India’s excise-free zones will not shield auto makers from the impact of higher excise levy proposed in the budget, as firms in the enclaves are not eligible to claim the modified value-added tax (Modvat) on buying parts and aggregates from vendors as they are already enjoying excise rebates, unlike others who do not operate from such areas.
Analysts said this will affect firms such as Mahindra and Mahindra Ltd (M&M), Ashok Leyland Ltd, Hero MotoCorp Ltd and Bajaj Auto Ltd. Few others, including Maruti Suzuki India Ltd, Hyundai Motor India Ltd and Honda Motorcycles and Scooter India Pvt. Ltd, will not be affected.
Modvat is a scheme that allows relief to manufacturers of finished products on excise duty borne by suppliers related to goods made by them. When a factory is located in an excise-free zone, any increase in the cost of purchase will have to be borne solely by the manufacturer. With the vendors likely to pass the 2% hike in excise duty proposed in the budget, the input costs for the manufacturers will go up and this will make production in these enclaves less attractive.
The companies will either have to pass on the entire increase to buyers or reduce production, analysts said.
“The higher are the number of units produced on the excise-free zones, the greater will be the impact,” said Mahantesh Sabarad, senior vice-president, equity and research, at brokerage Fortune Equity Brokers India Ltd.
M&M, which makes tractors in Rudrapur in Uttarakhand, three-wheelers in Haridwar in Uttarakhand and utility vehicles in Chakan near Pune (all excise-free zones, except Chakan), and a few other car makers have already announced price hikes.
Ashok Leyland, Bajaj Auto and Hero MotoCorp are yet to make announcements in this regard.
For the Chakan unit, which has been given the status of a non-manufacturing unit, M&M pays service tax, which also cannot benefit from Modvat, said Pawan Goenka, president, farm equipment and automotive sectors.
M&M’s overall tax outgo will be Rs. 850 crore in fiscal 2012-13, said Goenka. In fiscal 2011, it had paid Rs. 761.67 crore, 3.8% of its gross sales. The tax outgo for the current year is not known.
Goenka said the tax burden includes increase in excise duty on automobiles, an overall 2% hike in excise duty , and 2.5% increase on customs duty on non-alloy, flat-rolled steel.
Besides increasing the duty on small cars, the budget also proposed to raise the duty on large cars, which have an engine displacement of 1,500cc and above, by 2 percentage points to 24%.
In case of cars that attract 22% duty and an additional charge of Rs. 15,000 a vehicle, the budget has proposed to switch over to an ad-valorem rate of 27%.
M&M announced price hikes ranging from Rs. 3,000 to 35,000 on Friday to offset the impact.
Goenka said for the top-end variant of some of its models, the XUV500, for instance, the duty is as high as 29%.
According to him, as a result of the excise hike, while the cost of production on tractors has gone by Rs. 5,000-6,000— 1% of the selling price, for utility vehicles, it has gone up by Rs. 3,000-38,000, 2% of the selling price.
Two-wheeler market leader Hero MotoCorp, which has one out of very three motorcycles produced in Haridwar, is also likely to be hit. Hero produces at least 600,000 units every month.
Ravi Sud, chief financial officer, did not respond to calls and text messages.
Bajaj Auto, which also has one-third of its production accounted for by its unit in Pantnagar in Uttarakhand, is likely to be hit. Kevin P. D’Sa, vice-president, finance, at Bajaj Auto, did not respond to calls or messages. K Srinivas, president, motorcycle business, at the firm, said, “We will pass on the hike.”
Ashok Leyland, India’s second largest commercial vehicle maker, which has a factory in Pantnagar, is also likely to be impacted. Company officials were not available for a comment over the weekend.
The Pantnagar unit accounts for one-fourth of its total production, said Ajay Shethiya, an analyst at Centrum Broking Pvt Ltd.
“With the freight rates already being under pressure, any price hike by a commercial vehicle maker will not go down well with the fleet operators,” Shethiya said. “Even for tractors, the hike may dampen sales.”
Italian triumph for Mahindra
Mahindra Racing created history of sorts by becoming the first Indian outfit to win an international motorsport event and that too on foreign soil! The team did the Indian flag proud by winning the lung-opener of the Italian Championship,at the Mugello Circuit,in style.
The talented Riccardo Moretti,meanwhile,had the competition gasping with disbelief as he pulled away effortlessly after a brilliant start.For the next 30 minutes,he never had to check his mirrors as he clocked over a second-and-a-half per lap from the second-placed Mantovani,who faced the music when he was overhauled by his Aprilia teammate Dalla Porta in the eighth lap while Moretti waltzed to his first win of the 2012 season.
The win was rather facile and after two laps it was clear that unless the Mahindra rider did something really silly,the trophy was in the bag.Moretti was nervous before the start of the race as he was returning to racing after a three-year break.In the interim,he raced only for three events in the World Moto 3 Championship until his money dried up.
Whether its Formula One or a 125cc bike championship,the problem of sponsors remains.Mahindra Racing did well in identifying the 2009 champion as their premier rider and now itsup tothem to puttheir collective heads down to work towards the title.
Team Mahindra,however,has its task cut out if they want to bring their Indian rider,Sarath Kumar,up to speed.Sarathsimply cant afford to allow his teammate to clock over six seconds.He admits that his braking and slow speed cornering technique need improvement.His confidence was dented slightly when his bike suffered a mechanicalfailuretowards the end of the race.
Mahindra now look forwardtothe nexteventin Imola after leaving the tough 5.2-mile Mugello circuit with a satisfying and historic win.
The talented Riccardo Moretti,meanwhile,had the competition gasping with disbelief as he pulled away effortlessly after a brilliant start.For the next 30 minutes,he never had to check his mirrors as he clocked over a second-and-a-half per lap from the second-placed Mantovani,who faced the music when he was overhauled by his Aprilia teammate Dalla Porta in the eighth lap while Moretti waltzed to his first win of the 2012 season.
The win was rather facile and after two laps it was clear that unless the Mahindra rider did something really silly,the trophy was in the bag.Moretti was nervous before the start of the race as he was returning to racing after a three-year break.In the interim,he raced only for three events in the World Moto 3 Championship until his money dried up.
Whether its Formula One or a 125cc bike championship,the problem of sponsors remains.Mahindra Racing did well in identifying the 2009 champion as their premier rider and now itsup tothem to puttheir collective heads down to work towards the title.
Team Mahindra,however,has its task cut out if they want to bring their Indian rider,Sarath Kumar,up to speed.Sarathsimply cant afford to allow his teammate to clock over six seconds.He admits that his braking and slow speed cornering technique need improvement.His confidence was dented slightly when his bike suffered a mechanicalfailuretowards the end of the race.
Mahindra now look forwardtothe nexteventin Imola after leaving the tough 5.2-mile Mugello circuit with a satisfying and historic win.
BSE Auto Index testing important hurdle
The BSE Auto Index comprises 10 scrips. Tata Motors has the most weight in the index with 28.6 per cent and Mahindra and Mahindra follows with 19 per cent. Bajaj Auto, Hero Motocorp and Maruti Suzuki India share 14.8 per cent, 12 per cent and 11.3 per cent respectively.
March 24, 2012:
The BSE Auto Index has been on a long-term term uptrend since bottoming out in December 2008 at a low of 2127. In September 2009, the index conclusively broke through its long-term resistance at around 5,880 and accelerated higher until it registered a new high in November 2010 at 10,536 levels.
The BSE Auto Index comprises 10 scrips. Tata Motors has the most weight in the index at 28.6 per cent and Mahindra and Mahindra follows with 19 per cent.
Bajaj Auto, Hero Motocorp and Maruti Suzuki India share 14.8 per cent, 12 per cent and 11.3 per cent respectively. Exide Industries, Cummins India, Bharat Forge, Ashok Leyland and Apollo Tyres are the other stocks in the index with weights between 1 and 4 per cent.
Long-term view
After registering its new high in late 2010, the index started to consolidate sideways in a broad range between 8,000 and 10,500 levels. The lower boundary at 8,000 levels provided support for the index to rebound higher during August 2011 and December 2011. Following a rally from the lower boundary, the index is presently testing significant long-term resistance in the zone between 10,330 and 10,530.
This sideways movement between 8,000 and 10,500 levels is positive for the index from a long-term perspective. The index is hovering well above its 21 and 50-week moving averages.
Conclusive breakthrough of the aforementioned resistance zone will lift the index to new highs - to 12,000 in the long-term. Significant long-term supports for the index, pegged at 9,000, 8,000, and 7,400 levels, will provide base if the index witnesses selling pressure.
As long as 6,500 levels hold the long-term trend remains up for the index.
Medium-term view
Since the December 2011 trough of 7,894 (52-week low), taking support at around 8,000 levels, the index has been on a medium-term uptrend.
However, marking a 52-week high at 10,487 on February 17 this year, the index began to lose its bullish momentum by consolidating sideways between 9,700 and 10,487. The index is hovering well above its 50 and 200-day moving averages.
As long as the index is jailed in the 9,700 and 10,487 range, its short-term trend will be sideways.
Only a breakthrough in either direction will script a clear medium-term trend.
A fall below 9,700 will pull the index down to 9,200 with a minor pause at around 9,500 levels.
A further break of 9,200 levels will mar the medium-term uptrend and drag the index down to 8,900 and then to 8,500 in the medium-term.
On the other hand, upward reversal from 9,700 can take the index to its upper boundary at 10,487.
An emphatic rally above the upper boundary will pave the way for a rally to 11,000 in the same time frame.
March 24, 2012:
The BSE Auto Index has been on a long-term term uptrend since bottoming out in December 2008 at a low of 2127. In September 2009, the index conclusively broke through its long-term resistance at around 5,880 and accelerated higher until it registered a new high in November 2010 at 10,536 levels.
The BSE Auto Index comprises 10 scrips. Tata Motors has the most weight in the index at 28.6 per cent and Mahindra and Mahindra follows with 19 per cent.
Bajaj Auto, Hero Motocorp and Maruti Suzuki India share 14.8 per cent, 12 per cent and 11.3 per cent respectively. Exide Industries, Cummins India, Bharat Forge, Ashok Leyland and Apollo Tyres are the other stocks in the index with weights between 1 and 4 per cent.
Long-term view
After registering its new high in late 2010, the index started to consolidate sideways in a broad range between 8,000 and 10,500 levels. The lower boundary at 8,000 levels provided support for the index to rebound higher during August 2011 and December 2011. Following a rally from the lower boundary, the index is presently testing significant long-term resistance in the zone between 10,330 and 10,530.
This sideways movement between 8,000 and 10,500 levels is positive for the index from a long-term perspective. The index is hovering well above its 21 and 50-week moving averages.
Conclusive breakthrough of the aforementioned resistance zone will lift the index to new highs - to 12,000 in the long-term. Significant long-term supports for the index, pegged at 9,000, 8,000, and 7,400 levels, will provide base if the index witnesses selling pressure.
As long as 6,500 levels hold the long-term trend remains up for the index.
Medium-term view
Since the December 2011 trough of 7,894 (52-week low), taking support at around 8,000 levels, the index has been on a medium-term uptrend.
However, marking a 52-week high at 10,487 on February 17 this year, the index began to lose its bullish momentum by consolidating sideways between 9,700 and 10,487. The index is hovering well above its 50 and 200-day moving averages.
As long as the index is jailed in the 9,700 and 10,487 range, its short-term trend will be sideways.
Only a breakthrough in either direction will script a clear medium-term trend.
A fall below 9,700 will pull the index down to 9,200 with a minor pause at around 9,500 levels.
A further break of 9,200 levels will mar the medium-term uptrend and drag the index down to 8,900 and then to 8,500 in the medium-term.
On the other hand, upward reversal from 9,700 can take the index to its upper boundary at 10,487.
An emphatic rally above the upper boundary will pave the way for a rally to 11,000 in the same time frame.
Auto industry set to see 'unprecedented' volatility: Seshayee
The automobile sector is likely to witness unprecedented volatility but there is an opportunity for it n ever risk, according to Mr R. Seshasayee, Executive Vice-Chairman of Ashok Leyland.
“I am representing an industry which is notorious for market volatility. We expected there could be a slowdown in this quarter (in January-March). When that did not happen, we started to worry. This is pretty much hardwired in managing the market volatility,” he said at a conference on “Thriving in an Imbalanced World” organised by CII here. Talking about the risks ahead, he said, “...there has been market risks in the last 200 years. I think we can manage the 200-year volatility (in the global market). But I think, what we are going to witness in the next few years, is a sort of volatility which we have not witnessed in the past”.
Mr Seshasayee underlined that the changes in global market conditions are going to be large.
Our Bureau reports: A conducive environment with transparent and credible regulatory mechanism is required to attract private sector investment. This could reduce the pressure on public sector funding, said the Union Shipping Minister, Mr G.K. Vasan.
The increased level of private sector participation in financing of infrastructure has also generated optimism that public funding need not necessarily be the exclusive route for infrastructure investment, he said in his address.
The Government's strategy is to increase investment in infrastructure through a combination of public investment and public-private partnership. During the 12th Plan, infrastructure investment is expected to go up to Rs 50 lakh crore. “We aim to attract a contribution of 50 per cent from private sector investments,” Mr Vasan said.
During this year, tax-free bonds of Rs 60,000 crore were announced for financing infrastructure projects. The Finance Minister has extended the availability of tax-free bonds of Rs 5,000 crore for the ports sectors for one more year, he said.
“I am sure if the private sector participants come forward to investment in infrastructure, with the right mix of courage and caution, we would be able to sail through the turbulent waters and achieve high growth,” he said.
“I am representing an industry which is notorious for market volatility. We expected there could be a slowdown in this quarter (in January-March). When that did not happen, we started to worry. This is pretty much hardwired in managing the market volatility,” he said at a conference on “Thriving in an Imbalanced World” organised by CII here. Talking about the risks ahead, he said, “...there has been market risks in the last 200 years. I think we can manage the 200-year volatility (in the global market). But I think, what we are going to witness in the next few years, is a sort of volatility which we have not witnessed in the past”.
Mr Seshasayee underlined that the changes in global market conditions are going to be large.
Our Bureau reports: A conducive environment with transparent and credible regulatory mechanism is required to attract private sector investment. This could reduce the pressure on public sector funding, said the Union Shipping Minister, Mr G.K. Vasan.
The increased level of private sector participation in financing of infrastructure has also generated optimism that public funding need not necessarily be the exclusive route for infrastructure investment, he said in his address.
The Government's strategy is to increase investment in infrastructure through a combination of public investment and public-private partnership. During the 12th Plan, infrastructure investment is expected to go up to Rs 50 lakh crore. “We aim to attract a contribution of 50 per cent from private sector investments,” Mr Vasan said.
During this year, tax-free bonds of Rs 60,000 crore were announced for financing infrastructure projects. The Finance Minister has extended the availability of tax-free bonds of Rs 5,000 crore for the ports sectors for one more year, he said.
“I am sure if the private sector participants come forward to investment in infrastructure, with the right mix of courage and caution, we would be able to sail through the turbulent waters and achieve high growth,” he said.
Patience running out for automakers in Maharastra
It is a bubble that is waiting to burst.
Big names in the auto business, right from Tata Motors and Mahindra & Mahindra to Volkswagen and General Motors, have earmarked over Rs 15,000-crore investments in Maharashtra. They have been sitting on this decision for a year now thanks to lack of any clarity on the new rules for VAT (value-added tax) refunds.
The present thinking within the Government is that only vehicles sold in the State will qualify for a set-off against VAT quite unlike the recent past when this extended to total sales.
As an incentive package, this is of little help since companies would have to wait forever to get something in return for their investments in Maharashtra.
Alternative, Gujarat
The new rules came into effect in March last year and the automakers have been waiting since then for some clarity from the Government. Nobody is pushing the panic button yet but it is getting increasingly clear that all of them are at the end of their tether.
“Time is running out and we need to decide quickly if we should continue in Maharashtra or relocate to another State which is more proactive with incentives,” top sources told Business Line. Gujarat is the unanimous favourite, especially when it already has in its kitty top names like Tata Motors, Ford, PSA Peugeot Citroen (which has put its project on hold) and Maruti-Suzuki.
Two-wheeler makers like Hero MotoCorp are also reportedly in the fray for setting up a plant in Gujarat. At one point, Bajaj Auto had also explored the option where the trigger was the issue of VAT refunds.
“None of the carmakers is keen on getting out of Maharashtra. After all, it is not the easiest of tasks to identify a site, set up an assembly line and plan a supplier cluster,” sources said.
The fact remains, though, that it has been an ‘exasperating wait' at a time when speed is the need of the hour.
For instance, Volkswagen wants to export more from India while building its domestic base too. The investments are ready to be made but the German automaker cannot do a thing till the VAT issue is clearly spelt out. The same holds true for M&M, GM and Tata Motors which are keen to expand capacities in an intensely competitive market.
It would be logical to assume that the companies are already examining alternative sites but, given a chance, would rather continue in Maharashtra.
“All the supporting infrastructure is in place here. However, that does not mean we will wait indefinitely. It will be the State's loss by the end of the day,” an auto sector official said.
Big names in the auto business, right from Tata Motors and Mahindra & Mahindra to Volkswagen and General Motors, have earmarked over Rs 15,000-crore investments in Maharashtra. They have been sitting on this decision for a year now thanks to lack of any clarity on the new rules for VAT (value-added tax) refunds.
The present thinking within the Government is that only vehicles sold in the State will qualify for a set-off against VAT quite unlike the recent past when this extended to total sales.
As an incentive package, this is of little help since companies would have to wait forever to get something in return for their investments in Maharashtra.
Alternative, Gujarat
The new rules came into effect in March last year and the automakers have been waiting since then for some clarity from the Government. Nobody is pushing the panic button yet but it is getting increasingly clear that all of them are at the end of their tether.
“Time is running out and we need to decide quickly if we should continue in Maharashtra or relocate to another State which is more proactive with incentives,” top sources told Business Line. Gujarat is the unanimous favourite, especially when it already has in its kitty top names like Tata Motors, Ford, PSA Peugeot Citroen (which has put its project on hold) and Maruti-Suzuki.
Two-wheeler makers like Hero MotoCorp are also reportedly in the fray for setting up a plant in Gujarat. At one point, Bajaj Auto had also explored the option where the trigger was the issue of VAT refunds.
“None of the carmakers is keen on getting out of Maharashtra. After all, it is not the easiest of tasks to identify a site, set up an assembly line and plan a supplier cluster,” sources said.
The fact remains, though, that it has been an ‘exasperating wait' at a time when speed is the need of the hour.
For instance, Volkswagen wants to export more from India while building its domestic base too. The investments are ready to be made but the German automaker cannot do a thing till the VAT issue is clearly spelt out. The same holds true for M&M, GM and Tata Motors which are keen to expand capacities in an intensely competitive market.
It would be logical to assume that the companies are already examining alternative sites but, given a chance, would rather continue in Maharashtra.
“All the supporting infrastructure is in place here. However, that does not mean we will wait indefinitely. It will be the State's loss by the end of the day,” an auto sector official said.
Honda CBR 150R Vrooms in
Honda first wooed enthusiasts by displaying its CBR150R at the Delhi Auto Expo in January 2012. Today, it launched the world-class economy sport bike at Rs 1,17,385 ex-showroom, Delhi
Always dreamt of owning a CBR? Felt the 250 was just not agile enough for city roads? Now is your chance because Honda has launched the smaller CBR 150R in the Indian auto market at Rs 1,16,385 (ex-showroom, Delhi) for the Standard and Rs. 1,17,385 (ex-showroom, Delhi) for the Deluxe variant. Other performance bikes one can purchase in this price range include the Yamaha R15 2.0, KTM Duke 200, the soon to be launched New Bajaj Pulsar 200NS and the Hero Karizma ZMR.
The CBR 150R has a light and compact DOHC 150cc engine which produces a peak power of 17.6PS at 10,500rpm and a peak torque of 12.66Nm at 8,500rpm, which is ideal for city riding conditions. The CBR’s engine, mated to a six-speed gearbox, will be liquid-cooled and fuel-injected with their patented PGM-FI technology. Front & rear disc brakes will be standard on the bike, it will also have mono-suspension and wide front and rear tubeless tyres offering better stability while cornering.
The Japanese bike manufacturer will be ready to roll out the first batch consisting approximately 750 bike units from their Manesar plant by the end of March 2012. The CBR150R will go head to head competing with the Yamaha R15 2.0 and the latter finally has direct competition in the game. We can’t wait to hear the results ourselves.
Like the CBR 250R, the entire bike seems to have been inspired by the king of the ring – Honda VFR 1200. Overall the bike is a toned-down version of the CBR250R with similar headlights, fuel tank and the silencer unit. Expect the 150R to be sporty, agile and brilliantly engineered, just like its elder siblings. Do not for a minute mistake the CBR150 to have any similarity in performance or ergonomics with the Honda CB Dazzler -- the CBR is a completely different machine and numbers will tell the difference shortly when we get our hands on one. More updates headed your way soon – watch this space!
Always dreamt of owning a CBR? Felt the 250 was just not agile enough for city roads? Now is your chance because Honda has launched the smaller CBR 150R in the Indian auto market at Rs 1,16,385 (ex-showroom, Delhi) for the Standard and Rs. 1,17,385 (ex-showroom, Delhi) for the Deluxe variant. Other performance bikes one can purchase in this price range include the Yamaha R15 2.0, KTM Duke 200, the soon to be launched New Bajaj Pulsar 200NS and the Hero Karizma ZMR.
The CBR 150R has a light and compact DOHC 150cc engine which produces a peak power of 17.6PS at 10,500rpm and a peak torque of 12.66Nm at 8,500rpm, which is ideal for city riding conditions. The CBR’s engine, mated to a six-speed gearbox, will be liquid-cooled and fuel-injected with their patented PGM-FI technology. Front & rear disc brakes will be standard on the bike, it will also have mono-suspension and wide front and rear tubeless tyres offering better stability while cornering.
The Japanese bike manufacturer will be ready to roll out the first batch consisting approximately 750 bike units from their Manesar plant by the end of March 2012. The CBR150R will go head to head competing with the Yamaha R15 2.0 and the latter finally has direct competition in the game. We can’t wait to hear the results ourselves.
Like the CBR 250R, the entire bike seems to have been inspired by the king of the ring – Honda VFR 1200. Overall the bike is a toned-down version of the CBR250R with similar headlights, fuel tank and the silencer unit. Expect the 150R to be sporty, agile and brilliantly engineered, just like its elder siblings. Do not for a minute mistake the CBR150 to have any similarity in performance or ergonomics with the Honda CB Dazzler -- the CBR is a completely different machine and numbers will tell the difference shortly when we get our hands on one. More updates headed your way soon – watch this space!
Motorcycle Expedition kick starts at OTA
In a bid to motivate the youth across South India to join the Indian Army, the Officer’s Training Academy, organised a Motorcycle Expedition that was flagged off from its campus at St Thomas Mount, early on Monday morning. The team of 10, which included two officers, six gentlemen and two lady cadets will cover a distance of 2,200 kilometres in 11 days to tell people in Tamil Nadu, Karnataka, Kerala and Puducherry about OTA's achievements from their fifty years of existence. The expedition will also carry the message of environmental conservation by urging people they meet to practice afforestation and rain water harvesting. It is also part of the many events planned to mark their year-long golden jubilee celebration, that have included training, education, sports, adventure, social relief initiatives and the cultural events.
The expedition will travel across the South Eastern and South Western Coast and make stops at Puducherry, Rameswaram, Kanya Kumari, Trivandrum, Cochin, Ezhimala, Mysore and Bangalore. As they are on a tight schedule they will be breezing through smaller towns without halting for too long. The team is expected to return on March 31
“We are going on this type of an expedition for the first time. And just in case there is an emergency, we also have a back up plan,” said Captain Mandar Patek.
The expedition was flagged off by Lt Gen SS Jog, Commandant, OTA. Apart from the officers of OTA, family members of the team participating in the expedition also proudly cheered them on and waved ‘all the best’ to the team.
“Though I am slightly afraid of him riding a two-wheeler for such a long time across such a distance, I know he will do his best and he will obviously keep in touch with me throughout the tour. This expedition
is important as OTA is not as popular in other South Indian states, as it is in Tamil Nadu, ” said a smiling Prachi, wife of Captain Mandar Patek.
The expedition will travel across the South Eastern and South Western Coast and make stops at Puducherry, Rameswaram, Kanya Kumari, Trivandrum, Cochin, Ezhimala, Mysore and Bangalore. As they are on a tight schedule they will be breezing through smaller towns without halting for too long. The team is expected to return on March 31
“We are going on this type of an expedition for the first time. And just in case there is an emergency, we also have a back up plan,” said Captain Mandar Patek.
The expedition was flagged off by Lt Gen SS Jog, Commandant, OTA. Apart from the officers of OTA, family members of the team participating in the expedition also proudly cheered them on and waved ‘all the best’ to the team.
“Though I am slightly afraid of him riding a two-wheeler for such a long time across such a distance, I know he will do his best and he will obviously keep in touch with me throughout the tour. This expedition
is important as OTA is not as popular in other South Indian states, as it is in Tamil Nadu, ” said a smiling Prachi, wife of Captain Mandar Patek.
Japanese expert to help create ‘visionary' managers
Senior managers in companies such as TVS Motors, Tata Motors, T.I Cycles and Ashok Leyland will get training in quality management with a Japanese touch.
The programme to create “visionary leaders” in the Indian manufacturing sector will kick off on April 21 in Mahabalipuram and is being conducted by Padma Shree awardee and Japanese management expert, Prof Shijo Shiba.
Under the aegis of the Confederation of Indian Industry, the National Manufacturing Competitiveness Council and the Japanese Government, the programme has been designed by Indian Institute of Technology, Madras and Kanpur as well as the Indian Institute of Management, Calcutta, to create a band of 1,000 young visionary leaders in manufacturing. It covers all the rungs of managements in big, small and medium enterprises.
“So far, 511 managers have already undergone training,” Prof Shiba told newspersons here on Tuesday.
A follower of Buddhism, 79-year-old Prof Shiba said that India now needed a new management paradigm. “My next effort will be to create a new set of managers with focus on the bottom of the pyramid (BoP). In manufacturing, the focus needs to shift from growth to sustainability,” he added.
He said he planned to create BoP management centre in India, as it needed a different kind of management ethos to cater to this segment.
Taking a mild dig at the Indian style of management, Prof Shiba said, “While there are many good aspects, there is a tendency to pass the buck. Managers need to take responsibility. The mindset needs to change,” he said.
Before Chennai, the programme trained managers in Pune, Gurgaon and Parwanoo in Himachal Pradesh.
The programme to create “visionary leaders” in the Indian manufacturing sector will kick off on April 21 in Mahabalipuram and is being conducted by Padma Shree awardee and Japanese management expert, Prof Shijo Shiba.
Under the aegis of the Confederation of Indian Industry, the National Manufacturing Competitiveness Council and the Japanese Government, the programme has been designed by Indian Institute of Technology, Madras and Kanpur as well as the Indian Institute of Management, Calcutta, to create a band of 1,000 young visionary leaders in manufacturing. It covers all the rungs of managements in big, small and medium enterprises.
“So far, 511 managers have already undergone training,” Prof Shiba told newspersons here on Tuesday.
A follower of Buddhism, 79-year-old Prof Shiba said that India now needed a new management paradigm. “My next effort will be to create a new set of managers with focus on the bottom of the pyramid (BoP). In manufacturing, the focus needs to shift from growth to sustainability,” he added.
He said he planned to create BoP management centre in India, as it needed a different kind of management ethos to cater to this segment.
Taking a mild dig at the Indian style of management, Prof Shiba said, “While there are many good aspects, there is a tendency to pass the buck. Managers need to take responsibility. The mindset needs to change,” he said.
Before Chennai, the programme trained managers in Pune, Gurgaon and Parwanoo in Himachal Pradesh.
The 'Impulse' to lead was 'Swift' - BSM Awards
Maruti Suzuki?s benchmark model bags Car of the Year award, Hero Impulse is Bike of the Year
With 11 new cars that were launched in 2011 being shortlisted for the top award, competition was intense. These are the Ford Fiesta, Honda Brio, Hyundai Eon, Hyundai Verna, Mahindra XUV500, Maruti Suzuki Swift, Nissan Sunny, Renault Fluence, Skoda Rapid, Toyota Etios Liva and the Volkswagen Jetta. The Swift walked away with the trophy for remaining the benchmark car in its segment. In fact, the last generation of Swift had won the Motoring Car of the Year 2006 award. Maruti Suzuki’s managing executive officer, engineering, I V Rao, collected the award.
The top honour for the Bike of the Year went to Hero MotoCorp’s Impulse. India’s first true on/off-roader, this motorcycle is a segment-buster that has an affordable price tag. The Bajaj Boxer 150 and the Honda CBR250R were the only other competitors in this category. Sanjay Bhan, Hero MotoCorp’s head, marketing, received the trophy.
The Brio may not have pipped the Swift to the post, but its brilliance was acknowledged. It won the Jury Award, that is given to the most significant car other than the Car of the Year. Seiki Inaba, director, marketing, Honda Siel Cars India, accepted the award for the Brio.
For the coveted title of SUV of the Year, there were five contenders – BMW X1, Force One, Mahindra Thar, Mahindra XUV500 and the Renault Koleos. Mahindra’s path-breaking SUV, the XUV500, effortlessly trounced the competition and emerged victorious. Mahindra & Mahindra’s president, automotive & farm equipment, Pawan Goenka, and chief executive, automotive division, Pravin Shah, collected the trophy.
The Range Rover Evoque, which is on its way to writing SUV history, won the Premium SUV of the Year award, which was received by Rohit Suri, head of Tata Motors’ Premier Car Division. The Premium Car of the Year went to the Audi A6, which won it despite other worthies like the Aston Martin Rapide, Maserati Quattroporte, Mercedes-Benz CLS, Volkswagen Passat and the Volvo S60 plus, of course, its own siblings, the A7 and the A8. Audi India’s brand director, Michael Perschke, collected the trophy for this benchmark sedan.
Performance cars have a one specialty about them, and that is to go very fast. At a time when performance aspects are being pushed to the outer limits, these cars have to excite the senses and deliver the goods. Cars as varied as the Aston Martin DBS, Audi RS5, BMW 650i, Ferrari 458 Italia, Lamborghini Aventador, Maserati Gran Cabrio Sport, Maserati MC Stradale, Mercedes-Benz SLK and the Volvo S60 T6 were in contention for the Performance Car of the Year award, but it was the awe-inspiring Lamborghini that won the hearts of the jury. Pavan Shetty, head-operations, India, for the supercar maker, accepted the trophy.
The Automotive Pioneer of the Year award is given to an automobile that pushes the boundaries of safety, comfort and driving pleasure and sets the trend for others to follow. This year, the luxuriously-appointed, highly innovative Audi A8 bagged the award, which was collected again by Perschke of Audi India.
Year 2011 will be remembered as the one when the Formula One circus finally landed in India. It was historic because the pinnacle of automotive racing was held in the country for the first time, and the credit for its success goes to Jaypee Sports International, that bagged the Motorsport Excellence award.
The last two awards were given to two big motorcycles. The Import Bike of the Year award was bagged by the BMW S1000RR. Sharad Kachalia, director-sales & marketing, Navnit Motors which is the official importers of BMW Motorrad, received the award.
The Premium Bike of the Year went to Bajaj Auto’s Kawasaki Ninja 650R, introduced in the country last year. The award was collected by Amit Nandi, vice-president, Probiking. Other contenders in this segment were the Honda CBR 250R, the Hyosung GT650N and the GT650R.
With 11 new cars that were launched in 2011 being shortlisted for the top award, competition was intense. These are the Ford Fiesta, Honda Brio, Hyundai Eon, Hyundai Verna, Mahindra XUV500, Maruti Suzuki Swift, Nissan Sunny, Renault Fluence, Skoda Rapid, Toyota Etios Liva and the Volkswagen Jetta. The Swift walked away with the trophy for remaining the benchmark car in its segment. In fact, the last generation of Swift had won the Motoring Car of the Year 2006 award. Maruti Suzuki’s managing executive officer, engineering, I V Rao, collected the award.
The top honour for the Bike of the Year went to Hero MotoCorp’s Impulse. India’s first true on/off-roader, this motorcycle is a segment-buster that has an affordable price tag. The Bajaj Boxer 150 and the Honda CBR250R were the only other competitors in this category. Sanjay Bhan, Hero MotoCorp’s head, marketing, received the trophy.
The Brio may not have pipped the Swift to the post, but its brilliance was acknowledged. It won the Jury Award, that is given to the most significant car other than the Car of the Year. Seiki Inaba, director, marketing, Honda Siel Cars India, accepted the award for the Brio.
For the coveted title of SUV of the Year, there were five contenders – BMW X1, Force One, Mahindra Thar, Mahindra XUV500 and the Renault Koleos. Mahindra’s path-breaking SUV, the XUV500, effortlessly trounced the competition and emerged victorious. Mahindra & Mahindra’s president, automotive & farm equipment, Pawan Goenka, and chief executive, automotive division, Pravin Shah, collected the trophy.
The Range Rover Evoque, which is on its way to writing SUV history, won the Premium SUV of the Year award, which was received by Rohit Suri, head of Tata Motors’ Premier Car Division. The Premium Car of the Year went to the Audi A6, which won it despite other worthies like the Aston Martin Rapide, Maserati Quattroporte, Mercedes-Benz CLS, Volkswagen Passat and the Volvo S60 plus, of course, its own siblings, the A7 and the A8. Audi India’s brand director, Michael Perschke, collected the trophy for this benchmark sedan.
Performance cars have a one specialty about them, and that is to go very fast. At a time when performance aspects are being pushed to the outer limits, these cars have to excite the senses and deliver the goods. Cars as varied as the Aston Martin DBS, Audi RS5, BMW 650i, Ferrari 458 Italia, Lamborghini Aventador, Maserati Gran Cabrio Sport, Maserati MC Stradale, Mercedes-Benz SLK and the Volvo S60 T6 were in contention for the Performance Car of the Year award, but it was the awe-inspiring Lamborghini that won the hearts of the jury. Pavan Shetty, head-operations, India, for the supercar maker, accepted the trophy.
The Automotive Pioneer of the Year award is given to an automobile that pushes the boundaries of safety, comfort and driving pleasure and sets the trend for others to follow. This year, the luxuriously-appointed, highly innovative Audi A8 bagged the award, which was collected again by Perschke of Audi India.
Year 2011 will be remembered as the one when the Formula One circus finally landed in India. It was historic because the pinnacle of automotive racing was held in the country for the first time, and the credit for its success goes to Jaypee Sports International, that bagged the Motorsport Excellence award.
The last two awards were given to two big motorcycles. The Import Bike of the Year award was bagged by the BMW S1000RR. Sharad Kachalia, director-sales & marketing, Navnit Motors which is the official importers of BMW Motorrad, received the award.
The Premium Bike of the Year went to Bajaj Auto’s Kawasaki Ninja 650R, introduced in the country last year. The award was collected by Amit Nandi, vice-president, Probiking. Other contenders in this segment were the Honda CBR 250R, the Hyosung GT650N and the GT650R.
No Easy Rides in Moto Market Anymore
Motorcycle market shifts a gear as Hero powers on minus Honda, which beats TVS to the No. 3 spot, and Bajaj Auto takes the race to global tracks : Lijee Philip
Fill it, shut it, forget it, is a line imprinted in the minds of more than half of motorcycle riders in India — a line Hero MotoCorp used to devastating effect to convey its proposition of fuel efficiency when it had Honda as its joint venture partner. A little over a year after the partners decided to go their separate ways, Hero MotoCorp is still king of the hill, accounting for 56% of all bikes sold between April 2011 and February 2012.
That’s bad news for the competition — not just because Hero has demonstrated a robust growth of 16.5% in the current fiscal year and bumped up its share from 54.6% a year ago. Rivals also need to be wary about the Japanese bikemaker that is synonymous with quality riding on its own. In January, Honda displayed its prowess when it overtook TVS Motors to claim the No. 3 position in the Indian motorcycles market.
Honda has now trained its sights on No. 2 Bajaj Auto Ltd (BAL). Although the gap between the two is still substantial — the Japanese maker has a share that is under a third of BAL’s — there are signs that Honda is closing in. For the month of February the difference in sales between the two companies (of all two-wheelers) was just 7,000 units. And with Honda Motorcycles & Scooters India (HMSI), the Indian operation of the Japanese giant, preparing to launch the Yuga 110 cc in May in the entrylevel segment, it will be in a position to address a new segment of buyers.
Nervous Bajaj? No
You’d expect BAL CEO Rajiv Bajaj to be nervous with the sight of Honda in his rear view mirror. He isn’t. For a very good reason: he is looking at BAL from a global perspective — 35% of BAL’s sales are overseas. Of the roughly 50 million two-wheelers sold globally, 30-35 million are motorcycles. By the end of the current fiscal year, BAL would have sold close to some 3.8 million motorcycles, giving it a global market share of over 10%. “We should go up to 20-25%. A day should come when 20% of our sales are from India and 80% from outside,” says Bajaj.
More important, says Bajaj, BAL is the world’s most profitable two-wheeler maker with operating profit margins of roughly 18%. Analysts point out that Hero and Honda have operating profit margins
of 11-12%; other global twowheeler majors (Suzuki, Yamaha, Kawasaki), have operating margins in low single digits, if not in negative territory.
New Customers
Hero may not have Honda in tow, but that isn’t stopping it from harbouring global ambitions. It’s teamed up with the world’s largest privately owned engine developer, AVL of Austria, to develop technology for its bread-and-butter 100 cc and 110 cc models: the Splendor range and the Passion. “Over time, we will develop our own R&D to make products for the global market,” says Pawan Munjal, MD & CEO, Hero MotoCorp.
The top three have begun to move out of their comfort zones in a bid to attract new customers. Hero, which reigns supreme in segments that matter — 100 cc and 110 cc — is now attempting to carve a space for itself at the higher end by signing a technology-sharing deal with US motorcycle firm Erik Buell Racing (EBR).
BAL is counting on its five-year alliance with KTM of Austria. Bajaj proudly says KTM is to Bajaj what Audi is to Volkswagen — to crack open new markets and produce higher-end products. BAL is yet to venture into China and Brazil, the largest, and third largest markets for motorcycles, respectively (India is the second largest).
By 2015, Bajaj expects half of KTM’s bikes to be produced out of his Chakan factory. KTM makes smaller bikes — more relevant to BAL. “I won’t be surprised if KTM hits volumes of 2,00,000 soon as it is now entering Malaysia and other emerging markets”, says Bajaj. By the end of the current fiscal, KTM would have sold some 1,20,000 bikes, 30% of them made in Chakan. KTM and Pulsar make BAL a powerhouse in the 60,000-plus bike segment.
But BAL’s weakest link is the 45 000-50 000 price band. Bikes in this range account for more than 25% of the market. It is also the segment Hero dominates, with a 93% share.
Even in the segment that’s one rung below — bikes priced between 40,000 and 45,000 — Hero reigns supreme. Riding on the warhorse Splendor, the Munjals control a little over 70% of this segment that accounts for a fifth of all motorcycle sales in the country.
Honda’s Plans
Bajaj may just have to bite the bullet — it has tried before and failed — and attack these two chunks of the market if it has to get somewhere close to Hero. At the same time, however, it also has to reckon with Honda, which sees 30% of its sales coming from India by 2020, from 13% currently. To achieve this, HMSI is expanding capacities furiously, and will invest 1,000 crore in the following fiscal year.
HMSI, which began its India sojourn with scooters, is keen to step up its presence in motorcycles. Currently scooters — with the bestselling Activa leading the way — have been the driver for HMSI, accounting for 60% of total production.
In 2012-13, motorcycles and scooters will be produced in equal proportion. The company is putting up a third plant which, when commercialised in early 2013, will give HMSI a capacity of 4 million units, close to BAL’s current capacity of 4.6 million (excluding three-wheelers).
Trying Times for TVS
The one hurting the most in the battle amongst the top three is TVS Motor. The southern company will work on filling the gaps in its portfolio and upgrading existing models in the new fiscal year. “Suffice it to say that TVS Motor is in the process of implementing a strategy to recover its third position in the next financial year with new product launches and dealer activation to increase market share,” says a senior TVS official.
In the next few months, TVS will launch a 125 cc bike; and by December it will re-launch the TVS Victor. Recently, it launched the 2012 version of the Star City, and refreshed versions of the Apache and Scooty are also in the works. But more than incremental improvements TVS may just need some stunning innovation to get back into the race and challenge the Big Three.
Fill it, shut it, forget it, is a line imprinted in the minds of more than half of motorcycle riders in India — a line Hero MotoCorp used to devastating effect to convey its proposition of fuel efficiency when it had Honda as its joint venture partner. A little over a year after the partners decided to go their separate ways, Hero MotoCorp is still king of the hill, accounting for 56% of all bikes sold between April 2011 and February 2012.
That’s bad news for the competition — not just because Hero has demonstrated a robust growth of 16.5% in the current fiscal year and bumped up its share from 54.6% a year ago. Rivals also need to be wary about the Japanese bikemaker that is synonymous with quality riding on its own. In January, Honda displayed its prowess when it overtook TVS Motors to claim the No. 3 position in the Indian motorcycles market.
Honda has now trained its sights on No. 2 Bajaj Auto Ltd (BAL). Although the gap between the two is still substantial — the Japanese maker has a share that is under a third of BAL’s — there are signs that Honda is closing in. For the month of February the difference in sales between the two companies (of all two-wheelers) was just 7,000 units. And with Honda Motorcycles & Scooters India (HMSI), the Indian operation of the Japanese giant, preparing to launch the Yuga 110 cc in May in the entrylevel segment, it will be in a position to address a new segment of buyers.
Nervous Bajaj? No
You’d expect BAL CEO Rajiv Bajaj to be nervous with the sight of Honda in his rear view mirror. He isn’t. For a very good reason: he is looking at BAL from a global perspective — 35% of BAL’s sales are overseas. Of the roughly 50 million two-wheelers sold globally, 30-35 million are motorcycles. By the end of the current fiscal year, BAL would have sold close to some 3.8 million motorcycles, giving it a global market share of over 10%. “We should go up to 20-25%. A day should come when 20% of our sales are from India and 80% from outside,” says Bajaj.
More important, says Bajaj, BAL is the world’s most profitable two-wheeler maker with operating profit margins of roughly 18%. Analysts point out that Hero and Honda have operating profit margins
of 11-12%; other global twowheeler majors (Suzuki, Yamaha, Kawasaki), have operating margins in low single digits, if not in negative territory.
New Customers
Hero may not have Honda in tow, but that isn’t stopping it from harbouring global ambitions. It’s teamed up with the world’s largest privately owned engine developer, AVL of Austria, to develop technology for its bread-and-butter 100 cc and 110 cc models: the Splendor range and the Passion. “Over time, we will develop our own R&D to make products for the global market,” says Pawan Munjal, MD & CEO, Hero MotoCorp.
The top three have begun to move out of their comfort zones in a bid to attract new customers. Hero, which reigns supreme in segments that matter — 100 cc and 110 cc — is now attempting to carve a space for itself at the higher end by signing a technology-sharing deal with US motorcycle firm Erik Buell Racing (EBR).
BAL is counting on its five-year alliance with KTM of Austria. Bajaj proudly says KTM is to Bajaj what Audi is to Volkswagen — to crack open new markets and produce higher-end products. BAL is yet to venture into China and Brazil, the largest, and third largest markets for motorcycles, respectively (India is the second largest).
By 2015, Bajaj expects half of KTM’s bikes to be produced out of his Chakan factory. KTM makes smaller bikes — more relevant to BAL. “I won’t be surprised if KTM hits volumes of 2,00,000 soon as it is now entering Malaysia and other emerging markets”, says Bajaj. By the end of the current fiscal, KTM would have sold some 1,20,000 bikes, 30% of them made in Chakan. KTM and Pulsar make BAL a powerhouse in the 60,000-plus bike segment.
But BAL’s weakest link is the 45 000-50 000 price band. Bikes in this range account for more than 25% of the market. It is also the segment Hero dominates, with a 93% share.
Even in the segment that’s one rung below — bikes priced between 40,000 and 45,000 — Hero reigns supreme. Riding on the warhorse Splendor, the Munjals control a little over 70% of this segment that accounts for a fifth of all motorcycle sales in the country.
Honda’s Plans
Bajaj may just have to bite the bullet — it has tried before and failed — and attack these two chunks of the market if it has to get somewhere close to Hero. At the same time, however, it also has to reckon with Honda, which sees 30% of its sales coming from India by 2020, from 13% currently. To achieve this, HMSI is expanding capacities furiously, and will invest 1,000 crore in the following fiscal year.
HMSI, which began its India sojourn with scooters, is keen to step up its presence in motorcycles. Currently scooters — with the bestselling Activa leading the way — have been the driver for HMSI, accounting for 60% of total production.
In 2012-13, motorcycles and scooters will be produced in equal proportion. The company is putting up a third plant which, when commercialised in early 2013, will give HMSI a capacity of 4 million units, close to BAL’s current capacity of 4.6 million (excluding three-wheelers).
Trying Times for TVS
The one hurting the most in the battle amongst the top three is TVS Motor. The southern company will work on filling the gaps in its portfolio and upgrading existing models in the new fiscal year. “Suffice it to say that TVS Motor is in the process of implementing a strategy to recover its third position in the next financial year with new product launches and dealer activation to increase market share,” says a senior TVS official.
In the next few months, TVS will launch a 125 cc bike; and by December it will re-launch the TVS Victor. Recently, it launched the 2012 version of the Star City, and refreshed versions of the Apache and Scooty are also in the works. But more than incremental improvements TVS may just need some stunning innovation to get back into the race and challenge the Big Three.
Strategy is nothing but Specialisation - Rajiv Bajaj
In an exclusive interview with ET , Rajiv Bajaj , MD & CEO, Bajaj Auto, throws light on how the motorcycle maker's three 'power' brands will drive growth and his game plan to become a global leader in bikes. Edited excerpts:
On the evolution of the Indian motorcycle industry over the past decade or so:
What is the one word each manufacturer owns that is in the mind of the motorcycle consumer? In my view, the word that Honda owns is quality, Hero owns is mileage and the one word Bajaj owns is power, thanks to the Pulsar. If it's Yamaha, that word is style. The one word that TVS owns is cheap (not in a bad sense) but as in the least expensive.
If this is true, then it points to a very high state of evolution in the market place where consumers are able to clearly associate brands with positions. Each of the above-mentioned brands has a clear position.
This has its pros and cons. The pro is that, for instance, if a consumer wants power, other things being equal, he will come to you. So, the brand becomes safer in that sense. It is relatively insulated. The con of that is people who don't seek power won't be really too interested in you-but I think the advantage is greater than the disadvantage.
On Bajaj's position:
We got back into the game with the Pulsar. People buy the Discover because it reminds them of the Pulsar. It's like a younger brother of the Pulsar; or a 'domesticated' Pulsar. There is this clear divide in this market place. Hero has a 71% share in the 100cc segment; I find that, after having a satisfying experience with Hero, consumers move up and they come to us. So, people who want bigger and stronger bikes come to us, but they will not buy a 100cc from us.
On whether Hero MotoCorp will continue to be number one because most consumers want fuel efficiency:
Yes, it will, if mileage continues to remain so important- unless someone is able to make a technology breakthrough and take it away from them. For example, Hero bikes give 65kmpl efficiency. Being engineers, we are always thinking of how to make something better. We don't know the difference between better and different. The consumer does not think better, he thinks different.
What I mean is that if Hero is delivering 65kmpl, we would be happy if we made something delivering 70kmpl. However, consumers can't tell the difference as 65 is only an average. The first time the consumer can actually perceive a difference is if there is a minimum 20% difference. A 33% difference is even more noticeable, while a 50% difference cannot be missed.
That's why we made the Pulsar 150cc. It's not a coincidence that 150cc is 50% more than 100cc. The question now is can anybody produce a technology that is 50% better? My view is that to move from 65kmpl to 78kmpl (a 20% difference) is difficult; from 65kmpl to 70kmpl has happened, but that is evolution, not a revolution.
On how Bajaj can create that difference:
We are now less in the engineering and more in the marketing industry. We have to be perceived to be different, with credibility; and there are also not too many tech levers to do this. For this, you might have to create a perception that you are at loggerheads with your father and will refuse to ever make scooters-thereby creating a perception that I am wedded to the Pulsar. I believe that one day everybody will buy powerful bikes; it may take five years or 15 years, but you have to direct the whole organisation in that direction. Strategy is nothing but specialisation. So, we have to stay where we are and try to expand the appeal for what we stand for, which is power.
On the future for the Pulsar, which is now a decade-old:
We follow a platform strategy. One platform is 125-200cc, from which we make the Pulsars and the KTM bikes. The next platform is 250-350cc, and there will be both brands out of this also. If the Pulsar has to go any further, we need another larger platform, but that would not be right as the Pulsar is not a niche bike like a Harley or a Ducati. So, 350cc may be a good place to stop as of now. Ten years down the line, the Pulsar can go much further.
On the need for more brands besides the Pulsar, Discover and KTM:
Many industries have a three-tier structure. People at the bottom buy on price, those at the top for exclusivity, and those in the middle for value for money. The most successful car brands of the last 50 years are Toyota and Volkswagen. They have understood how to position their brands and play the market. For VW, it is Skoda at the bottom, Audi at the top and VW in the middle. Toyota does it even better with Daihatsu at the bottom, Lexus at the top and Toyota in the middle.
On the evolution of the Indian motorcycle industry over the past decade or so:
What is the one word each manufacturer owns that is in the mind of the motorcycle consumer? In my view, the word that Honda owns is quality, Hero owns is mileage and the one word Bajaj owns is power, thanks to the Pulsar. If it's Yamaha, that word is style. The one word that TVS owns is cheap (not in a bad sense) but as in the least expensive.
If this is true, then it points to a very high state of evolution in the market place where consumers are able to clearly associate brands with positions. Each of the above-mentioned brands has a clear position.
This has its pros and cons. The pro is that, for instance, if a consumer wants power, other things being equal, he will come to you. So, the brand becomes safer in that sense. It is relatively insulated. The con of that is people who don't seek power won't be really too interested in you-but I think the advantage is greater than the disadvantage.
On Bajaj's position:
We got back into the game with the Pulsar. People buy the Discover because it reminds them of the Pulsar. It's like a younger brother of the Pulsar; or a 'domesticated' Pulsar. There is this clear divide in this market place. Hero has a 71% share in the 100cc segment; I find that, after having a satisfying experience with Hero, consumers move up and they come to us. So, people who want bigger and stronger bikes come to us, but they will not buy a 100cc from us.
On whether Hero MotoCorp will continue to be number one because most consumers want fuel efficiency:
Yes, it will, if mileage continues to remain so important- unless someone is able to make a technology breakthrough and take it away from them. For example, Hero bikes give 65kmpl efficiency. Being engineers, we are always thinking of how to make something better. We don't know the difference between better and different. The consumer does not think better, he thinks different.
What I mean is that if Hero is delivering 65kmpl, we would be happy if we made something delivering 70kmpl. However, consumers can't tell the difference as 65 is only an average. The first time the consumer can actually perceive a difference is if there is a minimum 20% difference. A 33% difference is even more noticeable, while a 50% difference cannot be missed.
That's why we made the Pulsar 150cc. It's not a coincidence that 150cc is 50% more than 100cc. The question now is can anybody produce a technology that is 50% better? My view is that to move from 65kmpl to 78kmpl (a 20% difference) is difficult; from 65kmpl to 70kmpl has happened, but that is evolution, not a revolution.
On how Bajaj can create that difference:
We are now less in the engineering and more in the marketing industry. We have to be perceived to be different, with credibility; and there are also not too many tech levers to do this. For this, you might have to create a perception that you are at loggerheads with your father and will refuse to ever make scooters-thereby creating a perception that I am wedded to the Pulsar. I believe that one day everybody will buy powerful bikes; it may take five years or 15 years, but you have to direct the whole organisation in that direction. Strategy is nothing but specialisation. So, we have to stay where we are and try to expand the appeal for what we stand for, which is power.
On the future for the Pulsar, which is now a decade-old:
We follow a platform strategy. One platform is 125-200cc, from which we make the Pulsars and the KTM bikes. The next platform is 250-350cc, and there will be both brands out of this also. If the Pulsar has to go any further, we need another larger platform, but that would not be right as the Pulsar is not a niche bike like a Harley or a Ducati. So, 350cc may be a good place to stop as of now. Ten years down the line, the Pulsar can go much further.
On the need for more brands besides the Pulsar, Discover and KTM:
Many industries have a three-tier structure. People at the bottom buy on price, those at the top for exclusivity, and those in the middle for value for money. The most successful car brands of the last 50 years are Toyota and Volkswagen. They have understood how to position their brands and play the market. For VW, it is Skoda at the bottom, Audi at the top and VW in the middle. Toyota does it even better with Daihatsu at the bottom, Lexus at the top and Toyota in the middle.
Suzuki to set up Rs.2,000-cr Two-wheeler plant in Rohtak
Japanese automaker Suzuki Motor Corp’s wholly-owned two-wheeler company, Suzuki Motorcycle India, plans to set up a greenfield plant in Rohtak entailing an investment of . 2,000 crore. The company has been allotted about 50 acre land by the Haryana government to set up the plant in a phased manner. It plans to have a cumulative production capacity of two million units, beginning with production of 500,000 units a year in the first phase by 2014. “The new facility will take care of our future capacity requirements to feed the Indian market till we exhaust the million-unit production capacity at our Manesar plant,” a senior executive said. Suzuki, which also owns India’s biggest carmaker Maruti Suzuki, has invested over . 15,000 crore in car production and assembly, a two-wheeler plant and a diesel engine-making plant in Gurgaon and Manesar in Haryana. The company also plans to invest another . 6,000 crore to expand its car plants at Manesar, besides setting up an R&D centre at Rohtak to develop technology and products at the 600-acre facility that is dubbed as its largest overseas research operation outside of Japan. Maruti has already made public plans to move out of Haryana and is looking at setting up a two-million capacity plant in Gujarat that is expected to commence operations after 2015.
Haryana currently houses the largest number of two-wheeler companies, with Hero Motocorp, Honda Motor & Scooter and the iconic American bike maker Harley Davidson already operating plants in the state. The fresh investments are likely to take the cumulative two-wheeler capacity in the state to around 10 million units by 2020.
Haryana currently houses the largest number of two-wheeler companies, with Hero Motocorp, Honda Motor & Scooter and the iconic American bike maker Harley Davidson already operating plants in the state. The fresh investments are likely to take the cumulative two-wheeler capacity in the state to around 10 million units by 2020.
Suzuki Motorcycle suspends 3 workers at Gurgaon Unit
Labour issues seem to have a recurrent relationship with Suzuki's domestic operations. Its motorcycle plant in Gurgaon has now run into labour-related dispute, five months after its Manesar–based Maruti Suzuki car operations ended its own troubles.
Three workers from Suzuki Motorcycle, including the General Secretary and Vice-President of the plant union, were suspended on Friday. This followed an altercation with a senior member of the management on Wednesday over a “production incentive scheme”.
“Discussions were going on with the (Haryana) Labour Department since morning and will continue tomorrow. There was a strong police presence inside the plant today,” a worker told Business Line.
The workers are demanding a variable incentive scheme as a portion of the earnings from each two-wheeler sold by the company.
This was to be reviewed in March, based on a wage settlement agreement in July 2011, another worker said.
A company official said, “The incentive negotiations were on when some union leaders resorted to strong-arm tactics with the human resources head. This also resulted in lower production and affected quality levels. So the decision to suspend them was taken as a disciplinary measure.”
Though workers decided to not stop work over the dispute, a collective call was taken to go on a “hunger strike” to express disappointment with the management.
Union members from three other Suzuki operations — Maruti's Gurgaon and Manesar plant, and Suzuki Powertrain — also reportedly met to discuss the future course of action.
It may be recalled that last year's labour dispute at Maruti Suzuki had also spread to Suzuki Motorcycle and Suzuki Powertrain units.
Three workers from Suzuki Motorcycle, including the General Secretary and Vice-President of the plant union, were suspended on Friday. This followed an altercation with a senior member of the management on Wednesday over a “production incentive scheme”.
“Discussions were going on with the (Haryana) Labour Department since morning and will continue tomorrow. There was a strong police presence inside the plant today,” a worker told Business Line.
The workers are demanding a variable incentive scheme as a portion of the earnings from each two-wheeler sold by the company.
This was to be reviewed in March, based on a wage settlement agreement in July 2011, another worker said.
A company official said, “The incentive negotiations were on when some union leaders resorted to strong-arm tactics with the human resources head. This also resulted in lower production and affected quality levels. So the decision to suspend them was taken as a disciplinary measure.”
Though workers decided to not stop work over the dispute, a collective call was taken to go on a “hunger strike” to express disappointment with the management.
Union members from three other Suzuki operations — Maruti's Gurgaon and Manesar plant, and Suzuki Powertrain — also reportedly met to discuss the future course of action.
It may be recalled that last year's labour dispute at Maruti Suzuki had also spread to Suzuki Motorcycle and Suzuki Powertrain units.
Captains see nothing for TN - Budget 2013
With no special announcements for Tamil Nadu, corporates here reacted to Pranab’s budgetary announcements in a tame manner.
hough the finance minister preceded his tax announcements with Shakespeare’s words “I must be cruel only to be kind”, Chennai businessmen found little kindness in them.
“The budget had nothing specific for Tamil Nadu,” lamented Mr R. Dinesh, CII Tamil Nadu chairman. “Amendment to GST will have a direct impact on supply chain,” he lamented.
The state’s strong auto industry, which was hoping for some kind of sops to overcome its hard times, found little to rejoice.
Several auto majors in the city expressed shock over the move to hike excise duty on petrol and diesel cars with higher engine capacity.
The industry was just scrambling back to normalcy but the excise duty hike and enlarging service tax net will slow down growth again, said Mr R. Sethuraman, senior VP of Hyundai Motors India Ltd. “We have no choice but to pass on the increase in cost to customers directly as we cannot absorb any more losses,” he lamented while hinting at a price rise of Rs 6,000-Rs 72,000 for their range of cars.
“I wish there was real thrust to manufacturing sector,” said Mr Venu Srinivasan, CMD, TVS Motor Company Ltd. “Issues like land acquisition, labour laws, Factories Act and getting away from Permit Raj are key for growth,” he added.
The IT services industry that was looking forward to stability, consistency and simplicity in policymaking was served a mixed bag, opined R. Chandrasekaran, Group chief executive, Cognizant. Textile associations too felt that the budget package only addressed the handloom and powerloom sector and not the larger needs to the industry.
On the export front, FIEO president M. Rafeeque Ahmed expressed his disappointment over non-extension of interest subsidy for exports.
hough the finance minister preceded his tax announcements with Shakespeare’s words “I must be cruel only to be kind”, Chennai businessmen found little kindness in them.
“The budget had nothing specific for Tamil Nadu,” lamented Mr R. Dinesh, CII Tamil Nadu chairman. “Amendment to GST will have a direct impact on supply chain,” he lamented.
The state’s strong auto industry, which was hoping for some kind of sops to overcome its hard times, found little to rejoice.
Several auto majors in the city expressed shock over the move to hike excise duty on petrol and diesel cars with higher engine capacity.
The industry was just scrambling back to normalcy but the excise duty hike and enlarging service tax net will slow down growth again, said Mr R. Sethuraman, senior VP of Hyundai Motors India Ltd. “We have no choice but to pass on the increase in cost to customers directly as we cannot absorb any more losses,” he lamented while hinting at a price rise of Rs 6,000-Rs 72,000 for their range of cars.
“I wish there was real thrust to manufacturing sector,” said Mr Venu Srinivasan, CMD, TVS Motor Company Ltd. “Issues like land acquisition, labour laws, Factories Act and getting away from Permit Raj are key for growth,” he added.
The IT services industry that was looking forward to stability, consistency and simplicity in policymaking was served a mixed bag, opined R. Chandrasekaran, Group chief executive, Cognizant. Textile associations too felt that the budget package only addressed the handloom and powerloom sector and not the larger needs to the industry.
On the export front, FIEO president M. Rafeeque Ahmed expressed his disappointment over non-extension of interest subsidy for exports.
Triumph Motor to set up bike assembly plant in Karnataka
UK-based premium bike-maker Triumph Motorcycles has zeroed in on the southern State of Karnataka for its local assembly plant, which may start well within a year. It had previously held talks with States such as Tamil Nadu and Maharashtra for the same.
Its third such facility globally after the UK and Thailand, the Indian plant will help Triumph price its models more competitively in the world's second-largest two wheeler market. This strategy follows another niche player, Harley-Davidson's, which started similar operations at a facility in Haryana last year.
Triumph signed a memorandum of understanding with the Karnataka Government about a month back, an official close to the development told Business Line. One of the pre-requisites for the location had been proximity to a port for both importing completely knocked-down (CKD) kits and later exporting bikes, if required.
“About 40 acres of land has been identified by the company at Narasapur (Kolar district) on the Bangalore-Chennai highway. This is about 50 km from Honda's upcoming motorcycle plant,” the official said.
The brand, which launched itself in India at the Auto Expo in January, is looking to assemble the Bonneville, Street Triple, Speed Triple and Daytona 675 models locally. Later, it may consider full manufacturing as well.
“We are gearing up to commence our Indian operations at the earliest. Of the seven motorcycles that will be entering the market, we will be assembling four of our bike models in India. We will be looking at setting up the CKD assembly facility in a propitious location,” the company said in a reply to emailed queries.
Starting from July, up to four dealerships will be appointed in 2012, with a target of around 12 outlets within the next three years. Triumph's local headquarters will likely be in Delhi, sources said.
“While the plant would take around a year to come up, the bike models would be launched earlier to build excitement around the brand. Though initially imported as fully-built units, the pricing will be kept on the lower side keeping in mind the reduced costs after local assembly starts,” a source said.
Premium bike-makers present in India include Ducati and BMW Motorrad, apart from high-end models from Suzuki, Yamaha and Honda and Korean player Hyosung. Starting from around Rs 5 lakh and going up to around Rs 45 lakh, most of these models are imported into the country.
Its third such facility globally after the UK and Thailand, the Indian plant will help Triumph price its models more competitively in the world's second-largest two wheeler market. This strategy follows another niche player, Harley-Davidson's, which started similar operations at a facility in Haryana last year.
Triumph signed a memorandum of understanding with the Karnataka Government about a month back, an official close to the development told Business Line. One of the pre-requisites for the location had been proximity to a port for both importing completely knocked-down (CKD) kits and later exporting bikes, if required.
“About 40 acres of land has been identified by the company at Narasapur (Kolar district) on the Bangalore-Chennai highway. This is about 50 km from Honda's upcoming motorcycle plant,” the official said.
The brand, which launched itself in India at the Auto Expo in January, is looking to assemble the Bonneville, Street Triple, Speed Triple and Daytona 675 models locally. Later, it may consider full manufacturing as well.
“We are gearing up to commence our Indian operations at the earliest. Of the seven motorcycles that will be entering the market, we will be assembling four of our bike models in India. We will be looking at setting up the CKD assembly facility in a propitious location,” the company said in a reply to emailed queries.
Starting from July, up to four dealerships will be appointed in 2012, with a target of around 12 outlets within the next three years. Triumph's local headquarters will likely be in Delhi, sources said.
“While the plant would take around a year to come up, the bike models would be launched earlier to build excitement around the brand. Though initially imported as fully-built units, the pricing will be kept on the lower side keeping in mind the reduced costs after local assembly starts,” a source said.
Premium bike-makers present in India include Ducati and BMW Motorrad, apart from high-end models from Suzuki, Yamaha and Honda and Korean player Hyosung. Starting from around Rs 5 lakh and going up to around Rs 45 lakh, most of these models are imported into the country.
Audi may buy Ducati decision likely by April
Volkswagen unit Audi is in talks to buy Italian motorbike maker Ducati, two sources familiar with the matter said, in a deal that could extend a long-standing rivalry with BMW to superbikes.
If talks with Ducati’s private equity owner Investindustrial are successful, Volkswagen will also add lightweight high-revving motorbike engine know-how vital to improving fuel efficiency, to an engineering empire which includes cutting-edge car, heavy truck and ship engine technology.
Audi is conducting due diligence and a decision about a purchase is expected by mid-April, one of these sources said. Volkswagen, Audi and Ducati’s owners declined comment.
At the annual earnings conference on Monday, Volkswagen Group chief executive Martin Winterkorn signaled that Europe’s largest automaker may be on the lookout to snap up the Bologna-based maker of the “Ducati monster”.
“I like everything that’s red,” Winterkorn said in response to a question about whether they would buy Ducati, a veiled reference to the fire-engine red fuel tanks which have become a hallmark for Ducati bikes. “One should never say no if an interesting opportunity arises, but we’re big enough,” Winterkorn further said, adding he did not like companies which are loss making.
Last month Investindustrial said it was looking for a “world class industrial partner” for Ducati.
Volkswagen could announce a deal as soon as its annual shareholders’ meeting on April 19.
BMW, which makes the Ducati rival S 1000 RR superbike, on Tuesday forecast it would reach its long-term sales target for cars four years earlier than planned, presenting Audi with a bigger challenge to clinch the crown of becoming the biggest selling premium automaker.
Before rising to become Volkswagen Group chief, Winterkorn built up Audi’s Ingolstadt headquarters to become a key research and development center for the entire VW group, specialised in lightweight fuel saving technologies like aluminum.
Snapping up Ducati would add yet another brand to Volkswagen’s sprawling empire which includes carmakers Lamborghini, Skoda, Seat, Bentley, Audi and Bugatti, as well as truck makers MAN and Scania.
Audi’s move would also be in line with a long held wish by Ferdinand Piech, Volkswagen’s current chairman and grandson of VW Beetle creator Ferdinand Porsche
If talks with Ducati’s private equity owner Investindustrial are successful, Volkswagen will also add lightweight high-revving motorbike engine know-how vital to improving fuel efficiency, to an engineering empire which includes cutting-edge car, heavy truck and ship engine technology.
Audi is conducting due diligence and a decision about a purchase is expected by mid-April, one of these sources said. Volkswagen, Audi and Ducati’s owners declined comment.
At the annual earnings conference on Monday, Volkswagen Group chief executive Martin Winterkorn signaled that Europe’s largest automaker may be on the lookout to snap up the Bologna-based maker of the “Ducati monster”.
“I like everything that’s red,” Winterkorn said in response to a question about whether they would buy Ducati, a veiled reference to the fire-engine red fuel tanks which have become a hallmark for Ducati bikes. “One should never say no if an interesting opportunity arises, but we’re big enough,” Winterkorn further said, adding he did not like companies which are loss making.
Last month Investindustrial said it was looking for a “world class industrial partner” for Ducati.
Volkswagen could announce a deal as soon as its annual shareholders’ meeting on April 19.
BMW, which makes the Ducati rival S 1000 RR superbike, on Tuesday forecast it would reach its long-term sales target for cars four years earlier than planned, presenting Audi with a bigger challenge to clinch the crown of becoming the biggest selling premium automaker.
Before rising to become Volkswagen Group chief, Winterkorn built up Audi’s Ingolstadt headquarters to become a key research and development center for the entire VW group, specialised in lightweight fuel saving technologies like aluminum.
Snapping up Ducati would add yet another brand to Volkswagen’s sprawling empire which includes carmakers Lamborghini, Skoda, Seat, Bentley, Audi and Bugatti, as well as truck makers MAN and Scania.
Audi’s move would also be in line with a long held wish by Ferdinand Piech, Volkswagen’s current chairman and grandson of VW Beetle creator Ferdinand Porsche
Auto sector aims at image makeover with young talent
Although manufacturing is still to shake off its fuddy-duddy employer image, the auto sector is changing gears to enter the fast lane.
While auto major Mahindra & Mahindra is gauging its employees' auto passion with a quiz, auto component manufacturer Tube Investments is giving its engineers an opportunity to do ‘more cerebral work.'
Although manufacturing will take some time to regain the charm it lost to IT, the auto industry is surely revving up to make its work environment appealing to young talent, says Mr Abdul Majeed, Auto Practice Leader, PwC.
The industry is also equipping its talent with the right skills.
“Auto majors such as GM, Ford and Suzuki are sending their Indian employees to centres of excellence abroad for training.”
Apart from sending engineers to manufacturing plants abroad, Tube Investments, a Murugappa Group company, is also encouraging people at the shop floor to ideate, which is something new for the group, says Mr L. Ramkumar, Managing Director.
The company now has people who have moved back from IT.
“We have realised engineers should be taken in R&D, production and planning — where there is more cerebral work. The idea is to give engineers a challenging technology or academic job rather than routine supervision, which can be done by operators. The first 3-5 years of their careers, youngsters want interesting work.”
Auto major Mahindra Rise initiated the Auto Quotient quiz to measure a person's auto passion which helps build a strong culture and capability among its employees.
It started ‘curiosity, observation and action' workshops for product development teams. Ideas from here have been incorporated in Xylo and XUV 500 designs.
The Mahindra quiz also aims to act as a tool for employer branding in campuses.
Salary gap
Mr Majeed says although the R&D spends of Indian auto industry is just 1 per cent of its overall revenues (compared to the global 3-4 per cent), things are changing. “GM and Ford are setting up R&D bases in India. Local players like Tata Motors are also keen to boost their R&D activity.”
Mr E. Balaji, Managing Director and CEO of HR consulting firm Ma Foi, points out that even compensation levels have changed to narrow the gap between IT and auto sectors. “Earlier, it was a 30-35 per cent gap, now it's about 10-15 per cent, making the industry more attractive for youngsters.”
While auto major Mahindra & Mahindra is gauging its employees' auto passion with a quiz, auto component manufacturer Tube Investments is giving its engineers an opportunity to do ‘more cerebral work.'
Although manufacturing will take some time to regain the charm it lost to IT, the auto industry is surely revving up to make its work environment appealing to young talent, says Mr Abdul Majeed, Auto Practice Leader, PwC.
The industry is also equipping its talent with the right skills.
“Auto majors such as GM, Ford and Suzuki are sending their Indian employees to centres of excellence abroad for training.”
Apart from sending engineers to manufacturing plants abroad, Tube Investments, a Murugappa Group company, is also encouraging people at the shop floor to ideate, which is something new for the group, says Mr L. Ramkumar, Managing Director.
The company now has people who have moved back from IT.
“We have realised engineers should be taken in R&D, production and planning — where there is more cerebral work. The idea is to give engineers a challenging technology or academic job rather than routine supervision, which can be done by operators. The first 3-5 years of their careers, youngsters want interesting work.”
Auto major Mahindra Rise initiated the Auto Quotient quiz to measure a person's auto passion which helps build a strong culture and capability among its employees.
It started ‘curiosity, observation and action' workshops for product development teams. Ideas from here have been incorporated in Xylo and XUV 500 designs.
The Mahindra quiz also aims to act as a tool for employer branding in campuses.
Salary gap
Mr Majeed says although the R&D spends of Indian auto industry is just 1 per cent of its overall revenues (compared to the global 3-4 per cent), things are changing. “GM and Ford are setting up R&D bases in India. Local players like Tata Motors are also keen to boost their R&D activity.”
Mr E. Balaji, Managing Director and CEO of HR consulting firm Ma Foi, points out that even compensation levels have changed to narrow the gap between IT and auto sectors. “Earlier, it was a 30-35 per cent gap, now it's about 10-15 per cent, making the industry more attractive for youngsters.”
New Chairman, Vice-Chairman for CII-TN State Council
R Dinesh, Joint Managing Director of TV Sundram Iyengar & Sons Limited, and MD of TVS Logistics Services Limited has been elected as the Chairman of CII Tamil Nadu State Council for the year 2012-13. His name was announced at the first meeting of the reconstituted Tamil Nadu State Council held in Chennai on yesterday.
Dinesh has been closely associated with the CII and was the Vice Chairman of CII Tamil Nadu State Council during the year 2011-12 and was also the Chairman of CII Madurai Zonal Council during 2008-09. He has also held position as Chairman of Infrastructure Task Force, CII Tamil Nadu during 2011-12. He is also an Associate Member of both Institute of Chartered Accountants of India and Institute of Cost & Works Accountants of India. Recently the CII has honoured Dinesh with the ‘Emerging Entrepreneurs’ Award.
Meanwhile, Narayan Sethuramon, Managing Director and Chief Executive Officer, WS Industries (India) Ltd, Chennai has been elected as the Vice Chairman of CII Tamil Nadu State Council for the year 2012-13. Sethuramon is an active member of CII and was one of the founding members of CII’s Young Indians (Yi). He was the National Chairman of Yi during 2006-07. He is also a member of the CII National Committee on Exports and Imports and member of National Councils on Manufacturing and Public Policy.
Narayan holds a Bachelor’s Degree in Production Engineering from PSG College of Technology, Coimbatore and a Master of Science in Industrial Administration from Purdue University, West Lafayette, the US.
Dinesh has been closely associated with the CII and was the Vice Chairman of CII Tamil Nadu State Council during the year 2011-12 and was also the Chairman of CII Madurai Zonal Council during 2008-09. He has also held position as Chairman of Infrastructure Task Force, CII Tamil Nadu during 2011-12. He is also an Associate Member of both Institute of Chartered Accountants of India and Institute of Cost & Works Accountants of India. Recently the CII has honoured Dinesh with the ‘Emerging Entrepreneurs’ Award.
Meanwhile, Narayan Sethuramon, Managing Director and Chief Executive Officer, WS Industries (India) Ltd, Chennai has been elected as the Vice Chairman of CII Tamil Nadu State Council for the year 2012-13. Sethuramon is an active member of CII and was one of the founding members of CII’s Young Indians (Yi). He was the National Chairman of Yi during 2006-07. He is also a member of the CII National Committee on Exports and Imports and member of National Councils on Manufacturing and Public Policy.
Narayan holds a Bachelor’s Degree in Production Engineering from PSG College of Technology, Coimbatore and a Master of Science in Industrial Administration from Purdue University, West Lafayette, the US.
Rejig at Sundaram-Clayton
The TVS Group is kicking off a major restructuring process to help provide greater business focus to group company Sundaram-Clayton Ltd (SCL).
As part of the restructuring,the automotive and nonautomotive (electronic and financial ) businesses of Sundaram-Clayton would be demerged into two separate entities with identical shareholding structures, said a source with direct knowledge of the matter.
The restructuring process has been going on for three years now to separate Sundaram-Claytons auto and nonauto businesses.Sources say that this is a structural adjustment and has nothing to do with issues like a family settlement.This demerger was on the cards since the demerger of WABCO-TVS five years ago but it could not be done at that time since a three-way demerger would have been very complex, said the source.
Analysts say the restructuring would improve valuation given that these will now be more focused businesses.
According to a company document,the board of directors of Sundaram-Clayton and that of its 100% subsidiaries Anusha Investments Ltd (AIL) and Sundaram Investments Ltd (SIL) approved the restructuring plan in November and December 2011 respectively.
The restructuring plan involves first merging Anusha Investments into Sundaram-Clayton,then hiving off all the non-auto businesses from the amalgamated company,to Sundaram Investments.
The document said that the equity share capital of Sundaram Investments will remain unlisted providing exit opportunity to the shareholders of SIL after demerger of non-automotive related business of SCL into SIL.
Apart from Anusha Investments and Sundaram Investments,Sundaram-Claytons subsidiaries include TVS Investments (TVSIL).
An NBFC,Anusha Investments is an investment company with major stakes in group companies among other interests.It has both auto and nonauto investments.Anusha Investments holds 48.56% in TVS Motor,in which Sundaram-Clayton holds 8.84%.After the merger,Sundaram-Clayton will hold 57.4% in TVS Motor.
After the demerger of the non-auto businesses of SCL into SIL,the shares of TVSIL will be transferred to SIL, says the document.
After the transfer of TVSIL shares to SIL,the former will become a wholly-owned subsidiary of SIL.
VALUE ADDITION
The restructuring plan involves first merging subsidiary Anusha Investments into Sundaram-Clayton,then hiving off all the non-auto businesses from the amalgamated company,to Sundaram Investments Electronic and financial businesses to form Sundaram Investments After the merger,Sundaram-Clayton will hold 57.4% in TVS Motor
As part of the restructuring,the automotive and nonautomotive (electronic and financial ) businesses of Sundaram-Clayton would be demerged into two separate entities with identical shareholding structures, said a source with direct knowledge of the matter.
The restructuring process has been going on for three years now to separate Sundaram-Claytons auto and nonauto businesses.Sources say that this is a structural adjustment and has nothing to do with issues like a family settlement.This demerger was on the cards since the demerger of WABCO-TVS five years ago but it could not be done at that time since a three-way demerger would have been very complex, said the source.
Analysts say the restructuring would improve valuation given that these will now be more focused businesses.
According to a company document,the board of directors of Sundaram-Clayton and that of its 100% subsidiaries Anusha Investments Ltd (AIL) and Sundaram Investments Ltd (SIL) approved the restructuring plan in November and December 2011 respectively.
The restructuring plan involves first merging Anusha Investments into Sundaram-Clayton,then hiving off all the non-auto businesses from the amalgamated company,to Sundaram Investments.
The document said that the equity share capital of Sundaram Investments will remain unlisted providing exit opportunity to the shareholders of SIL after demerger of non-automotive related business of SCL into SIL.
Apart from Anusha Investments and Sundaram Investments,Sundaram-Claytons subsidiaries include TVS Investments (TVSIL).
An NBFC,Anusha Investments is an investment company with major stakes in group companies among other interests.It has both auto and nonauto investments.Anusha Investments holds 48.56% in TVS Motor,in which Sundaram-Clayton holds 8.84%.After the merger,Sundaram-Clayton will hold 57.4% in TVS Motor.
After the demerger of the non-auto businesses of SCL into SIL,the shares of TVSIL will be transferred to SIL, says the document.
After the transfer of TVSIL shares to SIL,the former will become a wholly-owned subsidiary of SIL.
VALUE ADDITION
The restructuring plan involves first merging subsidiary Anusha Investments into Sundaram-Clayton,then hiving off all the non-auto businesses from the amalgamated company,to Sundaram Investments Electronic and financial businesses to form Sundaram Investments After the merger,Sundaram-Clayton will hold 57.4% in TVS Motor
Auto: limited impact as duty hike to be passed on
Excise duty rose from 10% to 12% (ad valorem) for most automobiles—two- and three-wheelers, commercial vehicles and cars within four metres length and under 1,500cc engine powerMark to Market | Vatsala Kamat There were no big surprises for the auto sector. Excise duty rose from 10% to 12% (ad valorem) for most automobiles—two- and three-wheelers, commercial vehicles and cars within four metres length and under 1,500cc engine power.
The more expensive, luxury car segment above 1,500cc and longer than four metres will suffer higher duties—24% compared with 22% earlier. The worst hit will be the utility vehicles segment, which will bear a 27% duty incidence (up from 22%). The duty on commercial vehicle chassis has been increased by 3-5 percentage points and is likely to affect the prices of buses and trucks meaningfully.
Further, the overall increase in excise duty on steel and other auto parts may also add to costs. But most leading automobile manufacturers, including Maruti Suzuki India Ltd, Mahindra and Mahindra Ltd (M&M) and TVS Motor Co. Ltd, are likely to pass on the increase to consumers.
Analysts expect price increases across the sector to range from Rs. 3,000 to Rs. 35,000 a vehicle.
Hence, they expect a minimal impact of the budget on auto firms’ profitability. As a result, the BSE auto index rose marginally even as the benchmark index fell 2.1% in the post-budget session. What about the impact of higher prices on demand? Well, the 2% increase in duty was already being factored in. And, unlike what the markets feared, there was no large increase in the duty of diesel vehicles. This was one of the reasons the M&M stock was the star performer among auto stocks—it rose 2.7% in Friday’s trading session.
Another boost for M&M is that the duty hike is not applicable to tractors, which comprise one-third of the firm’s sales and nearly half of its earnings before interest and tax. Of course, it remains to be seen if the hike in the cost of components and raw materials will hit the profit margins of tractors, given that sales volumes have been steadily declining.
The more expensive, luxury car segment above 1,500cc and longer than four metres will suffer higher duties—24% compared with 22% earlier. The worst hit will be the utility vehicles segment, which will bear a 27% duty incidence (up from 22%). The duty on commercial vehicle chassis has been increased by 3-5 percentage points and is likely to affect the prices of buses and trucks meaningfully.
Further, the overall increase in excise duty on steel and other auto parts may also add to costs. But most leading automobile manufacturers, including Maruti Suzuki India Ltd, Mahindra and Mahindra Ltd (M&M) and TVS Motor Co. Ltd, are likely to pass on the increase to consumers.
Analysts expect price increases across the sector to range from Rs. 3,000 to Rs. 35,000 a vehicle.
Hence, they expect a minimal impact of the budget on auto firms’ profitability. As a result, the BSE auto index rose marginally even as the benchmark index fell 2.1% in the post-budget session. What about the impact of higher prices on demand? Well, the 2% increase in duty was already being factored in. And, unlike what the markets feared, there was no large increase in the duty of diesel vehicles. This was one of the reasons the M&M stock was the star performer among auto stocks—it rose 2.7% in Friday’s trading session.
Another boost for M&M is that the duty hike is not applicable to tractors, which comprise one-third of the firm’s sales and nearly half of its earnings before interest and tax. Of course, it remains to be seen if the hike in the cost of components and raw materials will hit the profit margins of tractors, given that sales volumes have been steadily declining.
Pay more for cars, bikes
Prices of all cars slated to rise by a minimum two per cent
Car buyers would have to shell out more for their choice of vehicles, as Finance Minister Pranab Mukherjee proposed to raise the excise duty on small and large vehicles to its highest level in nearly four years, while also refraining from laying additional tax on diesel-driven vehicles.
Prices of all cars (compacts and sedans), utility vehicles (sports, multi-utlity and vans), commercial vehicles and two-wheeler is slated to rise by a minimum two per cent. The central excise duty has been enhanced by two percentage points to 12 per cent to 10 per cent.
In addition, there has been a two-way increase in excise duty on large cars. In keeping with the increase proposed in the standard rate the duty on such cars have been increased to 24 per cent from 22 per cent.
Presently, petrol cars longer than four meters having engine capacity above 1,200-cc and diesel cars longer than four meters with an engine capacity above 1,500-cc attract excise duty at the rate of 22 per cent, plus Rs 15,000.
Further, those vehicles, which attracted a tax of 22 per cent plus Rs 15,000, will now be subject to switching over to an ad valorem rate of 27 per cent, according to the finance minister's proposal.
The excise duty on all compact cars (as defined by the government) and two-wheelers was brought down to eight per cent from 12 per cent and to 20 per cent from 24 per cent on large cars in the first stimulus package of December 2008.
Further, fully imported large cars, SUVs and MUVs having engine capacity above the specified capacity with value exceeding $40,000 (about Rs 19.60 lakh) will now attract a custom duty of 75 per cent as against the current 60 per cent.
As a result car and SUV making companies like Maruti Suzuki, Hyundai, General Motors, Honda, among several others are taking a price hike across all their models. Commercial vehicle and two-wheeler makers like Hero MotoCorp, Bajaj Auto, Honda Motorcycle are evaluating an increase.
Though the exact quantum of increase is yet to be finalised by most manufacturers experts say that it could range between Rs 3,000-Rs 35,000 for cars and SUVs while that for two-wheelers the hike would mean an increase in the range of Rs 800-2,000. Commercial vehicle could pass an increase of Rs 15,000-35,000.
Pawan Goenka, president (automotive and farm equipment sectors) Mahindra & Mahindra said to a television channel, "The hike in duty will surely impact demand but it will wear off with time".
Imported cars whose price is double in India compared to the selling price in their home market will see a further hike by at least 15 percentage points. Price of models of Aston Martin, Lamborghini, Jaguar, Porsche, Bentley and Rolls Royce will go up as a result.
Meanwhile, to provide a competitive edge to home grown bicycle makers, the FM increased the customs duty on it to 30 per cent from 10 per cent and on bicycle parts from 10 per cent to 20 per cent.
Also, commercial vehicle bodies, on which specific rate of Rs 10,000 on chassis and applicable ad valorem duty is charged will now see a uniform rate of three per cent.
Specified parts required for the manufacture of hybrid vehicles enjoy full exemption from basic customs duty and special CVD with concessional excise duty/ CVD of six 6 per cent This concession is being extended to specified additional items and lithium ion batteries imported for the manufacture of battery packs for supply to electric or hybrid vehicle manufacturers.
Car buyers would have to shell out more for their choice of vehicles, as Finance Minister Pranab Mukherjee proposed to raise the excise duty on small and large vehicles to its highest level in nearly four years, while also refraining from laying additional tax on diesel-driven vehicles.
Prices of all cars (compacts and sedans), utility vehicles (sports, multi-utlity and vans), commercial vehicles and two-wheeler is slated to rise by a minimum two per cent. The central excise duty has been enhanced by two percentage points to 12 per cent to 10 per cent.
In addition, there has been a two-way increase in excise duty on large cars. In keeping with the increase proposed in the standard rate the duty on such cars have been increased to 24 per cent from 22 per cent.
Presently, petrol cars longer than four meters having engine capacity above 1,200-cc and diesel cars longer than four meters with an engine capacity above 1,500-cc attract excise duty at the rate of 22 per cent, plus Rs 15,000.
Further, those vehicles, which attracted a tax of 22 per cent plus Rs 15,000, will now be subject to switching over to an ad valorem rate of 27 per cent, according to the finance minister's proposal.
The excise duty on all compact cars (as defined by the government) and two-wheelers was brought down to eight per cent from 12 per cent and to 20 per cent from 24 per cent on large cars in the first stimulus package of December 2008.
Further, fully imported large cars, SUVs and MUVs having engine capacity above the specified capacity with value exceeding $40,000 (about Rs 19.60 lakh) will now attract a custom duty of 75 per cent as against the current 60 per cent.
As a result car and SUV making companies like Maruti Suzuki, Hyundai, General Motors, Honda, among several others are taking a price hike across all their models. Commercial vehicle and two-wheeler makers like Hero MotoCorp, Bajaj Auto, Honda Motorcycle are evaluating an increase.
Though the exact quantum of increase is yet to be finalised by most manufacturers experts say that it could range between Rs 3,000-Rs 35,000 for cars and SUVs while that for two-wheelers the hike would mean an increase in the range of Rs 800-2,000. Commercial vehicle could pass an increase of Rs 15,000-35,000.
Pawan Goenka, president (automotive and farm equipment sectors) Mahindra & Mahindra said to a television channel, "The hike in duty will surely impact demand but it will wear off with time".
Imported cars whose price is double in India compared to the selling price in their home market will see a further hike by at least 15 percentage points. Price of models of Aston Martin, Lamborghini, Jaguar, Porsche, Bentley and Rolls Royce will go up as a result.
Meanwhile, to provide a competitive edge to home grown bicycle makers, the FM increased the customs duty on it to 30 per cent from 10 per cent and on bicycle parts from 10 per cent to 20 per cent.
Also, commercial vehicle bodies, on which specific rate of Rs 10,000 on chassis and applicable ad valorem duty is charged will now see a uniform rate of three per cent.
Specified parts required for the manufacture of hybrid vehicles enjoy full exemption from basic customs duty and special CVD with concessional excise duty/ CVD of six 6 per cent This concession is being extended to specified additional items and lithium ion batteries imported for the manufacture of battery packs for supply to electric or hybrid vehicle manufacturers.
Realistic but not reformist: BS Jury
India Inc believes that the Union Budget has good intentions but isn?t forward-looking enough
In an extremely challenging year, the FM has presented a pragmatic Budget. To bolster the economy, he has given a big push to infrastructure, agriculture and industry as well. Incentives on R&D spends and accelerated depreciation are positives for industrial growth. The doubling of the infrastructure bonds is indeed a bold step, as is the move to take financial services to the doorstep of the farmer.
The infusion of substantial funds for capitalisation of RRBs and Nabard will help small and marginal farmers and facilitate the growth. The emphasis on resource mobilisation sends the right signal. The GDP growth forecast at 7.6 per cent seems achievable. It augurs well that the sharp focus on inclusive growth is gathering greater momentum.
Kumar Birla Chairman, Aditya Birla Group
This Budget clearly shows the FM’s intention of continuing reforms and economic growth. Measures like increasing consumption, building equity markets and moving towards a GST regime, clearly shows the intent.
Implementation of GST will bring in great efficiencies. It will also attract large investments for the creation of consolidated, technology led infrastructure, warehouses and distribution centres for all industries in the consumption sector.
The apparel industry will benefit by the increase in abatement on excise duty for branded ready garments as it will help in reducing prices and, in turn, increasing consumption.
Overall it has been a balancing, growth-oriented budget.
Kishore Biyani Chairman, Future Group
The FM has presented a pragmatic budget with doses of good intentions for long-term growth but lacked the short-term punch to get growth going. There are indications that the government is sincere about controlling fiscal deficit going forward. The focus on R&D is good as the weighted deduction of 200 per cent for R&D expenditure in an in-house facility has been extended for another five years. For the IT industry, the request to exempt SEZ income from MAT has not been granted and this is disappointing. The APA will be useful to ease transfer pricing litigation in the future. The emphasis on leveraging technology as an effective platform for delivering public services is encouraging but needs to translate into implementation on the ground.
N Chandrasekaran MD & CEO, TCS
It is a pragmatic budget, aimed at building on the positives in the economy and staying the course on reforms. A fiscal deficit target of 5.1 per cent for 2012-13 is credible. The initiative to introduce three-year rolling targets for expenditure items is laudable as it provides an ongoing reality check. Going forward, I hope that these measures are vigorously implemented. The focus on irrigation and agri-infrastucture, including the setting up of Irrigation and Water Resource Finance Company, are directionally appropriate.
The budget could have also included some forward looking measures to improve manufacturing competitiveness. This would have helped to increase the employment opportunities and reduce the current account deficit.
Venu Srinivasan CMD, TVS Motors
The Union Budget for fiscal 2013 is a pragmatic exercise aimed at growth and stability in the backdrop of the challenging year gone. It also seeks to address the imperative of fiscal consolidation. The intention to contain subsidies at 2 per cent of GDP next year and 1.75 per cent of GDP within three years is laudable. Greater efficiency in distribution and lower leakage through use of the Aadhaar platform are key positives.
In addition, necessary policy and administrative measures to facilitate the execution of investment plans would need to be pursued. In the long term, the fundamental strengths of the Indian economy coupled with appropriate fiscal policies and investments in key sectors should take India back to a higher growth trajectory.
Chanda Kochhar MD & CEO, ICICI Bank
The FM deserves kudos for delivering an honest assessment of the current economic environment and has presented a budget based on realistic assumptions. The GDP forecast of 7.6 per cent for FY13 is credible in today’s scenario. Needless to add, the fiscal deficit still remains a prime concern. The FY12 fiscal deficit target at 5.9 per cent of GDP is higher than anticipated, but the transparency should be appreciated.
Admittedly, the budget has no big-bang reforms or concerted measures towards reduction of subsidies or a road map on increasing foreign direct investment. As far as the capital markets are concerned, the proposals are not radical but incremental in nature, which is positive for the markets.
Deepak Parekh Chairman, HDFC
Some bold decisions were the need of the hour and the Finance Minister has decided to bite the bullet in this Union Budget. The decision to spell out clear targets for subsidy reduction sends out a strong signal that the government wants to weed out inefficiencies within the system.
The budget’s continued focus on key sectors such as infrastructure and agriculture is welcome as it will boost economic growth.
One feels that the Finance Minister should have used this opportunity to also spell out a clear time frame for the rollout of important tax reforms such as GST and DTC. Overall, I congratulate the Finance Minister for taking a progressive approach.
Sunil Mittal Chairman, Bharti Group
The Finance Minister has presented a mixed budget with fundamentally positive steps in some areas, not enough in others and large concern areas like the projected fiscal deficit of 5.1 per cent. A few of the positives of the budget include raising the plan outlay for agriculture by 18 per cent; initiatives for research and development in agriculture and allocations for improving warehousing and storage facilities for agricultural produce. All of these, executed well and on time, will address the supply side on food and agriculture that will drive domestic demand and consumption. Similarly, some of the measures to create maternal and child malnutrition programs is an essential step in ensuring that the unacceptably high levels of malnutrition are addressed.
Vinita Bali MD, Britannia
The Union Budget 2012-13, has opened possibilities of ramping up capacity creation and utilisation in the infrastructure sector. It has been particularly sensitive to the needs of the power sector. The exemptions from customs duty for thermal power plants for two years and a full exemption on customs duty on coal will go a long way to help the power and steel sector. Another important measures is allowing External Commercial Borrowings to fund power project debt.
The viability gap funding is a major positive for the oil & gas sector, in terms of infrastructure building. This will bring in investments for the gas pipeline infrastructure. The resolve of the Government will be tested in keeping the subsidies below 2 per cent as targeted.
Prashant Ruia Group Chief Executive, Essar Group
Budget 2012 was set against an intense backdrop of structural challenges – rising fiscal deficit, inflation, slowing down of investments and political challenges for the UPA government. Several small steps have been taken to drive growth while maintaining consumption, reviving investment, boosting capital markets and widening the tax net.
Some of the positive highlights include, putting the FRBM implementation back on the agenda, capping the subsidy to 2 per cent of GDP with the promise of reducing it to 1.7 per cent and doubling the limit on tax-free infrastructure bonds to Rs 60,000 to customs duty relief for import of fuels like coal which could restart much needed investments in these sectores.
In an extremely challenging year, the FM has presented a pragmatic Budget. To bolster the economy, he has given a big push to infrastructure, agriculture and industry as well. Incentives on R&D spends and accelerated depreciation are positives for industrial growth. The doubling of the infrastructure bonds is indeed a bold step, as is the move to take financial services to the doorstep of the farmer.
The infusion of substantial funds for capitalisation of RRBs and Nabard will help small and marginal farmers and facilitate the growth. The emphasis on resource mobilisation sends the right signal. The GDP growth forecast at 7.6 per cent seems achievable. It augurs well that the sharp focus on inclusive growth is gathering greater momentum.
Kumar Birla Chairman, Aditya Birla Group
This Budget clearly shows the FM’s intention of continuing reforms and economic growth. Measures like increasing consumption, building equity markets and moving towards a GST regime, clearly shows the intent.
Implementation of GST will bring in great efficiencies. It will also attract large investments for the creation of consolidated, technology led infrastructure, warehouses and distribution centres for all industries in the consumption sector.
The apparel industry will benefit by the increase in abatement on excise duty for branded ready garments as it will help in reducing prices and, in turn, increasing consumption.
Overall it has been a balancing, growth-oriented budget.
Kishore Biyani Chairman, Future Group
The FM has presented a pragmatic budget with doses of good intentions for long-term growth but lacked the short-term punch to get growth going. There are indications that the government is sincere about controlling fiscal deficit going forward. The focus on R&D is good as the weighted deduction of 200 per cent for R&D expenditure in an in-house facility has been extended for another five years. For the IT industry, the request to exempt SEZ income from MAT has not been granted and this is disappointing. The APA will be useful to ease transfer pricing litigation in the future. The emphasis on leveraging technology as an effective platform for delivering public services is encouraging but needs to translate into implementation on the ground.
N Chandrasekaran MD & CEO, TCS
It is a pragmatic budget, aimed at building on the positives in the economy and staying the course on reforms. A fiscal deficit target of 5.1 per cent for 2012-13 is credible. The initiative to introduce three-year rolling targets for expenditure items is laudable as it provides an ongoing reality check. Going forward, I hope that these measures are vigorously implemented. The focus on irrigation and agri-infrastucture, including the setting up of Irrigation and Water Resource Finance Company, are directionally appropriate.
The budget could have also included some forward looking measures to improve manufacturing competitiveness. This would have helped to increase the employment opportunities and reduce the current account deficit.
Venu Srinivasan CMD, TVS Motors
The Union Budget for fiscal 2013 is a pragmatic exercise aimed at growth and stability in the backdrop of the challenging year gone. It also seeks to address the imperative of fiscal consolidation. The intention to contain subsidies at 2 per cent of GDP next year and 1.75 per cent of GDP within three years is laudable. Greater efficiency in distribution and lower leakage through use of the Aadhaar platform are key positives.
In addition, necessary policy and administrative measures to facilitate the execution of investment plans would need to be pursued. In the long term, the fundamental strengths of the Indian economy coupled with appropriate fiscal policies and investments in key sectors should take India back to a higher growth trajectory.
Chanda Kochhar MD & CEO, ICICI Bank
The FM deserves kudos for delivering an honest assessment of the current economic environment and has presented a budget based on realistic assumptions. The GDP forecast of 7.6 per cent for FY13 is credible in today’s scenario. Needless to add, the fiscal deficit still remains a prime concern. The FY12 fiscal deficit target at 5.9 per cent of GDP is higher than anticipated, but the transparency should be appreciated.
Admittedly, the budget has no big-bang reforms or concerted measures towards reduction of subsidies or a road map on increasing foreign direct investment. As far as the capital markets are concerned, the proposals are not radical but incremental in nature, which is positive for the markets.
Deepak Parekh Chairman, HDFC
Some bold decisions were the need of the hour and the Finance Minister has decided to bite the bullet in this Union Budget. The decision to spell out clear targets for subsidy reduction sends out a strong signal that the government wants to weed out inefficiencies within the system.
The budget’s continued focus on key sectors such as infrastructure and agriculture is welcome as it will boost economic growth.
One feels that the Finance Minister should have used this opportunity to also spell out a clear time frame for the rollout of important tax reforms such as GST and DTC. Overall, I congratulate the Finance Minister for taking a progressive approach.
Sunil Mittal Chairman, Bharti Group
The Finance Minister has presented a mixed budget with fundamentally positive steps in some areas, not enough in others and large concern areas like the projected fiscal deficit of 5.1 per cent. A few of the positives of the budget include raising the plan outlay for agriculture by 18 per cent; initiatives for research and development in agriculture and allocations for improving warehousing and storage facilities for agricultural produce. All of these, executed well and on time, will address the supply side on food and agriculture that will drive domestic demand and consumption. Similarly, some of the measures to create maternal and child malnutrition programs is an essential step in ensuring that the unacceptably high levels of malnutrition are addressed.
Vinita Bali MD, Britannia
The Union Budget 2012-13, has opened possibilities of ramping up capacity creation and utilisation in the infrastructure sector. It has been particularly sensitive to the needs of the power sector. The exemptions from customs duty for thermal power plants for two years and a full exemption on customs duty on coal will go a long way to help the power and steel sector. Another important measures is allowing External Commercial Borrowings to fund power project debt.
The viability gap funding is a major positive for the oil & gas sector, in terms of infrastructure building. This will bring in investments for the gas pipeline infrastructure. The resolve of the Government will be tested in keeping the subsidies below 2 per cent as targeted.
Prashant Ruia Group Chief Executive, Essar Group
Budget 2012 was set against an intense backdrop of structural challenges – rising fiscal deficit, inflation, slowing down of investments and political challenges for the UPA government. Several small steps have been taken to drive growth while maintaining consumption, reviving investment, boosting capital markets and widening the tax net.
Some of the positive highlights include, putting the FRBM implementation back on the agenda, capping the subsidy to 2 per cent of GDP with the promise of reducing it to 1.7 per cent and doubling the limit on tax-free infrastructure bonds to Rs 60,000 to customs duty relief for import of fuels like coal which could restart much needed investments in these sectores.
TVS Motor declares 60% interim
The board of directors of TVS Motor Company has, at its meeting held on Wednesday, declared an interim dividend for the financial year ending March 31, 2012, at Re 0.60 per share on 47,50,87,114 equity shares of Re 1 each fully paid-up, absorbing a sum of Rs 33.13 crore, including dividend distribution tax.
The interim dividend declared will be paid on March 26, 2012.
The interim dividend declared will be paid on March 26, 2012.
Will Hero Re-create the Magic with EBR?
Adil Jal Darukhanawala delves deeper into the alliance between Hero MotoCorp and Erik Buell Racing from USA and traces the possibilities that lie ahead for both the entities
As a diehard motorcyclist I welcome the announcement of a bike maker aligning itself with a specialist genius with racing in his DNA. The obvious delight of riding a high performance machine is second to none but the requisite skill and survival sets for the riders to really feast and thrive on the obviously extreme of such bikes is something only a minority can handle, let alone master.
The words Erik Buell makes me drool because here is the Yankee master of the superbiking art. A man who has fused venerable bent twin irons made by Harley-Davidsons into sweet handling chassis meant to propel riders quickly around a race track in time honoured flat out form. It was this American alternative to the Japanese Big Four and the artistically inclined European bike makers, which made Buell distinctive. So much so that while his bikes were no winners in the aesthetic stakes, they were pretty effective around a race track, on their day.
Erik Buell gave new meaning and zing to archaic Harley-Davidsons and America’s long standing bike maker reveled in this new found feeling. However there is only so much you could do with the motor you have and even with innovative chassis and suspension systems plus a whole new approach to the art of the superbike, the entire Buell (Read : History of Erik Buell Racing) superstructure couldn’t quite match the ambitions of Harley-Davidson. I must digress here and state that what Harley-Davidson saw in Buell was good enough for them to buy it lock, stock and barrel. The honeymoon was great and everyone expected the offspring to be even lustier thoroughbreds.
Expectation is one thing and reality is quite another. Of course time is also of the essence and nurturing a brand alien to the parent brand’s DNA takes even more effort. The Buell brand didn’t survive long within Harley-Davidson and more than that it didn’t have the gravitas of other vee-twin engine superbikes the world adores, viz Ducati. Given the fact that there wasn’t much which made sense to the balance sheet, Harley-Davidson just jettisoned Buell in the blink of an eye and while enthusiasts around the world, like yours truly included, were saddened by the treatment and the abrupt manner Erik Buell and his small team were told to pack up, the situation was just about irretrievable. Heck, just think that Harley-Davidson also had picked up none other than another iconic Italian bike maker in the form of MV Agusta and they didn’t have any hesitation to consigning it off when it didn’t make sense.
So what became of Erik Buell one might well ask and the fact is that he went back to his roots – the racetrack. Keeping his 1190RS superbikes (Read : About The Buell 1190RS) , a large shed with a handful of CNC machines and a small staff component, he began to get back to making Harley-engined superbikes on special order. And also to help some of his customers hit the racetracks with them. Once a racer, always a racer, I say.
And that’s where he stood in my mind, a hero of sorts for many who looked at him as a forlorn David taking on the Goliaths of the superbike world. Until today afternoon that is when Hero MotoCorp stunned everyone when they announced “an alliance” with EBR. I don’t know of a marriage or a flirtation that is so skewed but maybe this is the reason why opposites could attract and should have been the catalyst for such an alliance.
The Hero MotoCorp pres note clearly mentions and I quote “HMCL will receive support in terms of cutting-edge technology and design to develop future models from EBR, a firm which specializes in designing and manufacturing powerful and high speed motorcycles.’
All well and good so far and also completely contrary to the “fill it, shut it, forget it” Hero mantra stands for. And what I find even more baffling is the fact that while I hold Erik Buell in very high esteem for what he has done with Harley-engined sports bikes on the racetracks, there never was a bigger racer and racing enthusiast in the two-wheeled world than Soichiro Honda. Wonder why this aspect wasn’t taken cognizance of all these 27 years the Hero-Honda JV was in existence.
Here is where the prudent mantra of horses for courses was so overwhelmingly a Honda strength and approach as also the need to just do what it took and not more to make those cleverly simple bikes that put billions of impoverished Indians on the move. Sad to say this is an area where Buell has next to no experience of. I may be wrong if I have made such a statement but the world hasn’t seen much from Buell on this count. But then the ethos and the essence to do high performance machines is so much an art and a passion as well as a science which is all about high tech engineering, precision craftsmanship and modern technology. In contrast everyone in the automobile world always says that it is easier to do a sports car than a small family hatchback and the same analogy holds good for what we see unfolding here.
My statement can come a cropper though if only for the welcome reason that Hero MotoCorp does intend to make superbikes and if that be the case, they have a modicum of potential to go down this route with Buell. However, the bikes would need to be made in India if they have to be cost effective, not to mention have an aura around them with Hero writ large in the sub-conscious otherwise it will be like Chinese-owned Italian brand Benelli which is floundering
As a diehard motorcyclist I welcome the announcement of a bike maker aligning itself with a specialist genius with racing in his DNA. The obvious delight of riding a high performance machine is second to none but the requisite skill and survival sets for the riders to really feast and thrive on the obviously extreme of such bikes is something only a minority can handle, let alone master.
The words Erik Buell makes me drool because here is the Yankee master of the superbiking art. A man who has fused venerable bent twin irons made by Harley-Davidsons into sweet handling chassis meant to propel riders quickly around a race track in time honoured flat out form. It was this American alternative to the Japanese Big Four and the artistically inclined European bike makers, which made Buell distinctive. So much so that while his bikes were no winners in the aesthetic stakes, they were pretty effective around a race track, on their day.
Erik Buell gave new meaning and zing to archaic Harley-Davidsons and America’s long standing bike maker reveled in this new found feeling. However there is only so much you could do with the motor you have and even with innovative chassis and suspension systems plus a whole new approach to the art of the superbike, the entire Buell (Read : History of Erik Buell Racing) superstructure couldn’t quite match the ambitions of Harley-Davidson. I must digress here and state that what Harley-Davidson saw in Buell was good enough for them to buy it lock, stock and barrel. The honeymoon was great and everyone expected the offspring to be even lustier thoroughbreds.
Expectation is one thing and reality is quite another. Of course time is also of the essence and nurturing a brand alien to the parent brand’s DNA takes even more effort. The Buell brand didn’t survive long within Harley-Davidson and more than that it didn’t have the gravitas of other vee-twin engine superbikes the world adores, viz Ducati. Given the fact that there wasn’t much which made sense to the balance sheet, Harley-Davidson just jettisoned Buell in the blink of an eye and while enthusiasts around the world, like yours truly included, were saddened by the treatment and the abrupt manner Erik Buell and his small team were told to pack up, the situation was just about irretrievable. Heck, just think that Harley-Davidson also had picked up none other than another iconic Italian bike maker in the form of MV Agusta and they didn’t have any hesitation to consigning it off when it didn’t make sense.
So what became of Erik Buell one might well ask and the fact is that he went back to his roots – the racetrack. Keeping his 1190RS superbikes (Read : About The Buell 1190RS) , a large shed with a handful of CNC machines and a small staff component, he began to get back to making Harley-engined superbikes on special order. And also to help some of his customers hit the racetracks with them. Once a racer, always a racer, I say.
And that’s where he stood in my mind, a hero of sorts for many who looked at him as a forlorn David taking on the Goliaths of the superbike world. Until today afternoon that is when Hero MotoCorp stunned everyone when they announced “an alliance” with EBR. I don’t know of a marriage or a flirtation that is so skewed but maybe this is the reason why opposites could attract and should have been the catalyst for such an alliance.
The Hero MotoCorp pres note clearly mentions and I quote “HMCL will receive support in terms of cutting-edge technology and design to develop future models from EBR, a firm which specializes in designing and manufacturing powerful and high speed motorcycles.’
All well and good so far and also completely contrary to the “fill it, shut it, forget it” Hero mantra stands for. And what I find even more baffling is the fact that while I hold Erik Buell in very high esteem for what he has done with Harley-engined sports bikes on the racetracks, there never was a bigger racer and racing enthusiast in the two-wheeled world than Soichiro Honda. Wonder why this aspect wasn’t taken cognizance of all these 27 years the Hero-Honda JV was in existence.
Here is where the prudent mantra of horses for courses was so overwhelmingly a Honda strength and approach as also the need to just do what it took and not more to make those cleverly simple bikes that put billions of impoverished Indians on the move. Sad to say this is an area where Buell has next to no experience of. I may be wrong if I have made such a statement but the world hasn’t seen much from Buell on this count. But then the ethos and the essence to do high performance machines is so much an art and a passion as well as a science which is all about high tech engineering, precision craftsmanship and modern technology. In contrast everyone in the automobile world always says that it is easier to do a sports car than a small family hatchback and the same analogy holds good for what we see unfolding here.
My statement can come a cropper though if only for the welcome reason that Hero MotoCorp does intend to make superbikes and if that be the case, they have a modicum of potential to go down this route with Buell. However, the bikes would need to be made in India if they have to be cost effective, not to mention have an aura around them with Hero writ large in the sub-conscious otherwise it will be like Chinese-owned Italian brand Benelli which is floundering
Honda to build 4th local motorcycle factory
Astra Honda Motor (AHM) says it will invest Rp 3.13 trillion (US$340 million) to build a motorcycle factory in the Bukit Indah Industrial Estate in Karawang, West Java.
Construction of the plant, the firm’s fourth in Indonesia, would begin in the first half of 2012 and the firm aims to start production in the second half of 2013, AHM executive vice president director Johannes Loman said on Tuesday.
AHM, a joint venture between the world’s largest motorcycle maker, Japan-based Honda Motor Co., and local conglomerate PT Astra International, plans to manufacturer 1.1 million motorcycles at the plant initially before reaching a total annual production capacity of 5.3 million units.
“This plant will focus on producing scooters, the sales of which have risen greatly in the past years and have contributed significantly to our total sales,” Loman told The Jakarta Post in a telephone interview.
Loman said that scooters, which have been driving AHM’s growth, accounted for more than 50 percent of current sales and would account for 55 percent to 57 percent of estimated sales once the new plant opens.
“This new production facility will help us a fulfill rising demand for scooters in line with the nation’s quickly expanding motorcycle market, particularly scooters,” Loman said.
Last year, AHM sold 2.3 million scooters, he said, out of a total sales of 4.27 million motorcycles, up 25 percent from 2010.
The firm also had a 53 percent share of the nation’s motorcycle sales market, which booked sales of 8.01 million units in 2011, a new record, up 8.7 percent from a year earlier.
AHM, in which Honda Motor and Astra International each have a 50 percent stake, has targeted to increase sales 7.7 percent to 12.4 percent in 2012.
The Indonesian Motorcycle Industry Association (AISI) previously said that motorcycle sales in the nation might top 9 million units this year.
The new factory will join AHM’s other factories in Cikarang, West Java, and in Sunter and Pegangsaan, North Jakarta.
The new plant would employ 3,000 workers, adding to the 18,000 workers currently employed at the other factories, Loman said.
The motorcycle market in Indonesia, the world’s third-largest two-wheeler market, still offers enormous room for growth, as the ratio of motorbike owners to residents is one unit per seven people.
Indonesia’s ratio is much lower than those of neighboring countries, which have ratios of one unit to every three people, according to AISI.
Motorcycle sales, along with car sales, are used as key indicators of consumption in Indonesia, as they are mainly desired by the nation’s burgeoning middle class.
Car sales have also seen an upward trend in recent years, with last year recording a new high for sales of 894,180 units, up 20 percent from 2010, according to the Indonesian Automotive Industry Association (Gaikindo).
Optimism for continued growth in motorcycle sales has been driven by increased consumer demand created by the nation’s stellar economic performance in the last year.
Indonesia’s economy, the largest in Southeast Asia, grew 6.5 percent last year, one of the highest rates in Asia, according to the Central Statistics Agency (BPS).
Construction of the plant, the firm’s fourth in Indonesia, would begin in the first half of 2012 and the firm aims to start production in the second half of 2013, AHM executive vice president director Johannes Loman said on Tuesday.
AHM, a joint venture between the world’s largest motorcycle maker, Japan-based Honda Motor Co., and local conglomerate PT Astra International, plans to manufacturer 1.1 million motorcycles at the plant initially before reaching a total annual production capacity of 5.3 million units.
“This plant will focus on producing scooters, the sales of which have risen greatly in the past years and have contributed significantly to our total sales,” Loman told The Jakarta Post in a telephone interview.
Loman said that scooters, which have been driving AHM’s growth, accounted for more than 50 percent of current sales and would account for 55 percent to 57 percent of estimated sales once the new plant opens.
“This new production facility will help us a fulfill rising demand for scooters in line with the nation’s quickly expanding motorcycle market, particularly scooters,” Loman said.
Last year, AHM sold 2.3 million scooters, he said, out of a total sales of 4.27 million motorcycles, up 25 percent from 2010.
The firm also had a 53 percent share of the nation’s motorcycle sales market, which booked sales of 8.01 million units in 2011, a new record, up 8.7 percent from a year earlier.
AHM, in which Honda Motor and Astra International each have a 50 percent stake, has targeted to increase sales 7.7 percent to 12.4 percent in 2012.
The Indonesian Motorcycle Industry Association (AISI) previously said that motorcycle sales in the nation might top 9 million units this year.
The new factory will join AHM’s other factories in Cikarang, West Java, and in Sunter and Pegangsaan, North Jakarta.
The new plant would employ 3,000 workers, adding to the 18,000 workers currently employed at the other factories, Loman said.
The motorcycle market in Indonesia, the world’s third-largest two-wheeler market, still offers enormous room for growth, as the ratio of motorbike owners to residents is one unit per seven people.
Indonesia’s ratio is much lower than those of neighboring countries, which have ratios of one unit to every three people, according to AISI.
Motorcycle sales, along with car sales, are used as key indicators of consumption in Indonesia, as they are mainly desired by the nation’s burgeoning middle class.
Car sales have also seen an upward trend in recent years, with last year recording a new high for sales of 894,180 units, up 20 percent from 2010, according to the Indonesian Automotive Industry Association (Gaikindo).
Optimism for continued growth in motorcycle sales has been driven by increased consumer demand created by the nation’s stellar economic performance in the last year.
Indonesia’s economy, the largest in Southeast Asia, grew 6.5 percent last year, one of the highest rates in Asia, according to the Central Statistics Agency (BPS).
After premium bikes, Hero MotoCorp actively eyeing low-cost segment
A year after dissolving its joint venture with Honda, Hero MotoCorp is actively looking at the low-cost bike segment. This is expected to help the company further consolidate its strong hold in the domestic mass biking segment.
Low-cost bikes are typically targeted at buyers who would like to scale up from mopeds. So, the plan is to reduce prices to the Rs 20,000 —30,000 range (now it starts at Rs 34,500 for Hero's CD Dawn).
“We believe that there is a very large mass of customers in that segment — at the bottom of the pyramid. We're working on trying to come up with something, but it's not easy with the way costs are going up. But, we will have something,” Mr Pawan Munjal, Managing Director and CEO of Hero MotoCorp told Business Line.
“We'll be looking at prices which are much lower than where we currently are, otherwise it makes no sense. The market is for people who don't have any (personal) transport at all.”
Product strategy
In its recently set up R&D facility and along with new technical partners — the US-based EBR, and a rumoured tie-up with Austrian power train expert AVL — the company is working on several new product strategies. Apart from larger engines for high-end models, downsizing engines below its current starting point of 100cc is also being looked at.
Hero's increased interest in the mass segment is underlined by the fact that 88 per cent of its 4.53 million two wheeler sales (April-December 2011) came from the up to 125cc segment.
As this segment represents 70 per cent of total domestic bike sales, Hero commands a 45 per cent market share overall.
“It's easy to make something like a moped, but does that serve your purpose. A moped is not as successful in this country since it is not rugged and sturdy as per the usage our consumers — the kind of loading patterns and driving habits. We have to have a real motorcycle,” Mr Munjal said.
Industry sources said Hero had been eyeing this segment for the past few years but had been constrained from developing new technologies under the terms of its 27-year-old joint venture agreement with Honda.
That partnership formally ended in March last year, paving the way for Hero to set up its own research and development facility and seek fresh alliances.
Low-cost bikes are typically targeted at buyers who would like to scale up from mopeds. So, the plan is to reduce prices to the Rs 20,000 —30,000 range (now it starts at Rs 34,500 for Hero's CD Dawn).
“We believe that there is a very large mass of customers in that segment — at the bottom of the pyramid. We're working on trying to come up with something, but it's not easy with the way costs are going up. But, we will have something,” Mr Pawan Munjal, Managing Director and CEO of Hero MotoCorp told Business Line.
“We'll be looking at prices which are much lower than where we currently are, otherwise it makes no sense. The market is for people who don't have any (personal) transport at all.”
Product strategy
In its recently set up R&D facility and along with new technical partners — the US-based EBR, and a rumoured tie-up with Austrian power train expert AVL — the company is working on several new product strategies. Apart from larger engines for high-end models, downsizing engines below its current starting point of 100cc is also being looked at.
Hero's increased interest in the mass segment is underlined by the fact that 88 per cent of its 4.53 million two wheeler sales (April-December 2011) came from the up to 125cc segment.
As this segment represents 70 per cent of total domestic bike sales, Hero commands a 45 per cent market share overall.
“It's easy to make something like a moped, but does that serve your purpose. A moped is not as successful in this country since it is not rugged and sturdy as per the usage our consumers — the kind of loading patterns and driving habits. We have to have a real motorcycle,” Mr Munjal said.
Industry sources said Hero had been eyeing this segment for the past few years but had been constrained from developing new technologies under the terms of its 27-year-old joint venture agreement with Honda.
That partnership formally ended in March last year, paving the way for Hero to set up its own research and development facility and seek fresh alliances.
February car sales rise 13% on price hike fears
NEW DELHI: Car sales shot up in February as customers, fearing higher excise and new taxes on diesel vehicles after the upcoming Union Budget on Friday, booked their vehicles in a hurry.
Sales rose 13% in February to 2,11,402 units - also the highest pace of growth since April 2011 - from 1,86,890 units sold in the same month last year, according to data issued by the Society of Indian Automobile Manufacturers (SIAM) on Monday.
This is the first time ever that monthly car sales crossed the two-lakh unit mark. Sales had grown by 7.2% in January, 8.5% in December and 7.5% in November. It is also expected that demand will pick up if the tax structure remains unchanged at the Budget.
SIAM is expecting some rollback of excise duty that was given as stimulus during the 2008-09 slowdown. "The perception of higher prices, as the government may roll back 2% excise concession given to the auto sector, and impose new taxes to garner more revenue is driving the current demand for cars and two-wheelers," SIAM director general Vishnu Mathur said.
The demand for petrol cars, however, has been largely muted in the current fiscal year due to higher fuel prices. The preference has shifted to diesel-powered cars and sports-utility vehicles that now form around 45% of the total passenger vehicles sold in India. The government controls diesel prices in India - it is a good 40% cheaper than petrol - which is driving demand, besides the higher fuel-efficiency offered by such vehicles over gasoline.
Major carmakers like Maruti, Hyundai and Tata Motors were the biggest gainers in terms of sales in February. Country's largest carmaker Maruti Suzuki's sales jumped 7% to 94,118 vehicles, while rival Hyundai Motor India's sales grew by a higher 13% to 36,658 cars. Mumbai-based Tata Motors' sales rose 5.46% to 28,236 units in the same month over last year.
"The demand for new cars is sweeping back. Customers are willing to buy new cars at the current prices with a substantial increase in footfalls at our dealership in recent months. The momentum could be impacted if there are any adverse measures like higher taxes or preference to any particular fuel of vehicles," said a senior Maruti executive, preferring not to go on record.
Analysts tracking the sector say that stable interest rates on auto loans are also firing up the market. "There has been an improvement in sentiment as consumers are no longer expecting increase in interest rates. Stability in rates by most banks have helped increase car sales as well as propelled demand for other segments while the future is largely dependent on the measures adopted by the government in the Budget," said Sageraj Bariya, managing partner at Equitorials, a Mumbai-based consultancy.
According to SIAM, improved performance by other segments also improved the macro scenario of the domestic auto market, with the exception of three-wheelers that declined in February to 14% to 42,242 units compared to 48,878 units last year.
Two-wheeler sales in February jumped 12% to 11.44 lakh units while with scooters leading the charge and grew 28% to 2.37 lakh units last month. While motorcycle sales during the month grew by lower 8% 8.38 lakh units. The sale of commercial vehicles zoomed 19% to 76,891 units from 64,775 units in the year-ago period, fired mainly by light commercial vehicle sales that rose 31% to 43,982 units.
Sales rose 13% in February to 2,11,402 units - also the highest pace of growth since April 2011 - from 1,86,890 units sold in the same month last year, according to data issued by the Society of Indian Automobile Manufacturers (SIAM) on Monday.
This is the first time ever that monthly car sales crossed the two-lakh unit mark. Sales had grown by 7.2% in January, 8.5% in December and 7.5% in November. It is also expected that demand will pick up if the tax structure remains unchanged at the Budget.
SIAM is expecting some rollback of excise duty that was given as stimulus during the 2008-09 slowdown. "The perception of higher prices, as the government may roll back 2% excise concession given to the auto sector, and impose new taxes to garner more revenue is driving the current demand for cars and two-wheelers," SIAM director general Vishnu Mathur said.
The demand for petrol cars, however, has been largely muted in the current fiscal year due to higher fuel prices. The preference has shifted to diesel-powered cars and sports-utility vehicles that now form around 45% of the total passenger vehicles sold in India. The government controls diesel prices in India - it is a good 40% cheaper than petrol - which is driving demand, besides the higher fuel-efficiency offered by such vehicles over gasoline.
Major carmakers like Maruti, Hyundai and Tata Motors were the biggest gainers in terms of sales in February. Country's largest carmaker Maruti Suzuki's sales jumped 7% to 94,118 vehicles, while rival Hyundai Motor India's sales grew by a higher 13% to 36,658 cars. Mumbai-based Tata Motors' sales rose 5.46% to 28,236 units in the same month over last year.
"The demand for new cars is sweeping back. Customers are willing to buy new cars at the current prices with a substantial increase in footfalls at our dealership in recent months. The momentum could be impacted if there are any adverse measures like higher taxes or preference to any particular fuel of vehicles," said a senior Maruti executive, preferring not to go on record.
Analysts tracking the sector say that stable interest rates on auto loans are also firing up the market. "There has been an improvement in sentiment as consumers are no longer expecting increase in interest rates. Stability in rates by most banks have helped increase car sales as well as propelled demand for other segments while the future is largely dependent on the measures adopted by the government in the Budget," said Sageraj Bariya, managing partner at Equitorials, a Mumbai-based consultancy.
According to SIAM, improved performance by other segments also improved the macro scenario of the domestic auto market, with the exception of three-wheelers that declined in February to 14% to 42,242 units compared to 48,878 units last year.
Two-wheeler sales in February jumped 12% to 11.44 lakh units while with scooters leading the charge and grew 28% to 2.37 lakh units last month. While motorcycle sales during the month grew by lower 8% 8.38 lakh units. The sale of commercial vehicles zoomed 19% to 76,891 units from 64,775 units in the year-ago period, fired mainly by light commercial vehicle sales that rose 31% to 43,982 units.
Auto Sector revs up to address employability issue
The vehicles on our roads are nearly as sophisticated as the ones running anywhere elseglobally. But the technical skills required to assemble or service them don't always match up. This could soon change. The auto industry is presenting an upgraded curriculum to meet the new on-road requirements.
For long, the industry has lamented the shortage of skilled workers . While technical training institutes churn out the numbers, their knowledge is often not up-to-date.
“Sophistication of today's vehicles – both passenger and commercial – has increased. Vehicles are focused on electronics. Candidates have to be trained for nearly six months before they become productive,” says Mr Srivats Ram, Managing Director, Wheels India. “When the industry is ramping up capacity, it is looking for quick deployment of talent.”
Overhauling the entire technical training curriculum may not be feasible. However, a bridge course in specific skills may be more apt, says Mr Sunil Chaturvedi, CEO, Automotive Skills Development Council. The council, in collaboration with auto experts , is ready with a programme that will set quality standards and competencies. The council is an offshoot of the National Skill Development Council. It has teamed up with the Automotive Component Manufacturers Association, Society of Indian Automobile Manufacturers and Federation of Automobile Dealers in this effort.
Companies such as Toyota Kirloskar, Bosch, TVS, M&M, Maruti Suzuki India and Tata Motors have pitched in with their ideas, says Mr Chaturvedi.
Revamped modules
Modules in machining, auto servicing and driving are ready for rollout in June-July. These will be introduced in select Industrial Training Institutes and technical training centres across the country. The bridge course, for 2-3 months, is targeted at final-semester students and diploma holders.
The council will also be responsible for faculty training, assessment and certification. Modules on welding, fitting and mechatronics are on cards.
In 8-10 years, the auto industry is set to triple its current market size. It will require 10 million more skilled people by 2020. Hopefully, the new initiative will take care of that, says Mr Ram.
For long, the industry has lamented the shortage of skilled workers . While technical training institutes churn out the numbers, their knowledge is often not up-to-date.
“Sophistication of today's vehicles – both passenger and commercial – has increased. Vehicles are focused on electronics. Candidates have to be trained for nearly six months before they become productive,” says Mr Srivats Ram, Managing Director, Wheels India. “When the industry is ramping up capacity, it is looking for quick deployment of talent.”
Overhauling the entire technical training curriculum may not be feasible. However, a bridge course in specific skills may be more apt, says Mr Sunil Chaturvedi, CEO, Automotive Skills Development Council. The council, in collaboration with auto experts , is ready with a programme that will set quality standards and competencies. The council is an offshoot of the National Skill Development Council. It has teamed up with the Automotive Component Manufacturers Association, Society of Indian Automobile Manufacturers and Federation of Automobile Dealers in this effort.
Companies such as Toyota Kirloskar, Bosch, TVS, M&M, Maruti Suzuki India and Tata Motors have pitched in with their ideas, says Mr Chaturvedi.
Revamped modules
Modules in machining, auto servicing and driving are ready for rollout in June-July. These will be introduced in select Industrial Training Institutes and technical training centres across the country. The bridge course, for 2-3 months, is targeted at final-semester students and diploma holders.
The council will also be responsible for faculty training, assessment and certification. Modules on welding, fitting and mechatronics are on cards.
In 8-10 years, the auto industry is set to triple its current market size. It will require 10 million more skilled people by 2020. Hopefully, the new initiative will take care of that, says Mr Ram.
Budget Must Focus on Creating Employment
Politics demands that jobs be created through growth, enabled by good policy and governance. Economics dictates that growth can only come on the back of investment and employment generation. There is no contradiction between the needs of politics and the needs of the economy. What is missing is the connectivity between growth and equity. I believe this can be achieved if the government focussed all its policies on one primary objective: employment generation. A sixth of India’s population resides in rural areas dependent on agriculture. It is imperative that the policies of the government of India are aimed at shifting at least a section of these people from farms to factories.
This demands focussed investment promotion, so that the economy creates jobs. India needs and badly needs better road connectivity, more power, an efficient supply chain system to connect the farms to the markets. The economy must find the resources to invest. The Budget of 2012 affords India the opportunity to refocus its energies and resources towards creating assets, income and growth. The economy cannot live beyond its means forever. The Budget 2012 must institute fiscal consolidation, cut unproductive government expenditure and subsidies. Those who can pay must pay market prices for fuel, fertilisers and food.
Fiscal tightening is not about denying the poor but about empowering them by creating employment and income opportunities instead of making them dependent on dole. Consolidation will achieve two results: it will free resources for investment in infrastructure and will bring down the cost of money for entrepreneurs and consumers. One only has to compare India with China to understand the gravity. The cost of money in China is barely 4 per cent while in India business pays 14 per cent as interest on borrowings. That is a straight 10 per cent advantage for Chinese business. To survive, business must be competitive.
The combination of lack of power, infrastructure, high capital costs and inflexible labour policies are making India uncompetitive globally. India currently has a current account deficit of over 3 per cent of GDP exposing the country once again to vulnerability on the balance of payments front. India needs to earn more in dollars, find consumers for its produce. This means we need to export more and unless manufacturing is made competitive by enabling policy exports won’t pick up.
Every year, around 15 million young people join the job market but we don’t create the jobs, and industry cannot create jobs unless policy is restructured. There is an immediate need first at the centre to debottleneck policy stuck at different levels. Policy on land acquisition, labour reforms, environmental clearances are all trapped in political debates that need resolution. We need to relook at labour laws to create employment. Why not allow 30 per cent contract labour with the proviso that companies institute training programmes to make labour employable?
Two decades back, India dismantled the licence permit raj but the raj continues at the state level. A wide gamut of clearances and permits reporting to different authorities and regulators delay investment and deny jobs to the poor. Every business is subject to inspections under 12 different acts on any given day of any month. Compare this with Thailand where only three inspections are allowed and only on specified days. Why can’t certification be handled by certified engineers just as accounts are audited by chartered accountants? We must re-look at the gamut of permits and clearances used by state government to hold business to ransom.
India needs to revive the idea of reforms that lost its way after 1991. We need to find it, revive it and refocus it to suit the imperative of growth and equity. If India fails to harvest the demographic dividend, it will not just lose the opportunity for growth. It will also expose the country to political unrest. Growth is both a political and an economic imperative for India.
This demands focussed investment promotion, so that the economy creates jobs. India needs and badly needs better road connectivity, more power, an efficient supply chain system to connect the farms to the markets. The economy must find the resources to invest. The Budget of 2012 affords India the opportunity to refocus its energies and resources towards creating assets, income and growth. The economy cannot live beyond its means forever. The Budget 2012 must institute fiscal consolidation, cut unproductive government expenditure and subsidies. Those who can pay must pay market prices for fuel, fertilisers and food.
Fiscal tightening is not about denying the poor but about empowering them by creating employment and income opportunities instead of making them dependent on dole. Consolidation will achieve two results: it will free resources for investment in infrastructure and will bring down the cost of money for entrepreneurs and consumers. One only has to compare India with China to understand the gravity. The cost of money in China is barely 4 per cent while in India business pays 14 per cent as interest on borrowings. That is a straight 10 per cent advantage for Chinese business. To survive, business must be competitive.
The combination of lack of power, infrastructure, high capital costs and inflexible labour policies are making India uncompetitive globally. India currently has a current account deficit of over 3 per cent of GDP exposing the country once again to vulnerability on the balance of payments front. India needs to earn more in dollars, find consumers for its produce. This means we need to export more and unless manufacturing is made competitive by enabling policy exports won’t pick up.
Every year, around 15 million young people join the job market but we don’t create the jobs, and industry cannot create jobs unless policy is restructured. There is an immediate need first at the centre to debottleneck policy stuck at different levels. Policy on land acquisition, labour reforms, environmental clearances are all trapped in political debates that need resolution. We need to relook at labour laws to create employment. Why not allow 30 per cent contract labour with the proviso that companies institute training programmes to make labour employable?
Two decades back, India dismantled the licence permit raj but the raj continues at the state level. A wide gamut of clearances and permits reporting to different authorities and regulators delay investment and deny jobs to the poor. Every business is subject to inspections under 12 different acts on any given day of any month. Compare this with Thailand where only three inspections are allowed and only on specified days. Why can’t certification be handled by certified engineers just as accounts are audited by chartered accountants? We must re-look at the gamut of permits and clearances used by state government to hold business to ransom.
India needs to revive the idea of reforms that lost its way after 1991. We need to find it, revive it and refocus it to suit the imperative of growth and equity. If India fails to harvest the demographic dividend, it will not just lose the opportunity for growth. It will also expose the country to political unrest. Growth is both a political and an economic imperative for India.
Hero eyes Ducati takeover quest
Ducati Motor Holding SpA (DMH), maker of luxury bikes ridden by celebrities such as Brad Pitt, is among assets being examined by Hero MotoCorp Ltd. (HMCL) as India’s biggest motorcycle maker looks for acquisitions to expand overseas.
“Lots of people have been coming to us with Ducati -- not one banker but many bankers,” Pawan Kant Munjal, managing director of Hero, said in a March 2 interview in New Delhi. “We’re talking to a lot of people. Not just Ducati -- whoever comes to us, we talk to them.”
Ducati would add products such as the $28,000 Superbike 1199 Panigale S Tricolore to a company that’s amassed a $1 billion war chest selling bikes for as little as 38,053 rupees ($763). Hero may be seeking to replicate the success of Tata Motors Ltd. (TTMT), maker of the world’s cheapest car, which is seeing profits surge after buying Jaguar Land Rover Plc.
“It is an excellent fit -- Ducati is a big brand and has a lot of technology; Hero is looking to be a serious global player,” said Deepesh Rathore, managing director of IHS Automotive in India. “Hero might get it cheap. Thanks to the European slowdown, Ducati’s numbers haven’t been great.”
Hero, which in December 2010 decided to exit a 26-year partnership with Honda Motor Co. (7267), the world’s largest motorcycle maker, is looking to gain technology through partnerships and acquisitions after that licensing relationship ends in 2014. Last month, Hero entered into a partnership with Erik Buell Racing, where it would sponsor two EBR teams in the AMA Pro Racing National Guard Superbike Championship in return for technology and design support for future models.
Hong Kong IPO
Hero (HMCL) has cash reserves of about $1 billion, Munjal said. The company had investments of 37.5 billion rupees, cash and bank balances of 1.4 billion rupees, as well as reserves and surpluses of 40.8 billion rupees as of Sept. 30, according to company’s latest earnings statement.
Investindustrial SpA, the Milan-based private-equity company that owns Ducati, may hold an initial public offering of the luxury-motorcycle maker in Hong Kong this year or sell it to a rival, two people familiar with the plans said last month. A spokesman for Investindustrial wasn’t immediately available to comment late last week.
Investindustrial is seeking to sell or list Ducati for as much as 1 billion euros ($1.3 billion), the Financial Times reported last month, citing Andrea Bonomi, chairman of the European buyout firm.
Bayerische Motoren Werke AG (BMW) said last month it’s not interested in buying Ducati, which was delisted in 2008 from the Milan stock exchange.
Expanding Outside India
Hero and Bajaj Auto Ltd. (BJAUT) are looking to expand overseas as competition intensifies in India, the world’s second-biggest motorcycle market after China, as Honda, Yamaha Motor Co. (7272) and Suzuki Motor Corp. (7269) expand capacity in the country.
Honda is increasing its operations in India and will spend as much as 10 billion rupees on its third factory near Bangalore in southern India that will be ready in 2013, the company said in August. When complete, Honda will have the capacity to build 4 million two-wheelers in India annually.
Motorcycle sales in India grew 15 percent in 2011 to 9.95 million units, according to data from the Society of Indian Automobile Manufacturers. The industry body said Jan. 10 it expects deliveries of two-wheelers, including motorcycles and scooters, in the year beginning April 1 will increase 11 percent to 14 percent.
Africa, Latin America
Still, the Indian market is still profitable for Hero. Net income at Hero rose 43 percent to 6.13 billion rupees ($123 million) in the quarter ended Dec. 31 and expects to sell more than 6 million units in the fiscal year to March 31, New Delhi- based Hero said on Jan. 19. In the 11 months to February, Hero has sold 5.7 million two-wheelers, it said on March 1.
Hero is looking to begin sales in Africa and Latin America this year, following Bajaj Auto, which sells more than 35 percent of its products overseas and expects to exceed its export target of 1.5 million units in the year ending March 31.
Hero aims to export 1 million units annually in five or six years, Munjal said.
“We’ve been seen as a utility-bike maker, fuel-efficient bikes, and somebody who’s at the lower level of the market, who’s more small-town and rural-market focused,” said Munjal. “So our ambition is to become one of the biggest global two- wheeler players and to do that, you cannot only be in one small segment.”
Following Tata
Hero’s shares declined as much as 3.6 percent for the biggest intraday loss since Feb. 27, and traded at 1,891.80 rupees as of 3:13 p.m. in Mumbai. The benchmark BSE India Sensitive Index (SENSEX) dropped 1.5 percent.
“Investors are scared about Hero’s plan of buying Ducati,” said Umesh Karne, an analyst with Brics Securities Ltd. in Mumbai. “Hero will have to take on the burden in terms of Ducati’s debt so initially there may be some pain.”
Indian companies have bought luxury brands and succeeded before. Jaguar, acquired by Tata Motors from Ford Motor Co. (F) in 2008 for $2.4 billion, has helped drive profitability for India’s biggest automaker. Tata’s net income last quarter increased 41 percent to a record 34.1 billion rupees, led by the Jaguar unit, which is generating more than half of the parent’s revenue.
Hero may follow Tata’s lead should the motorcycle maker negotiate a cheap price for Ducati, according to Basudeb Banerjee, an analyst with Quant Broking Pvt.
“If they pay the current market price, it could be negative as Ducati will take at least two years to turn around,” said Banerjee, who’s based in Mumbai. “If they get it a low price, then it could be good for Hero as they will gain technology and also the Ducati brand, which is strong around the world.”
“Lots of people have been coming to us with Ducati -- not one banker but many bankers,” Pawan Kant Munjal, managing director of Hero, said in a March 2 interview in New Delhi. “We’re talking to a lot of people. Not just Ducati -- whoever comes to us, we talk to them.”
Ducati would add products such as the $28,000 Superbike 1199 Panigale S Tricolore to a company that’s amassed a $1 billion war chest selling bikes for as little as 38,053 rupees ($763). Hero may be seeking to replicate the success of Tata Motors Ltd. (TTMT), maker of the world’s cheapest car, which is seeing profits surge after buying Jaguar Land Rover Plc.
“It is an excellent fit -- Ducati is a big brand and has a lot of technology; Hero is looking to be a serious global player,” said Deepesh Rathore, managing director of IHS Automotive in India. “Hero might get it cheap. Thanks to the European slowdown, Ducati’s numbers haven’t been great.”
Hero, which in December 2010 decided to exit a 26-year partnership with Honda Motor Co. (7267), the world’s largest motorcycle maker, is looking to gain technology through partnerships and acquisitions after that licensing relationship ends in 2014. Last month, Hero entered into a partnership with Erik Buell Racing, where it would sponsor two EBR teams in the AMA Pro Racing National Guard Superbike Championship in return for technology and design support for future models.
Hong Kong IPO
Hero (HMCL) has cash reserves of about $1 billion, Munjal said. The company had investments of 37.5 billion rupees, cash and bank balances of 1.4 billion rupees, as well as reserves and surpluses of 40.8 billion rupees as of Sept. 30, according to company’s latest earnings statement.
Investindustrial SpA, the Milan-based private-equity company that owns Ducati, may hold an initial public offering of the luxury-motorcycle maker in Hong Kong this year or sell it to a rival, two people familiar with the plans said last month. A spokesman for Investindustrial wasn’t immediately available to comment late last week.
Investindustrial is seeking to sell or list Ducati for as much as 1 billion euros ($1.3 billion), the Financial Times reported last month, citing Andrea Bonomi, chairman of the European buyout firm.
Bayerische Motoren Werke AG (BMW) said last month it’s not interested in buying Ducati, which was delisted in 2008 from the Milan stock exchange.
Expanding Outside India
Hero and Bajaj Auto Ltd. (BJAUT) are looking to expand overseas as competition intensifies in India, the world’s second-biggest motorcycle market after China, as Honda, Yamaha Motor Co. (7272) and Suzuki Motor Corp. (7269) expand capacity in the country.
Honda is increasing its operations in India and will spend as much as 10 billion rupees on its third factory near Bangalore in southern India that will be ready in 2013, the company said in August. When complete, Honda will have the capacity to build 4 million two-wheelers in India annually.
Motorcycle sales in India grew 15 percent in 2011 to 9.95 million units, according to data from the Society of Indian Automobile Manufacturers. The industry body said Jan. 10 it expects deliveries of two-wheelers, including motorcycles and scooters, in the year beginning April 1 will increase 11 percent to 14 percent.
Africa, Latin America
Still, the Indian market is still profitable for Hero. Net income at Hero rose 43 percent to 6.13 billion rupees ($123 million) in the quarter ended Dec. 31 and expects to sell more than 6 million units in the fiscal year to March 31, New Delhi- based Hero said on Jan. 19. In the 11 months to February, Hero has sold 5.7 million two-wheelers, it said on March 1.
Hero is looking to begin sales in Africa and Latin America this year, following Bajaj Auto, which sells more than 35 percent of its products overseas and expects to exceed its export target of 1.5 million units in the year ending March 31.
Hero aims to export 1 million units annually in five or six years, Munjal said.
“We’ve been seen as a utility-bike maker, fuel-efficient bikes, and somebody who’s at the lower level of the market, who’s more small-town and rural-market focused,” said Munjal. “So our ambition is to become one of the biggest global two- wheeler players and to do that, you cannot only be in one small segment.”
Following Tata
Hero’s shares declined as much as 3.6 percent for the biggest intraday loss since Feb. 27, and traded at 1,891.80 rupees as of 3:13 p.m. in Mumbai. The benchmark BSE India Sensitive Index (SENSEX) dropped 1.5 percent.
“Investors are scared about Hero’s plan of buying Ducati,” said Umesh Karne, an analyst with Brics Securities Ltd. in Mumbai. “Hero will have to take on the burden in terms of Ducati’s debt so initially there may be some pain.”
Indian companies have bought luxury brands and succeeded before. Jaguar, acquired by Tata Motors from Ford Motor Co. (F) in 2008 for $2.4 billion, has helped drive profitability for India’s biggest automaker. Tata’s net income last quarter increased 41 percent to a record 34.1 billion rupees, led by the Jaguar unit, which is generating more than half of the parent’s revenue.
Hero may follow Tata’s lead should the motorcycle maker negotiate a cheap price for Ducati, according to Basudeb Banerjee, an analyst with Quant Broking Pvt.
“If they pay the current market price, it could be negative as Ducati will take at least two years to turn around,” said Banerjee, who’s based in Mumbai. “If they get it a low price, then it could be good for Hero as they will gain technology and also the Ducati brand, which is strong around the world.”
Badge engineering is emerging trend in two-wheeler segment
Badge engineering or cross badging seems to be gaining ground in the Indian two-wheeler segment. The increasing product development cost and the need to break-even faster and save money by spreading development and engineering costs over a large number of models are getting bike makers to launch products faster.
The Honda Unicorn and Hunk/Avenger of Hero, HMSI Twister/Stunner and Hero Ignitor and the Honda Activa/Dio and Hero Pleasure, Hero Maestro and Honda Aviator are badge engineered bikes. These bikes are using the shared technology/engine from Honda to maximise sales, say senior officials.
"In large markets there is diversification of demand and for better scale of economy, bike makers are cross badging," said says NK Rattan, HMSI's VP for sales, marketing, planning & corporate affairs (at the time of writing Rattan had put in his papers at HMSI with March 10 as his last day).
The basic engines are kept the same with exteriors changes. The differentiated products give variety to the customer while the basic requirements like fuel efficiency, price remain the same, Rattan said.
Badge engineering is already prevalent among car companies. The VW Vento and the Skoda Rapid , VW Polo and Skoda Fabia, to-be-launched Skoda Citigo and VW Up and the Renault Pulse and the Nissan Micra are all badge engineered cars. Badge engineering is when mechanically its the same car with minor cosmetic changes and a new badge. This is different from platform sharing where components are shared and the interiors and the exteriors are different.
"We are not averse to badge engineering as it helps minimize costs and lead times. Sharing of components, powertrains and platforms are a very common practice globally and the Renault Nissan Alliance helps us leverage multiple platforms across a varied product line for both the companies resulting in economies of scale. We will see a lot more badge engineering than we have so far specially with so many global players coming in," said Marc Nassif, MD Renault India.
In India we have taken advantage of this opportunity to launch some products which are based on common platforms but we will also offer products in the Indian market which carry a strong Renault DNA.
The goal of the Renault-Nissan Alliance is to increase efficiencies across two companies that sell more than 7 million cars per year in nearly 200 countries worldwide.
Some of the biggest efficiencies come from component sharing, which we have been working on with light-commercial vehicles and our passenger cars. We only move forward with platform and component sharing projects when it promotes brand integrity and customer satisfaction, " said Nissan India spokesperson.
In India the Renault-Nissan alliance is using a common platform , components and cross badging to develop two very different cars, with unique designs and different styling cues that appeal to different demographic segments. The Nissan Micra has a more feminine appeal ....and the Renault Pulse a more masculine appeal.
VW, has around 8-9 brands within its portfolio and each brand has a distinct positioning, pricing and appeals to a specific customer.
"We find customers very loyal to brands and like to remain within the family and companies find it better to invest in the same segment on two brands. Badge engineering gives huge cost savings, easier to ramp up and make changes and bring the product quicker to the market and we have been quite sucessful at it , said John Chacko , president and managing director, Volkswagen India.
Cross badging gives better synergies , different characters at different prices with a larger customer base said Adil Jal Darukhanawala.
The Honda Unicorn and Hunk/Avenger of Hero, HMSI Twister/Stunner and Hero Ignitor and the Honda Activa/Dio and Hero Pleasure, Hero Maestro and Honda Aviator are badge engineered bikes. These bikes are using the shared technology/engine from Honda to maximise sales, say senior officials.
"In large markets there is diversification of demand and for better scale of economy, bike makers are cross badging," said says NK Rattan, HMSI's VP for sales, marketing, planning & corporate affairs (at the time of writing Rattan had put in his papers at HMSI with March 10 as his last day).
The basic engines are kept the same with exteriors changes. The differentiated products give variety to the customer while the basic requirements like fuel efficiency, price remain the same, Rattan said.
Badge engineering is already prevalent among car companies. The VW Vento and the Skoda Rapid , VW Polo and Skoda Fabia, to-be-launched Skoda Citigo and VW Up and the Renault Pulse and the Nissan Micra are all badge engineered cars. Badge engineering is when mechanically its the same car with minor cosmetic changes and a new badge. This is different from platform sharing where components are shared and the interiors and the exteriors are different.
"We are not averse to badge engineering as it helps minimize costs and lead times. Sharing of components, powertrains and platforms are a very common practice globally and the Renault Nissan Alliance helps us leverage multiple platforms across a varied product line for both the companies resulting in economies of scale. We will see a lot more badge engineering than we have so far specially with so many global players coming in," said Marc Nassif, MD Renault India.
In India we have taken advantage of this opportunity to launch some products which are based on common platforms but we will also offer products in the Indian market which carry a strong Renault DNA.
The goal of the Renault-Nissan Alliance is to increase efficiencies across two companies that sell more than 7 million cars per year in nearly 200 countries worldwide.
Some of the biggest efficiencies come from component sharing, which we have been working on with light-commercial vehicles and our passenger cars. We only move forward with platform and component sharing projects when it promotes brand integrity and customer satisfaction, " said Nissan India spokesperson.
In India the Renault-Nissan alliance is using a common platform , components and cross badging to develop two very different cars, with unique designs and different styling cues that appeal to different demographic segments. The Nissan Micra has a more feminine appeal ....and the Renault Pulse a more masculine appeal.
VW, has around 8-9 brands within its portfolio and each brand has a distinct positioning, pricing and appeals to a specific customer.
"We find customers very loyal to brands and like to remain within the family and companies find it better to invest in the same segment on two brands. Badge engineering gives huge cost savings, easier to ramp up and make changes and bring the product quicker to the market and we have been quite sucessful at it , said John Chacko , president and managing director, Volkswagen India.
Cross badging gives better synergies , different characters at different prices with a larger customer base said Adil Jal Darukhanawala.
Hero MotoCorp to make its own engines, teams up with engine developer AVL
Fixing its technology deficit after separating from Japanese partner Honda, BM Munjal-owned Hero MotoCorp, India's largest two-wheeler maker by volumes, is building in-house capabilities to make its own engines by teaming up with the world's largest privately-owned engine developer, AVL of Austria.
Close on the heels of forging a "strategic partnership" with Erik Buel Racing (EBR) of the US for high-end technology, Hero MotoCorp has now roped in AVL to build its "internal capabilities" for new engine development.
"We have tied up with AVL to develop our in-house capabilities in engine technologies. A team from our R&D division is already in Austria. Our team is also working in close coordination with AVL ITC ( India Technical Centre) based in Gurgaon. The team is working on a few options across motorcycles and scooters," Pawan Munjal, MD & CEO Hero MotoCorp, told ET.
Its technology tie-up with Austria-based AVL will allow Hero MotoCorp to develop technology for its bread-and-butter 100cc bikes such as Splendor and Passion.
Looking beyond the Conventional
The tie-up will also help it take the 150cc CBZ and Hunk to the next level to meet intensified competition from rivals such as Honda and Bajaj Auto in this high-margin segment.
Also, this new in-house capability would allow Hero to develop engines independently of its estranged partner Honda Motor Company, which currently breeds its entire lineup of bikes and scooters that catapulted it to become the world's largest two-wheeler maker by sales. The erstwhile partners now compete in the 11-million-strong Indian two-wheeler market.
"We would be developing engines of all sizes to make new products and also refurbish the existing product lines," Munjal added, specifying that the arrangement with AVL would go beyond making the current portfolio of 100-230cc engines.
Hero MotoCorp is also looking beyond the conventional. The company is "seriously working on commercialising" the concept hybrid scooter "Leap", which it showcased at the Auto Expo in Delhi in January
The tie-up with AVL (Anstalt fA¼r Verbrennungskraftmaschinen List) would be independent of Hero's alliance with superbike specialist EBR announced just a fortnight ago.
Since parting ways with Honda, Hero MotoCorp has been fast sprucing up its research and development set-up based at its Dharuhera and Gurgaon plants. The company, which currently has around 300 engineers, has been aggressively investing in further enhancing its R&D division, both in terms of infrastructure and people.
"Gradually we will develop our own full-scale R&D facility to make products for global market on our own. The multiple technology and engineering would leapfrog to the next level even as we internally enhance our R&D to make products for trans-continental markets," Munjal added.
Analysts tracking the sector say Indian players stand a fair chance to succeed globally, backed by huge domestic volumes and healthy balance sheets to support their global ambitions. "Most Indian two-wheeler companies enjoy inherent low-cost manufacturing advantages coming from hugely depreciated plants along with financially sound business that would help them invest in markets overseas," Kumar Kandaswami, senior director at Deloitte consultancy, said. "Many have already taken the acquisition route to investment in technology that is expected to meet their needs to churn out globalised products at faster pace."
Close on the heels of forging a "strategic partnership" with Erik Buel Racing (EBR) of the US for high-end technology, Hero MotoCorp has now roped in AVL to build its "internal capabilities" for new engine development.
"We have tied up with AVL to develop our in-house capabilities in engine technologies. A team from our R&D division is already in Austria. Our team is also working in close coordination with AVL ITC ( India Technical Centre) based in Gurgaon. The team is working on a few options across motorcycles and scooters," Pawan Munjal, MD & CEO Hero MotoCorp, told ET.
Its technology tie-up with Austria-based AVL will allow Hero MotoCorp to develop technology for its bread-and-butter 100cc bikes such as Splendor and Passion.
Looking beyond the Conventional
The tie-up will also help it take the 150cc CBZ and Hunk to the next level to meet intensified competition from rivals such as Honda and Bajaj Auto in this high-margin segment.
Also, this new in-house capability would allow Hero to develop engines independently of its estranged partner Honda Motor Company, which currently breeds its entire lineup of bikes and scooters that catapulted it to become the world's largest two-wheeler maker by sales. The erstwhile partners now compete in the 11-million-strong Indian two-wheeler market.
"We would be developing engines of all sizes to make new products and also refurbish the existing product lines," Munjal added, specifying that the arrangement with AVL would go beyond making the current portfolio of 100-230cc engines.
Hero MotoCorp is also looking beyond the conventional. The company is "seriously working on commercialising" the concept hybrid scooter "Leap", which it showcased at the Auto Expo in Delhi in January
The tie-up with AVL (Anstalt fA¼r Verbrennungskraftmaschinen List) would be independent of Hero's alliance with superbike specialist EBR announced just a fortnight ago.
Since parting ways with Honda, Hero MotoCorp has been fast sprucing up its research and development set-up based at its Dharuhera and Gurgaon plants. The company, which currently has around 300 engineers, has been aggressively investing in further enhancing its R&D division, both in terms of infrastructure and people.
"Gradually we will develop our own full-scale R&D facility to make products for global market on our own. The multiple technology and engineering would leapfrog to the next level even as we internally enhance our R&D to make products for trans-continental markets," Munjal added.
Analysts tracking the sector say Indian players stand a fair chance to succeed globally, backed by huge domestic volumes and healthy balance sheets to support their global ambitions. "Most Indian two-wheeler companies enjoy inherent low-cost manufacturing advantages coming from hugely depreciated plants along with financially sound business that would help them invest in markets overseas," Kumar Kandaswami, senior director at Deloitte consultancy, said. "Many have already taken the acquisition route to investment in technology that is expected to meet their needs to churn out globalised products at faster pace."