holistic management expertise for students to build,promote and nurture manufacturing enterprises,apart from creating leaders in policy advocacy, said Munjal.
Auto sales change gear, up 7%
Domestic passenger car sales witnessed a turnaround in November after four consecutive months of contraction, rising by 7% on the back of a marginal revival in demand, coupled with a low base. According to figures released by the Society of Indian Automobile Manufacturers (Siam) on Thursday, domestic passenger car sales stood at 171,131 units in November, as against 159,939 units in the same month last year.
“Domestic car sales have bounced back as the base in November last year was low. Also, we have seen some revival of demand in last month,” Siam senior director Sugato Sen said.
However, sales in December are likely to be lower than in November, he said. “The entry-level car segment, which is the biggest contributor to sales, has been hit most because of fuel hikes and rising interest rates. However, demand in the upper-end segment is comparatively doing well,” he said.
Car sales in India have been declining on a year-on-year basis since July, mainly due to the severe impact of labour issues on the country’s largest car-manufacturer Maruti Suzuki India’s (MSI) production.
Sales registered their steepest monthly decline in nearly 11 years in October this year, tanking by 23.77% on account of a huge drop in MSI’s output due to labour trouble, coupled with high interest rates and fuel prices. MSI’s domestic sales declined in November as well, dipping by 16.59% to 73,078 units from 87,618 units in the same month last year, Siam said.
However, the strong performance of other manufacturers made up for the slippage in MSI sales in November. Rival Hyundai Motor India posted a 10.72% growth in sales to 34,878 units in November, 2011, from 31,501 units in the same period last year. Tata Motors also reported a jump in sales to 23,540 units from 12,234 units in the same period last year, translating into a 92.41% increase.
As per the figures released by Siam, motorcycle sales in India grew by 22.67% in November to 869,070 units from 708,476 units in the corresponding month last year. Market leader Hero MotoCorp’s domestic sales increased by 27.02% to 485,381 units last month from 382,138 units in the same period last year.
In addition, Bajaj Auto saw a 18.24% rise in sales to 228,407 units from 193,174 units in the same period last year. However, TVS Motor Company posted a 10.45% fall in sales to 44,359 units last month from 49,534 units in the same month of 2010. Honda Motorcycle & Scooter India’s (HMSI) sales went up by 40.94% to 72,120 units during the month under review from 51,171 units in November, 2010.
Siam said total scooter sales stood at 229,309 units in November, 2011, as against 165,610 units in the same month last year, a 38.46% increase.
Market leader HMSI posted sales of 1,17,850 units, up 72.60% from 68,278 units in the year-ago period, while TVS Motor Co saw a growth of 16.08% in scooter sales to 41,132 units from 35,433 units in November, 2010.
In addition, Hero MotoCorp registered sales of 35,576 scooters, an increase of 30.95% from 27,168 units in the corresponding month last fiscal.
Total two-wheeler sales grew by 25.27% to 11,63,294 units last month from 9,28,660 units in November, 2010, as per the data.
Sales of commercial vehicles grew by 34.99% to 66,264 units during the month under review from 49,087 units in the year-ago period, Siam said. Light commercial vehicle sales rose by 48.01% during the month to 40,178 units from 27,145 units in November last year, it added.
Sales of medium and heavy commercial vehicles stood at 26,086 units in November, compared to 21,942 units in the same month last year, an 18.87% increase. Domestic three-wheeler sales grew by 5.85% to 42,875 units during the month under review from 40,504 units in November, 2010. Total sales of vehicles across categories registered an increase of 22.22% to 1,489,714 units in November from 1,218,885 units in the same month last year, Siam added.
Siam may lower FY12 car sales forecast
Despite better sales, the automobile industry is likely to see a downward revision of the passenger car sales growth forecast for 2011-12 for the third time this fiscal in January due to sluggish demand over the last few months. According to Siam, the passenger car segment may not even see single-digit growth in the current financial year. “During the Auto Expo next month, we are going to revise our sales projections for the fiscal... I feel the passenger car segment will again be downgraded,” Sen said. In October, Siam had significantly lowered its passenger car sales growth forecast for 2011-12 to 2-4%, the second revision after pegging it at 10-12% in July, as against its projection of 16-18% announced at the beginning of the current financial year. In the April-November period this financial year, domestic car sales declined by 3.53% to 12,19,509 units from 12,64,142 units in the year-ago period. “We may not see a decline in car sales for the entire financial year. The numbers may be just at the same level of last financial year,” Sen said. Talking about the passenger vehicle segment, Sen said, “It may see a growth of around 2%.” On total vehicles sales, Siam had revised its projection marginally upward to 11-14% for FY12 from 11-13% announced in July. It had revised its growth projection for the two-wheeler segment upward in October to 13-15% from 12-14%, while the estimate for commercial vehicle sales was increased to 13-15% from the earlier estimate of 12-14% in July.
“Domestic car sales have bounced back as the base in November last year was low. Also, we have seen some revival of demand in last month,” Siam senior director Sugato Sen said.
However, sales in December are likely to be lower than in November, he said. “The entry-level car segment, which is the biggest contributor to sales, has been hit most because of fuel hikes and rising interest rates. However, demand in the upper-end segment is comparatively doing well,” he said.
Car sales in India have been declining on a year-on-year basis since July, mainly due to the severe impact of labour issues on the country’s largest car-manufacturer Maruti Suzuki India’s (MSI) production.
Sales registered their steepest monthly decline in nearly 11 years in October this year, tanking by 23.77% on account of a huge drop in MSI’s output due to labour trouble, coupled with high interest rates and fuel prices. MSI’s domestic sales declined in November as well, dipping by 16.59% to 73,078 units from 87,618 units in the same month last year, Siam said.
However, the strong performance of other manufacturers made up for the slippage in MSI sales in November. Rival Hyundai Motor India posted a 10.72% growth in sales to 34,878 units in November, 2011, from 31,501 units in the same period last year. Tata Motors also reported a jump in sales to 23,540 units from 12,234 units in the same period last year, translating into a 92.41% increase.
As per the figures released by Siam, motorcycle sales in India grew by 22.67% in November to 869,070 units from 708,476 units in the corresponding month last year. Market leader Hero MotoCorp’s domestic sales increased by 27.02% to 485,381 units last month from 382,138 units in the same period last year.
In addition, Bajaj Auto saw a 18.24% rise in sales to 228,407 units from 193,174 units in the same period last year. However, TVS Motor Company posted a 10.45% fall in sales to 44,359 units last month from 49,534 units in the same month of 2010. Honda Motorcycle & Scooter India’s (HMSI) sales went up by 40.94% to 72,120 units during the month under review from 51,171 units in November, 2010.
Siam said total scooter sales stood at 229,309 units in November, 2011, as against 165,610 units in the same month last year, a 38.46% increase.
Market leader HMSI posted sales of 1,17,850 units, up 72.60% from 68,278 units in the year-ago period, while TVS Motor Co saw a growth of 16.08% in scooter sales to 41,132 units from 35,433 units in November, 2010.
In addition, Hero MotoCorp registered sales of 35,576 scooters, an increase of 30.95% from 27,168 units in the corresponding month last fiscal.
Total two-wheeler sales grew by 25.27% to 11,63,294 units last month from 9,28,660 units in November, 2010, as per the data.
Sales of commercial vehicles grew by 34.99% to 66,264 units during the month under review from 49,087 units in the year-ago period, Siam said. Light commercial vehicle sales rose by 48.01% during the month to 40,178 units from 27,145 units in November last year, it added.
Sales of medium and heavy commercial vehicles stood at 26,086 units in November, compared to 21,942 units in the same month last year, an 18.87% increase. Domestic three-wheeler sales grew by 5.85% to 42,875 units during the month under review from 40,504 units in November, 2010. Total sales of vehicles across categories registered an increase of 22.22% to 1,489,714 units in November from 1,218,885 units in the same month last year, Siam added.
Siam may lower FY12 car sales forecast
Despite better sales, the automobile industry is likely to see a downward revision of the passenger car sales growth forecast for 2011-12 for the third time this fiscal in January due to sluggish demand over the last few months. According to Siam, the passenger car segment may not even see single-digit growth in the current financial year. “During the Auto Expo next month, we are going to revise our sales projections for the fiscal... I feel the passenger car segment will again be downgraded,” Sen said. In October, Siam had significantly lowered its passenger car sales growth forecast for 2011-12 to 2-4%, the second revision after pegging it at 10-12% in July, as against its projection of 16-18% announced at the beginning of the current financial year. In the April-November period this financial year, domestic car sales declined by 3.53% to 12,19,509 units from 12,64,142 units in the year-ago period. “We may not see a decline in car sales for the entire financial year. The numbers may be just at the same level of last financial year,” Sen said. Talking about the passenger vehicle segment, Sen said, “It may see a growth of around 2%.” On total vehicles sales, Siam had revised its projection marginally upward to 11-14% for FY12 from 11-13% announced in July. It had revised its growth projection for the two-wheeler segment upward in October to 13-15% from 12-14%, while the estimate for commercial vehicle sales was increased to 13-15% from the earlier estimate of 12-14% in July.
Royal Enfield and the art of leisure biking
“Royal Enfield has come a long way and we are now moving into a space of being much more of a leisure brand,” says Mr Siddhartha Lal, Managing Director and Chief Executive Officer of Eicher Motors, which owns the Chennai-based motorcycle company.
He hastens to add that leisure has nothing to do with luxury since Royal Enfield bikes are largely used on a daily basis to work and back. “It has become a practical leisure bike and that is our position as a result,” he told Business Line in a recent interview.
The foundation for leisure biking was laid at Royal Enfield a little over a decade ago when Mr Lal and his team were trying to figure out what the company was all about. They looked at commuters, different sizes/categories of bikes and finally realised that there was no point competing with the (then) Indo-Japanese bikes but, instead, creating an individual space for Enfield.
“Even though a number of aspects of the brand such as ride quality and fit and finish were not in the leisure realm, the basic DNA of commuting long distances was there all along. We took that DNA and expanded the scope, which meant everything else had to fit in right,” Mr Lal says.
He believes the leisure concept, which is equally true for watches, books or furniture, will take up at least five per cent of the market. “For a large chunk of riders, they should aspire to own a Royal Enfield someday, which means it is up to us to make it an aspiration,” Mr Lal adds.
There have also been some interesting trends in the sales pattern. Earlier, the company was dependent upon semi-urban markets such as Punjab or Kerala, which dominated sales. Today, in the last six-eight years, while volumes continue to be strong in these two States, 60-80 per cent of sales come from the cities, including tier-2 metros.
In addition, the Royal Enfield customer base is a lot more youthful today than what it has been in the recent past when middle-aged men were in the driver's seat.
“Today, we are a brand that anyone should aspire for and be able to get his hands on, which is why I stressed that leisure is not luxury. Anyone who enjoys biking, regardless of his socioeconomic background, and gives it top priority, is the person who should come to us,” Mr Lal says.
According to him, some of the recent riding initiatives such as the Himalayan rally have been huge brand-building efforts. “It gets people to really enjoy the type of motorcycling which is part of our culture. This is the starting point of our branding efforts, which is all about rides,” he says.
Regional rides are next on the radar, which involves a day/weekend trip organised by Royal Enfield dealers and is displayed on the Web site. The idea is to integrate with the community and these end up becoming regular friends' circles.
“We do not have sports personalities or actors to endorse our bikes. I would rather flush my head down a loo than have someone who does not know how to ride a bike pose for my motorcycle. We do not want to build our brand this way,” Mr Lal reiterates.
He hastens to add that leisure has nothing to do with luxury since Royal Enfield bikes are largely used on a daily basis to work and back. “It has become a practical leisure bike and that is our position as a result,” he told Business Line in a recent interview.
The foundation for leisure biking was laid at Royal Enfield a little over a decade ago when Mr Lal and his team were trying to figure out what the company was all about. They looked at commuters, different sizes/categories of bikes and finally realised that there was no point competing with the (then) Indo-Japanese bikes but, instead, creating an individual space for Enfield.
“Even though a number of aspects of the brand such as ride quality and fit and finish were not in the leisure realm, the basic DNA of commuting long distances was there all along. We took that DNA and expanded the scope, which meant everything else had to fit in right,” Mr Lal says.
He believes the leisure concept, which is equally true for watches, books or furniture, will take up at least five per cent of the market. “For a large chunk of riders, they should aspire to own a Royal Enfield someday, which means it is up to us to make it an aspiration,” Mr Lal adds.
There have also been some interesting trends in the sales pattern. Earlier, the company was dependent upon semi-urban markets such as Punjab or Kerala, which dominated sales. Today, in the last six-eight years, while volumes continue to be strong in these two States, 60-80 per cent of sales come from the cities, including tier-2 metros.
In addition, the Royal Enfield customer base is a lot more youthful today than what it has been in the recent past when middle-aged men were in the driver's seat.
“Today, we are a brand that anyone should aspire for and be able to get his hands on, which is why I stressed that leisure is not luxury. Anyone who enjoys biking, regardless of his socioeconomic background, and gives it top priority, is the person who should come to us,” Mr Lal says.
According to him, some of the recent riding initiatives such as the Himalayan rally have been huge brand-building efforts. “It gets people to really enjoy the type of motorcycling which is part of our culture. This is the starting point of our branding efforts, which is all about rides,” he says.
Regional rides are next on the radar, which involves a day/weekend trip organised by Royal Enfield dealers and is displayed on the Web site. The idea is to integrate with the community and these end up becoming regular friends' circles.
“We do not have sports personalities or actors to endorse our bikes. I would rather flush my head down a loo than have someone who does not know how to ride a bike pose for my motorcycle. We do not want to build our brand this way,” Mr Lal reiterates.
Auto sector to lose tax sops in FY13
With state governments offering tax sops on investments, automobile firms have enjoyed relatively low tax rates over the last few years. On an average, tax rates for auto companies, which have set up facilities in tax-free zones, have declined from 28 per cent to 20 per cent.
In 2007, the government offered 100 per cent income tax exemption for five years and 200 per cent weighted average deduction on research and development (R&D) for investments in Uttarakhand. Other sops included a 10-year excise duty exemption and an income tax exemption of 30 per cent after the first five years.
However, this tax-free jamboree will soon end. According to Credit Suisse, with the benefits in Uttarakhand expiring, while the tax rates for Bajaj Auto and Tata Motors could rise from FY13, those for Hero MotoCorp and Ashok Leyland will be affected from FY14. The biggest beneficiary of the state’s liberal tax structure has been Hero MotoCorp, as 33 per cent of its total production comes from these tax-free zones. For Tata Motors and Bajaj, the tax-free zones account for 20 per cent of their total production. No wonder, Hero’s tax rate has nearly halved to 17 per cent from 31 per cent in the last five years. While Bajaj Auto’s income tax exemption expires in FY12, that for Hero and Ashok Leyland ends in FY13. Hence, from 26 per cent in FY12, Bajaj Auto’s tax rates will rise to 29 per cent in FY13.
Technically, Hero, too, should have been hit with the tax holiday ending, but, given that its research and development costs are expected to increase substantially, the company will benefit from the 200 per cent deduction on the same. According to Ambit Capital, Hero’s FY12 net earnings growth would be ahead of the Ebitda (earnings before interest, taxes, depreciation, and amortisation) growth, thanks to a step up in R&D expenses and lower tax rates, as production has increased at its Haridwar plant, which enjoys tax benefits. However, revenue and earnings growth is expected to moderate in FY13. Analysts say Tata Motors would also see tax rates rise from 17 per cent to 22 per cent, as the company manufactures its popular Ace model in Uttarakhand.
In 2007, the government offered 100 per cent income tax exemption for five years and 200 per cent weighted average deduction on research and development (R&D) for investments in Uttarakhand. Other sops included a 10-year excise duty exemption and an income tax exemption of 30 per cent after the first five years.
However, this tax-free jamboree will soon end. According to Credit Suisse, with the benefits in Uttarakhand expiring, while the tax rates for Bajaj Auto and Tata Motors could rise from FY13, those for Hero MotoCorp and Ashok Leyland will be affected from FY14. The biggest beneficiary of the state’s liberal tax structure has been Hero MotoCorp, as 33 per cent of its total production comes from these tax-free zones. For Tata Motors and Bajaj, the tax-free zones account for 20 per cent of their total production. No wonder, Hero’s tax rate has nearly halved to 17 per cent from 31 per cent in the last five years. While Bajaj Auto’s income tax exemption expires in FY12, that for Hero and Ashok Leyland ends in FY13. Hence, from 26 per cent in FY12, Bajaj Auto’s tax rates will rise to 29 per cent in FY13.
Technically, Hero, too, should have been hit with the tax holiday ending, but, given that its research and development costs are expected to increase substantially, the company will benefit from the 200 per cent deduction on the same. According to Ambit Capital, Hero’s FY12 net earnings growth would be ahead of the Ebitda (earnings before interest, taxes, depreciation, and amortisation) growth, thanks to a step up in R&D expenses and lower tax rates, as production has increased at its Haridwar plant, which enjoys tax benefits. However, revenue and earnings growth is expected to moderate in FY13. Analysts say Tata Motors would also see tax rates rise from 17 per cent to 22 per cent, as the company manufactures its popular Ace model in Uttarakhand.
Setting up platform for electric vehicles may cost Govt dear
Study says at least Rs 22,500 cr may be needed to develop infrastructure, create demand
New Delhi, Dec. 5:
Developing the infrastructure and market for hybrid and electric vehicles (xEVs) will not be cheap. The price for the Government's ambitious plan is estimated to be as high as around Rs 22,500 crore.
These are the findings of a study by consultant Booz & Co on the potential of the xEV market, which was commissioned by the Society of Indian Automobile Manufacturers and the Ministry of Heavy Industry.
It says that India has the potential to reach sales of over 6-7 million such vehicles by 2020, of which 4.8 million would be two wheelers.
EV mission
This report has provided the basis for the Government's electric vehicle mission, under which it plans a Rs 740-crore Research & Development (R&D) fund in the 12th Five Year Plan and an inter-ministerial panel to monitor the implementation of the project.
“It is impossible to reach this potential without a clear roadmap. To induce acceptance of xEVs among consumers and producers as well as localise production, investments in infrastructure and incentives are required,” states the report.
In India, only Mahindra Reva currently makes electric cars. However, electric scooters are more popular, with around five players in the market led by Hero Electric.
The other carmakers which have xEV technology like Maruti, Hyundai and Tata Motors, have been waiting for a clear policy before taking the plunge.
“An estimated Rs 12,500 – 13,500 crore on the demand and supply side, and Rs 8,000-9,000 crore on R&D and infrastructure across all vehicle segments, clubbed with mandates for xEVs in various Central and State Government fleets could help India reach the estimated potential,” the report states.
This is apart from the up to Rs 45,000 crore in investment needed from the automakers over the next nine years on setting up manufacturing capacities.
“Most of the expenses will be borne by industry. The Government will help by creating the supporting infrastructure like power generation, charging centres, in developing technologies and other tax incentives. Manufacturing investments will have to be done by the specific companies,” said a senior Central Government official.
Returns
The report also claims that the returns on such large investments will also be lucrative.
Earnings across the whole segment are expected to be up to Rs 43,000 crore, with electric two wheelers contributing Rs 28,000 crore and four wheelers up to Rs 7,100 crore.
Such vehicles may also help in reducing the overall dependence on traditional fuels and lowering ambient pollution.
Fuel savings could amount to Rs 14,000 crore in 2020, while carbon dioxide emissions could go down by 1.5 per cent overall.
New Delhi, Dec. 5:
Developing the infrastructure and market for hybrid and electric vehicles (xEVs) will not be cheap. The price for the Government's ambitious plan is estimated to be as high as around Rs 22,500 crore.
These are the findings of a study by consultant Booz & Co on the potential of the xEV market, which was commissioned by the Society of Indian Automobile Manufacturers and the Ministry of Heavy Industry.
It says that India has the potential to reach sales of over 6-7 million such vehicles by 2020, of which 4.8 million would be two wheelers.
EV mission
This report has provided the basis for the Government's electric vehicle mission, under which it plans a Rs 740-crore Research & Development (R&D) fund in the 12th Five Year Plan and an inter-ministerial panel to monitor the implementation of the project.
“It is impossible to reach this potential without a clear roadmap. To induce acceptance of xEVs among consumers and producers as well as localise production, investments in infrastructure and incentives are required,” states the report.
In India, only Mahindra Reva currently makes electric cars. However, electric scooters are more popular, with around five players in the market led by Hero Electric.
The other carmakers which have xEV technology like Maruti, Hyundai and Tata Motors, have been waiting for a clear policy before taking the plunge.
“An estimated Rs 12,500 – 13,500 crore on the demand and supply side, and Rs 8,000-9,000 crore on R&D and infrastructure across all vehicle segments, clubbed with mandates for xEVs in various Central and State Government fleets could help India reach the estimated potential,” the report states.
This is apart from the up to Rs 45,000 crore in investment needed from the automakers over the next nine years on setting up manufacturing capacities.
“Most of the expenses will be borne by industry. The Government will help by creating the supporting infrastructure like power generation, charging centres, in developing technologies and other tax incentives. Manufacturing investments will have to be done by the specific companies,” said a senior Central Government official.
Returns
The report also claims that the returns on such large investments will also be lucrative.
Earnings across the whole segment are expected to be up to Rs 43,000 crore, with electric two wheelers contributing Rs 28,000 crore and four wheelers up to Rs 7,100 crore.
Such vehicles may also help in reducing the overall dependence on traditional fuels and lowering ambient pollution.
Fuel savings could amount to Rs 14,000 crore in 2020, while carbon dioxide emissions could go down by 1.5 per cent overall.
Garware Motors plans more models, electric bikes
Garware Motors Ltd., on Monday outlined plans to launch more bikes from the versatile Hyosung stable in India, which could include the roll out of the latter’s electric bike range.
The company, which has introduced three super bikes during the year in partnership with Korean company S&T Motors, manufacturer of Hyosung brand of bikes known globally for its superbike range, is at advanced stage of homologating its twin-engine-powered 250 cc bike to be launched next year, said Mr. S.P.Raykar, Director, Garware Motors Limited.
Describing their collection of super bikes as ‘luxury on wheels’ Mr. Raykar said the company would be first to introduce a twin-engine 250 cc engine powered bike to be priced at Rs.2.25 lakh. The homologation work is now underway. This twin engine bike is expected to generate excitement among young discerning bikers.
Referring to long history that Garware has, in terms of import of cars during 1930’s and 1940’s, he said that the Rs. 5,000-crore turnover group has a passion for cars and bikes. This venture is an outcome of that passion.
“We are planning to take this association forward and are evaluating the option of launch of electric bikes from Hyosung stable,” he added.
The GT650N has an introductory price of Rs. 3,87,000, GT650 Rs.4,83,000 , GT 650R Rs. 4,83,000 and ST7 at Rs. 5,80,000 (all ex-showroom prices) in Hyderabad.
The company, which has introduced three super bikes during the year in partnership with Korean company S&T Motors, manufacturer of Hyosung brand of bikes known globally for its superbike range, is at advanced stage of homologating its twin-engine-powered 250 cc bike to be launched next year, said Mr. S.P.Raykar, Director, Garware Motors Limited.
Describing their collection of super bikes as ‘luxury on wheels’ Mr. Raykar said the company would be first to introduce a twin-engine 250 cc engine powered bike to be priced at Rs.2.25 lakh. The homologation work is now underway. This twin engine bike is expected to generate excitement among young discerning bikers.
Referring to long history that Garware has, in terms of import of cars during 1930’s and 1940’s, he said that the Rs. 5,000-crore turnover group has a passion for cars and bikes. This venture is an outcome of that passion.
“We are planning to take this association forward and are evaluating the option of launch of electric bikes from Hyosung stable,” he added.
The GT650N has an introductory price of Rs. 3,87,000, GT650 Rs.4,83,000 , GT 650R Rs. 4,83,000 and ST7 at Rs. 5,80,000 (all ex-showroom prices) in Hyderabad.
Two-wheeler majors aim for decent FY12 sales
Undeterred by the slump in the automobile market, two-wheeler manufacturers India Yamaha and Bajaj Auto aim to post decent sales this financial year, buoyed by their strong performance in November.
While Japanese two-wheeler manufacturer India Yamaha aims to sell 480,000 units this year, rival Bajaj Auto plans to post sales of four million units this fiscal.
India Yamaha Motor Director-Sales and Marketing Jun Nakata said the company plans to sell over 480,000 lakh units this year and aims to garner a 10% market share in the next few years.
"We are looking to sell 480,000 lakh motorcycles this fiscal and are looking to achieve an overall 10% market share over the next few years," India Yamaha Motor Director (Sales and Marketing) Jun Nakata told PTI.
In November, India Yamaha reported a 29.20% increase in total sales to 39,162 units. The company had sold 30,310 units in the same month last year.
Sales in the domestic market grew by 24.08% during the month, with the company selling 28,178 units, as against 22,710 units in the corresponding period last year.
There was good news on the export front too for India Yamaha, with a whopping 44.53% jump in sales to 10,984 units during the month from 7,600 units a year ago.
Asked about the sluggish automobile market conditions, Nakata said the company has not been greatly affected. "We have none or very less impact so far. We expect growth be around 15% in the industry," he said.
Auto analysts said increasing fuel prices and high interest rates prompt many buyers to go for two-wheelers instead cars. However, there could be an impact on sales of high-performance bikes in the above 150-cc category, they said.
Nakata, however, struck a positive note, asserting that sales for India Yamaha, including premium segment products, would remain at the same level.
Bajaj Auto General Manager, Marketing and Sales, Chandrashekar told PTI that the company expects to sell over four million units this fiscal.
"The impact in the passenger car business is because of various reasons, including interest rates and fuel prices.If a car owner feels the pinch, then two-wheelers always come as an option," he said.
He reiterated that the two-wheeler industry was growing at 13-15% year-on-year.
In November, Bajaj Auto registered a 25% jump in motorcycle sales to 3,31,967 units. The company had sold 2,65,036 units in the corresponding month last year.
Total sales in November stood at 3,74,477 units, up by 25% from 2,99,231 units in the same period a year ago.
While Japanese two-wheeler manufacturer India Yamaha aims to sell 480,000 units this year, rival Bajaj Auto plans to post sales of four million units this fiscal.
India Yamaha Motor Director-Sales and Marketing Jun Nakata said the company plans to sell over 480,000 lakh units this year and aims to garner a 10% market share in the next few years.
"We are looking to sell 480,000 lakh motorcycles this fiscal and are looking to achieve an overall 10% market share over the next few years," India Yamaha Motor Director (Sales and Marketing) Jun Nakata told PTI.
In November, India Yamaha reported a 29.20% increase in total sales to 39,162 units. The company had sold 30,310 units in the same month last year.
Sales in the domestic market grew by 24.08% during the month, with the company selling 28,178 units, as against 22,710 units in the corresponding period last year.
There was good news on the export front too for India Yamaha, with a whopping 44.53% jump in sales to 10,984 units during the month from 7,600 units a year ago.
Asked about the sluggish automobile market conditions, Nakata said the company has not been greatly affected. "We have none or very less impact so far. We expect growth be around 15% in the industry," he said.
Auto analysts said increasing fuel prices and high interest rates prompt many buyers to go for two-wheelers instead cars. However, there could be an impact on sales of high-performance bikes in the above 150-cc category, they said.
Nakata, however, struck a positive note, asserting that sales for India Yamaha, including premium segment products, would remain at the same level.
Bajaj Auto General Manager, Marketing and Sales, Chandrashekar told PTI that the company expects to sell over four million units this fiscal.
"The impact in the passenger car business is because of various reasons, including interest rates and fuel prices.If a car owner feels the pinch, then two-wheelers always come as an option," he said.
He reiterated that the two-wheeler industry was growing at 13-15% year-on-year.
In November, Bajaj Auto registered a 25% jump in motorcycle sales to 3,31,967 units. The company had sold 2,65,036 units in the corresponding month last year.
Total sales in November stood at 3,74,477 units, up by 25% from 2,99,231 units in the same period a year ago.
Honda set to fire on all cylinders in India
Honda's sales numbers in November at 1.99 lakh motorcycles and scooters did not just catapult it to the third slot in the market after Hero MotorCorp and Bajaj Auto. It is the beginning of a new India strategy which will focus on a rapid product rollout at aggressive prices.
By March next year, Honda Motorcycle & Scooter India (HMSI) will commission its second production line at the newly commissioned Rajasthan plant. Along with the Manesar unit, the company's monthly output will then go up to 2.4 lakh units or nearly three million two-wheelers annually. This number will be sustained through 2012-13 by which time work on the third facility in Karnataka will have begun.
Reports have been doing the rounds that HMSI is already scouting for a fourth plant though this may seem a bit farfetched for the moment. It could well be a reality post 2014-15 when all three facilities – Haryana, Rajasthan and Karnataka – are at optimal production levels and rolling out over four million units annually.
Sources say Honda will be keen to prove a point after its recent split with the Hero Group which has, since, taken over the two-wheeler leadership mantle. The Japanese automaker has realised that quite unlike the 1980s, when it first entered the two-wheeler market (in two separate partnerships with the Firodias and Munjals), the landscape has changed considerably.
For one thing, local competition has just got a lot stiffer. Not only will it have to contend with its former ally, the Hero Group, but Bajaj Auto has also staged a strong comeback over the last two years. TVS Motor, likewise, would be keen to get back the third slot from HMSI.
Its global CEO, Mr Takanobu Ito, had referred to this in a recent presentation. “Today, key competitors in those (emerging) markets are Chinese and Indian makers. In order for Honda to remain a market leader, it must not only maintain the high attractiveness and quality of products but also further improve cost-competitiveness to match the low prices of these competitors,” he had said.
Rivals say Honda will pull out all stops to ensure that it emerges triumphs in the pricing game. Having been associated with the Hero Group for over two decades, it is not unaware of the fact that it will have to target the Splendor and Passion motorcycles to make a difference in the leadership game.
“The only way to do this is to offer a superior product at a lower price. Honda is a global company that can leverage economies of scale to make this a reality. It can afford to take a beating on its India bottomline quite unlike other locally listed companies,” an industry veteran told Business Line.
By March next year, Honda Motorcycle & Scooter India (HMSI) will commission its second production line at the newly commissioned Rajasthan plant. Along with the Manesar unit, the company's monthly output will then go up to 2.4 lakh units or nearly three million two-wheelers annually. This number will be sustained through 2012-13 by which time work on the third facility in Karnataka will have begun.
Reports have been doing the rounds that HMSI is already scouting for a fourth plant though this may seem a bit farfetched for the moment. It could well be a reality post 2014-15 when all three facilities – Haryana, Rajasthan and Karnataka – are at optimal production levels and rolling out over four million units annually.
Sources say Honda will be keen to prove a point after its recent split with the Hero Group which has, since, taken over the two-wheeler leadership mantle. The Japanese automaker has realised that quite unlike the 1980s, when it first entered the two-wheeler market (in two separate partnerships with the Firodias and Munjals), the landscape has changed considerably.
For one thing, local competition has just got a lot stiffer. Not only will it have to contend with its former ally, the Hero Group, but Bajaj Auto has also staged a strong comeback over the last two years. TVS Motor, likewise, would be keen to get back the third slot from HMSI.
Its global CEO, Mr Takanobu Ito, had referred to this in a recent presentation. “Today, key competitors in those (emerging) markets are Chinese and Indian makers. In order for Honda to remain a market leader, it must not only maintain the high attractiveness and quality of products but also further improve cost-competitiveness to match the low prices of these competitors,” he had said.
Rivals say Honda will pull out all stops to ensure that it emerges triumphs in the pricing game. Having been associated with the Hero Group for over two decades, it is not unaware of the fact that it will have to target the Splendor and Passion motorcycles to make a difference in the leadership game.
“The only way to do this is to offer a superior product at a lower price. Honda is a global company that can leverage economies of scale to make this a reality. It can afford to take a beating on its India bottomline quite unlike other locally listed companies,” an industry veteran told Business Line.
Hero MotoCorp, muthoot Pappachan Group tie up
Hero MotoCorp Ltd has tied up with Muthoot Capital Services Ltd (MCSL), a division of Muthoot Pappachan Group, to offer instant ‘Need based Financial Services' for its two-wheeler customers. The tie-up will enable Hero MotoCorp offer its products in the semi-urban and rural markets using the services of Muthoot Pappachan Group's retail outlets and dedicated manpower at every Hero MotoCorp Dealer/authorised outlets of Kerala, Tamil Nadu, Andhra Pradesh, Karnataka and Goa. MCSL and Hero MotoCorp Ltd will work closely to bring in operational efficiency, optimise the turn around time (TAT) and enhance customer satisfaction. The financing option will be offered to customers purchasing two-wheelers at the authorised Hero MotoCorp retail outlets on EMI under the innovative flexi repayment options.
Mr R. Balakrishnan, Vice-President of Muthoot Capital Services Ltd division, said the two-wheeler segments is picking up quite well despite the difficult market conditions, and the company is looking at having a decisive stake in this growing auto finance segment in this region.
Mr R. Balakrishnan, Vice-President of Muthoot Capital Services Ltd division, said the two-wheeler segments is picking up quite well despite the difficult market conditions, and the company is looking at having a decisive stake in this growing auto finance segment in this region.
Pulsar, now 10 helped bajaj ride to big league
36 months and Rs100 crore. That’s what took Bajaj Auto to develop the Pulsar.
And the seeds of a game-changer were sown for what was then India’s largest scooter maker.
Ten years ago, on November 23, 2001 to be precise, Bajaj launched Pulsar, marking its foray into the sports premium bike segment.
It was an enormous leap of faith for the company which was then betting on a segment that virtually had no volumes to
speak of.
Many people including the company’s own research firm had dissuaded Rajiv Bajaj, managing director, Bajaj Auto, from entering the segment as it was not expected to ring in volumes. Ten years ago, 150cc and above bikes were only 5% of the market with very few players offering them.
Also, for the first time, Bajaj was marketing a bike under the Bajaj brand. Before that all its motorcycles were co-branded with Kawasaki of Japan, with which it had a technical collaboration.
The bike was developed in-house by Bajaj Research & Development.
The stakes were also high because Bajaj Auto was in the process of shedding its image as a scooter maker and was making efforts to become a large player in motorcycles.
And the gamble paid off handsomely.
Pulsar went on to change the dynamics of the Indian motorcycle segment, which was then dominated by 100cc bikes, with Hero Honda firmly in the lead.
The bike firmly entrenched Bajaj as India’s second-largest motorcycle maker, with a dominant 45% share in the 150cc and above segment.
When Pulsar was launched, it was pitted against Hero Honda’s (now Hero MotoCorp) CBZ, which was at least Rs10,000 expensive than the Pulsar.
“Pulsar was a killer product for Bajaj Auto. There was a huge gap between the 100cc and the higher-end bikes. Pulsar filled the gap and killed all the products around it over the years,” said V G Ramakrishnan, director at Frost & Sullivan.
However Bajaj’s other bikes including Caliber, Caliber, Croma and Aspire did not really make a mark owing to the strong domination of Hero Honda.
“The brand Pulsar became synonymous for the high-powered sports bikes. It became an aspirational product for the youth. Whether it was styling or pricing, it was an attractive package that connected with the youth,” said Ramakrishnan.
In 2001-2002 the company sold on an average 1,000 units of Pulsar a month. Today it sells around 61,000.
“Pulsar is one product that worked well for the company. It showed company’s aggressiveness and at the same time garnered profits for Bajaj. Pulsar’s profitability was at least 6-8 times higher than the regular 100cc products available in the market,” said Mahantesh Sabarad, senior vice-president, equity research, Fortune Equities.
Bajaj Auto started with introducing two engine capacities for the Pulsar brand, which included 180cc and 150cc models. The company currently has four variants with engine capacities of 135cc, 150cc, 180cc and 220cc.
“Over the years we have introduced five upgrades. The only challenge for us was how do we beat the previous Pulsar model,” said R Chandrasekar, general manager, marketing and sales for Bajaj Auto.
The company is in the process of introducing a brand new Pulsar, which is expected to be launched in the Auto Expo in January.
“The new Pulsar will be 100% brand-new and will come with technology better than the current DTS-i. The new technology is the next level for motorcycles, not just the next level for Bajaj,” Rajiv Bajaj had said during the second-quarter results.
And the seeds of a game-changer were sown for what was then India’s largest scooter maker.
Ten years ago, on November 23, 2001 to be precise, Bajaj launched Pulsar, marking its foray into the sports premium bike segment.
It was an enormous leap of faith for the company which was then betting on a segment that virtually had no volumes to
speak of.
Many people including the company’s own research firm had dissuaded Rajiv Bajaj, managing director, Bajaj Auto, from entering the segment as it was not expected to ring in volumes. Ten years ago, 150cc and above bikes were only 5% of the market with very few players offering them.
Also, for the first time, Bajaj was marketing a bike under the Bajaj brand. Before that all its motorcycles were co-branded with Kawasaki of Japan, with which it had a technical collaboration.
The bike was developed in-house by Bajaj Research & Development.
The stakes were also high because Bajaj Auto was in the process of shedding its image as a scooter maker and was making efforts to become a large player in motorcycles.
And the gamble paid off handsomely.
Pulsar went on to change the dynamics of the Indian motorcycle segment, which was then dominated by 100cc bikes, with Hero Honda firmly in the lead.
The bike firmly entrenched Bajaj as India’s second-largest motorcycle maker, with a dominant 45% share in the 150cc and above segment.
When Pulsar was launched, it was pitted against Hero Honda’s (now Hero MotoCorp) CBZ, which was at least Rs10,000 expensive than the Pulsar.
“Pulsar was a killer product for Bajaj Auto. There was a huge gap between the 100cc and the higher-end bikes. Pulsar filled the gap and killed all the products around it over the years,” said V G Ramakrishnan, director at Frost & Sullivan.
However Bajaj’s other bikes including Caliber, Caliber, Croma and Aspire did not really make a mark owing to the strong domination of Hero Honda.
“The brand Pulsar became synonymous for the high-powered sports bikes. It became an aspirational product for the youth. Whether it was styling or pricing, it was an attractive package that connected with the youth,” said Ramakrishnan.
In 2001-2002 the company sold on an average 1,000 units of Pulsar a month. Today it sells around 61,000.
“Pulsar is one product that worked well for the company. It showed company’s aggressiveness and at the same time garnered profits for Bajaj. Pulsar’s profitability was at least 6-8 times higher than the regular 100cc products available in the market,” said Mahantesh Sabarad, senior vice-president, equity research, Fortune Equities.
Bajaj Auto started with introducing two engine capacities for the Pulsar brand, which included 180cc and 150cc models. The company currently has four variants with engine capacities of 135cc, 150cc, 180cc and 220cc.
“Over the years we have introduced five upgrades. The only challenge for us was how do we beat the previous Pulsar model,” said R Chandrasekar, general manager, marketing and sales for Bajaj Auto.
The company is in the process of introducing a brand new Pulsar, which is expected to be launched in the Auto Expo in January.
“The new Pulsar will be 100% brand-new and will come with technology better than the current DTS-i. The new technology is the next level for motorcycles, not just the next level for Bajaj,” Rajiv Bajaj had said during the second-quarter results.