The Tamil Nadu Government will soon announce an automotive sector-specific policy to build up on the strong automobile industry base the State already has. The policy details were being worked out by the State Manufacturing Competitive Council, said Mr Rajeev Ranjan, Industry Secretary to the State.
In his keynote address to the Auto Serve 2010, organised here by the Confederation of Indian Industry, he said the State already has a production base of six major car companies in addition to commercial vehicles and tyres, and will soon receive more investments in this sector.
Earlier addressing the gathering, Mr R. Seshasayee, Managing Director, Ashok Leyland, said there is a huge skill gap and called for collective efforts and investments in skill development.
“The automotive sector should continue to work together as a networked body to manage and monitor the changes and challenges in the industry collectively,” he said.
The growing automotive aftermarket presents a large opportunity for layers across the value chain. However, with the market demand for parts and services set to double over the next five years, being able to satisfy this demand is a significant challenge, says a CII study on Opportunities in the Indian automotive aftermarket.
The study conducted by McKinsey further says, companies across the value chain will have to double their capacity as well as enhance capabilities to produce parts for and service a wider variety and complexity of vehicles. This will require significant additional investments. The reason why both the automotive dealer fraternity and the after-market servicing equipment industry are being upbeat is the same – the massive base of vehicles that will now need regular repairs and maintenance. The base of vehicles (including two-wheelers, cars, utility vehicles and commercial vehicles) now on the roads in India is estimated to be nearly 120 million units.
The market for automotive repairs and service maintenance in the US is estimated to be over $ 100 billion.
The numbers are pretty promising here too. The Indian automotive aftermarket is expected to grow to around $ 9.4 billion by 2015 from its present estimated size $ 3.7 billion.
Bajaj to ride on Pulsar, Discover brand identities
Bajaj to ride on Pulsar, Discover brand identities
Bajaj Auto will incorporate its twin brand strategy of the Pulsar and Discover across all its dealerships with the help of a UK-based design house.
“Within the company, we have aligned ourselves to this brand statement and the next step is to take it to all our dealerships so that customers will have a clear understanding of what we stand for. The brand identity will be the main focus while the Bajaj corporate identity, in contrast, will be understated,” Mr S. Sridhar, President, Motorcycle Business, told Business Line.
This is keeping in line with the company's priority to focus on brands, and not just products, which it believes will hold the key to growth in the future. The Discover and Pulsar have played a big role in doubling its market share in bikes to nearly 35 per cent in the last 12-15 months and combined volumes of the two brands are nearly 2.5 lakh units each month.
The transition to these newly designed showrooms will happen in phases and the exercise will be completed for the entire network by the end of next fiscal. Bajaj is also increasing the number of its dealerships by 130 to over 600 with the focus being on Tier 2 and 3 centres. In addition, nearly 1,100 service centres are also being upgraded at an investment of nearly Rs 20 crore to meet the needs of the Pulsar and Discover.
From the company's point of view, this initiative is particularly important to get the bigger numbers from small town India where the Discover will play the catalyst as a mass commuter motorcycle. The flagship, Pulsar is more of the urban bike where growth will largely come from cities.
“We were waiting for the Discover to reach the right volumes before embarking on this network expansion drive. The timing is perfect now since the brand is doing 1.2 lakh units a month in the domestic market alone,” Mr Sridhar said.
This translates into a market share of 23 per cent in the commuter segment and Bajaj has targeted increasing this to 30 per cent by the start of the festive season in 2011. Growth in the Tier 2 and 3 centres is critical to this goal since this is where Hero Honda reigns supreme with its Splendor and Passion brands which clock over 2.7 lakh units each month.
The Discover 100 and 150 have been the best piece of news to Bajaj Auto in the volumes-driven commuter segment. It remains to be seen if another bike under this brand umbrella will debut next fiscal to keep the momentum going. If everything goes according to plan, monthly numbers of the Discover could average 200,000 units by the end of next fiscal, sources said.
Bajaj Auto will incorporate its twin brand strategy of the Pulsar and Discover across all its dealerships with the help of a UK-based design house.
“Within the company, we have aligned ourselves to this brand statement and the next step is to take it to all our dealerships so that customers will have a clear understanding of what we stand for. The brand identity will be the main focus while the Bajaj corporate identity, in contrast, will be understated,” Mr S. Sridhar, President, Motorcycle Business, told Business Line.
This is keeping in line with the company's priority to focus on brands, and not just products, which it believes will hold the key to growth in the future. The Discover and Pulsar have played a big role in doubling its market share in bikes to nearly 35 per cent in the last 12-15 months and combined volumes of the two brands are nearly 2.5 lakh units each month.
The transition to these newly designed showrooms will happen in phases and the exercise will be completed for the entire network by the end of next fiscal. Bajaj is also increasing the number of its dealerships by 130 to over 600 with the focus being on Tier 2 and 3 centres. In addition, nearly 1,100 service centres are also being upgraded at an investment of nearly Rs 20 crore to meet the needs of the Pulsar and Discover.
From the company's point of view, this initiative is particularly important to get the bigger numbers from small town India where the Discover will play the catalyst as a mass commuter motorcycle. The flagship, Pulsar is more of the urban bike where growth will largely come from cities.
“We were waiting for the Discover to reach the right volumes before embarking on this network expansion drive. The timing is perfect now since the brand is doing 1.2 lakh units a month in the domestic market alone,” Mr Sridhar said.
This translates into a market share of 23 per cent in the commuter segment and Bajaj has targeted increasing this to 30 per cent by the start of the festive season in 2011. Growth in the Tier 2 and 3 centres is critical to this goal since this is where Hero Honda reigns supreme with its Splendor and Passion brands which clock over 2.7 lakh units each month.
The Discover 100 and 150 have been the best piece of news to Bajaj Auto in the volumes-driven commuter segment. It remains to be seen if another bike under this brand umbrella will debut next fiscal to keep the momentum going. If everything goes according to plan, monthly numbers of the Discover could average 200,000 units by the end of next fiscal, sources said.
Hero Honda likely to ride past its worst this quater
We believe the current quarter will mark the bottom for Hero Honda’s market share and margins. While we cut our FY11E EPS by 8%, we raise our FY12-13E by 15-19% (earnings to grow 24% pa over FY11-13E) and raise our DCF-based target price to Rs 2,365. We believe HH is the best play on Indian consumers as of now.
Bottoming out: HH has lost market share in the past one year (-775 bp YTD), giving up the extraordinary share gains it had registered the previous year. Its share price movement was more on account of weakness and subsequent correction of Bajaj’s portfolio rather than any changes in HH’s positioning.
We believe the market shares have now reverted to sustainable levels and expect HH to start growing in line with the market. During the past year, HH’s margin has contracted sharply (-440 bp YTD) as the firm has been reluctant to pass on cost inflation even though its competitors have already done so. We expect this situation to be remedied soon as the current supply situation and competitive structure leave HH with tremendous pricing power.
Catalysts: We expect key near-term triggers to be strong volume growth and potential price increases later this year.
A key event that’s been widely discussed in the media is a potential exit of Honda from the joint venture. This could be sentimentally negative but we do not expect Honda’s potential exit to be meaningfully detrimental to HH’s prospects.
Valuation: We value HH on a DCF basis and set a target price of Rs2,365, after factoring in earnings changes.
At our target price, HH would trade at 18x FY12E, at a substantial discount to most other consumer stocks in the domestic market. We upgrade HH to an outperformer.
Bottoming out: HH has lost market share in the past one year (-775 bp YTD), giving up the extraordinary share gains it had registered the previous year. Its share price movement was more on account of weakness and subsequent correction of Bajaj’s portfolio rather than any changes in HH’s positioning.
We believe the market shares have now reverted to sustainable levels and expect HH to start growing in line with the market. During the past year, HH’s margin has contracted sharply (-440 bp YTD) as the firm has been reluctant to pass on cost inflation even though its competitors have already done so. We expect this situation to be remedied soon as the current supply situation and competitive structure leave HH with tremendous pricing power.
Catalysts: We expect key near-term triggers to be strong volume growth and potential price increases later this year.
A key event that’s been widely discussed in the media is a potential exit of Honda from the joint venture. This could be sentimentally negative but we do not expect Honda’s potential exit to be meaningfully detrimental to HH’s prospects.
Valuation: We value HH on a DCF basis and set a target price of Rs2,365, after factoring in earnings changes.
At our target price, HH would trade at 18x FY12E, at a substantial discount to most other consumer stocks in the domestic market. We upgrade HH to an outperformer.
TVS asked to show it didn't infringe patent
A division bench of the Madras high court last week asked TVS Motor Co. Ltd to prove that the technology used in its Flame brand of motorcycles did not infringe on a patent held by Bajaj Auto Ltd.
The division bench directive reverses an order of a single bench of the same high court, which a few months ago had asked Bajaj to prove that TVS impinged on patented technology used in its Pulsar range of bikes.
Both the companies declined to comment on the latest order.
In 2007, TVS had filed a lawsuit against Bajaj seeking a declaration of non-infringement, groundless threats and compensation on the back of Bajaj’s media campaign that TVS’ 125cc Flame bike infringed its patent.
Soon after this, Bajaj filed a counter-suit seeking an injunction against TVS’ new product on the ground that it infringed upon its patent on a twin-spark technology used in its Pulsar motorcycles.
The division bench said that since TVS contested the patent obtained by Bajaj, the burden of proof was on TVS.
“Since the plaintiff has made a categorical assertion in the plaint that they would prove the groundless threat and non-infringement of patent by adducing evidence, it should have been called upon to produce evidence in support of their contentions,” the division bench said.
In response to an interim injunction filed by TVS in May 2009, which restrained Bajaj from interfering with the manufacturing and marketing of TVS products with two spark plugs and three valves, the Supreme Court in a September 2009 judgement allowed TVS to sell the Flame, but directed that it maintain and file accounts of sales that would have to be verified by a receiver appointed by the Madras high court.
“The nature of these litigations, which had no precedent in the country, was actually delayed on lack of clarity on the lead of evidence since the court had clubbed the hearing of two suits on the same matter,” said Sumathi Chandrashekaran, a patent lawyer who first blogged on the court’s new directive.
The division bench directive reverses an order of a single bench of the same high court, which a few months ago had asked Bajaj to prove that TVS impinged on patented technology used in its Pulsar range of bikes.
Both the companies declined to comment on the latest order.
In 2007, TVS had filed a lawsuit against Bajaj seeking a declaration of non-infringement, groundless threats and compensation on the back of Bajaj’s media campaign that TVS’ 125cc Flame bike infringed its patent.
Soon after this, Bajaj filed a counter-suit seeking an injunction against TVS’ new product on the ground that it infringed upon its patent on a twin-spark technology used in its Pulsar motorcycles.
The division bench said that since TVS contested the patent obtained by Bajaj, the burden of proof was on TVS.
“Since the plaintiff has made a categorical assertion in the plaint that they would prove the groundless threat and non-infringement of patent by adducing evidence, it should have been called upon to produce evidence in support of their contentions,” the division bench said.
In response to an interim injunction filed by TVS in May 2009, which restrained Bajaj from interfering with the manufacturing and marketing of TVS products with two spark plugs and three valves, the Supreme Court in a September 2009 judgement allowed TVS to sell the Flame, but directed that it maintain and file accounts of sales that would have to be verified by a receiver appointed by the Madras high court.
“The nature of these litigations, which had no precedent in the country, was actually delayed on lack of clarity on the lead of evidence since the court had clubbed the hearing of two suits on the same matter,” said Sumathi Chandrashekaran, a patent lawyer who first blogged on the court’s new directive.
TVS Motor plans low-cost bikes
TVS Motor is scripting a new twist in the race to capture the12-million plus two-wheeler market. The company plans to introduce low-cost models across product segments. This would result in creation of a new segment within an existing segment.
“The work is on (for low-cost models) but I can’t share more details,” the company’s chairman Venu Srinivasan told FE.
Over the last one year, leading motorcycle makers have been developing cost-effective products, primarily, in the low-cost segment to rake in high numbers. The FE had reported in October that Mahindra & Mahindra has started preliminary work on developing a low-cost motorcycle which is going to be sub-100cc. Hero Honda Motors and Bajaj Auto are also weighing options to introduce a low-cost & high mileage bike.
TVS Motor is looking at international designs and new technologies for its product portfolio.
An auto analyst said the rankings in the two-wheeler market could see a major churn in the next few years.
“The approach that the two-wheeler makers adopt will determine who’s at the top. With uncertainty over the future of the alliance between the Hero Group and Honda Motors, Bajaj Auto and TVS Motor could be the companies to watch out for as far as innovation and product development is concerned,” he added. “The introduction of the Nano made us take notice (of producing low cost products)... it is possible to manufacture low cost products in the country,” Srinivasan said.
He said the low-cost model would thrive in the country because of the vast potential in rural areas. “Rural area sales will be important because people want to climb up the value chain,” he added. The company has no plans to introduce cars by leveraging technology that will be used for its low-cost bikes.
“The two-wheeler market is huge in India and we are going to focus solely on it.”
Currently, Bajaj Auto is the contract manufacturer for Renault-Nissan’s ultra- low-cost car that would take on Tata Nano. Srinivasan expects scooters to stage a comeback. He sees scooters’ share of the two-wheeler market to rise to 35% from 20% over five years .
TVS New Star Sport is among the cheapest bikes in the country. The ex-showroom price of this 100cc bike is Rs 32,000. In October, TVS Motors sold 1,95,271 units, 48% more than in October 2009. Bajaj Auto sales increase 32% to 3.3 lakh units.
“The work is on (for low-cost models) but I can’t share more details,” the company’s chairman Venu Srinivasan told FE.
Over the last one year, leading motorcycle makers have been developing cost-effective products, primarily, in the low-cost segment to rake in high numbers. The FE had reported in October that Mahindra & Mahindra has started preliminary work on developing a low-cost motorcycle which is going to be sub-100cc. Hero Honda Motors and Bajaj Auto are also weighing options to introduce a low-cost & high mileage bike.
TVS Motor is looking at international designs and new technologies for its product portfolio.
An auto analyst said the rankings in the two-wheeler market could see a major churn in the next few years.
“The approach that the two-wheeler makers adopt will determine who’s at the top. With uncertainty over the future of the alliance between the Hero Group and Honda Motors, Bajaj Auto and TVS Motor could be the companies to watch out for as far as innovation and product development is concerned,” he added. “The introduction of the Nano made us take notice (of producing low cost products)... it is possible to manufacture low cost products in the country,” Srinivasan said.
He said the low-cost model would thrive in the country because of the vast potential in rural areas. “Rural area sales will be important because people want to climb up the value chain,” he added. The company has no plans to introduce cars by leveraging technology that will be used for its low-cost bikes.
“The two-wheeler market is huge in India and we are going to focus solely on it.”
Currently, Bajaj Auto is the contract manufacturer for Renault-Nissan’s ultra- low-cost car that would take on Tata Nano. Srinivasan expects scooters to stage a comeback. He sees scooters’ share of the two-wheeler market to rise to 35% from 20% over five years .
TVS New Star Sport is among the cheapest bikes in the country. The ex-showroom price of this 100cc bike is Rs 32,000. In October, TVS Motors sold 1,95,271 units, 48% more than in October 2009. Bajaj Auto sales increase 32% to 3.3 lakh units.
Honda Motorcycle to set up plant in AP
Honda Motorcycle and Scooter India (HMSI), a subsidiary of Honda Motor Company, will soon set up its third two-wheeler manufacturing facility near here with an investment of Rs1,000 crore, a government official said on Wednesday.
He also said that two more global companies -- Italian industrial manufacturing firm Camozzi and Korean power equipment major Hyosung Corporation -- are planning to invest Rs300 crore and Rs450 crore, respectively in Andra Pradesh.
“Honda wanted 100 acres of land for setting up the facility and we have shown them available land in Medak and Nalgonda districts close to Hyderabad,” Andhra Pradesh Industrial Infrastructure Corporation managing director B. R. Meena told the news agency here today.
“Honda officials said they would invest Rs1,000 crore on the production facility in a phased manner of which Rs500 crore will come in the first phase,” he added.
HMSI currently has a two-wheeler manufacturing plant at Manesar in Haryana with an annual production capacity of 1.55 million units per annum while the second plant, with a production capacity of 6 lakh units, is coming up at Tapukara in Rajasthan.
The proposed manufacturing facility in Andhra Pradesh will be HMSI’s first in South India.
Meena said Honda officials have submitted their proposal for setting up the two-wheeler manufacturing facility two days ago. Initially, the unit would manufacture 2,000 two-wheelers per month and gradually increase the capacity.
“They are yet to submit a detailed project report to us,” he added.
Meanwhile, the Camozzi Group has also come forward to set up its textile and other industrial equipment manufacturing units near Hyderabad.
“Camozzi has plans to invest Rs300 crore on the facility and wants 20 acres of land,” Meena said.
Besides, he said, power and industrial systems major Hyosung Corporation is also headed for AP to set up a Rs450 crore high-voltage transformers manufacturing plant.
The company sought allocation of 25 acres of land at Mannavaram near Tirupati where the NTPC-Bhel joint venture power plant equipment manufacturing facility is coming up.
“We had preliminary discussions with representatives of these major companies and are awaiting submission of detailed project reports. The proposals are under active consideration of the government,” Meena said.
He also said that two more global companies -- Italian industrial manufacturing firm Camozzi and Korean power equipment major Hyosung Corporation -- are planning to invest Rs300 crore and Rs450 crore, respectively in Andra Pradesh.
“Honda wanted 100 acres of land for setting up the facility and we have shown them available land in Medak and Nalgonda districts close to Hyderabad,” Andhra Pradesh Industrial Infrastructure Corporation managing director B. R. Meena told the news agency here today.
“Honda officials said they would invest Rs1,000 crore on the production facility in a phased manner of which Rs500 crore will come in the first phase,” he added.
HMSI currently has a two-wheeler manufacturing plant at Manesar in Haryana with an annual production capacity of 1.55 million units per annum while the second plant, with a production capacity of 6 lakh units, is coming up at Tapukara in Rajasthan.
The proposed manufacturing facility in Andhra Pradesh will be HMSI’s first in South India.
Meena said Honda officials have submitted their proposal for setting up the two-wheeler manufacturing facility two days ago. Initially, the unit would manufacture 2,000 two-wheelers per month and gradually increase the capacity.
“They are yet to submit a detailed project report to us,” he added.
Meanwhile, the Camozzi Group has also come forward to set up its textile and other industrial equipment manufacturing units near Hyderabad.
“Camozzi has plans to invest Rs300 crore on the facility and wants 20 acres of land,” Meena said.
Besides, he said, power and industrial systems major Hyosung Corporation is also headed for AP to set up a Rs450 crore high-voltage transformers manufacturing plant.
The company sought allocation of 25 acres of land at Mannavaram near Tirupati where the NTPC-Bhel joint venture power plant equipment manufacturing facility is coming up.
“We had preliminary discussions with representatives of these major companies and are awaiting submission of detailed project reports. The proposals are under active consideration of the government,” Meena said.
Mahindra to enter 125cc MotoGP with own team
Come the opening round of the 2011 World Championship MotoGP season and auto major Mahindra & Mahindra will embark upon a path never tread by any Indian corporate in the world of motorcycle road racing. Mahindra will enter the 125cc class of the MotoGP world championships with its very own team.
The World MotoGP Championship is the blue riband of motorcycle sport, akin to what F1 means to four-wheelers. While Mahindra has entered the vibrant Indian motorcycle market, first by buying over Kinetic and then adding its very own 110cc commuter motorcycle to its small but ever expanding range, the bigger potential is what Mahindra has overseas. Its acquisition of Italian specialist engineering firm Engines Engineering a couple of years ago is key, not just for its motorcycle ambitions in India but also its key engineering skills base across its automotive brands. Engines Engineering has been very active in the sport, having made racing machines and also specialized components for some of the world`s best known racing teams.
Technology is key driver for this move into the sport and an application has been made to the World MotoGP Championship series promoter Dorna for an entry in the 125cc class for 2011. It is expected that the team will be known as Mahindra and it will enter a team of two riders in the 2011 season. The bikes, the riders and the team management would be made up of specialists from within Mahindra & Mahindra and the team would be based at Engines Engineering facility in Italy.
Speaking of rivals, Mahindra can expect to face entrenched bike makers like Piaggio subsidiaries Gilera and Derbi and the dominant class leader, Aprilia. Group companies like Mahindra`s Engineering Services Division, its IT divisions, Systech specialist auto components division and also of course Mahindra 2Wheelers would all be involved in this unique exercise which is without parallel in the Indian automotive industry. The World MotoGP Championship is also the one which is beamed across the globe, just as F1 is, and it closely follows F1 in the audience it caters to.
The 2011 season will be the last for the 125cc two-stroke class for in 2012 this class changes to the Moto3 category for four-stroke motorcycles and this would also be a good test bed for the firm to perfect its approach to small capacity mass-produced bikes which are penciled into the Mahindra product range around the same time. Factor in the fact that there would be an Indian MotoGP Grand Prix in 2012 at the Jaypee circuit in Noida, this Mahindra move may be coincidental but it dovetails well in the overall scheme of things.
The World MotoGP Championship is the blue riband of motorcycle sport, akin to what F1 means to four-wheelers. While Mahindra has entered the vibrant Indian motorcycle market, first by buying over Kinetic and then adding its very own 110cc commuter motorcycle to its small but ever expanding range, the bigger potential is what Mahindra has overseas. Its acquisition of Italian specialist engineering firm Engines Engineering a couple of years ago is key, not just for its motorcycle ambitions in India but also its key engineering skills base across its automotive brands. Engines Engineering has been very active in the sport, having made racing machines and also specialized components for some of the world`s best known racing teams.
Technology is key driver for this move into the sport and an application has been made to the World MotoGP Championship series promoter Dorna for an entry in the 125cc class for 2011. It is expected that the team will be known as Mahindra and it will enter a team of two riders in the 2011 season. The bikes, the riders and the team management would be made up of specialists from within Mahindra & Mahindra and the team would be based at Engines Engineering facility in Italy.
Speaking of rivals, Mahindra can expect to face entrenched bike makers like Piaggio subsidiaries Gilera and Derbi and the dominant class leader, Aprilia. Group companies like Mahindra`s Engineering Services Division, its IT divisions, Systech specialist auto components division and also of course Mahindra 2Wheelers would all be involved in this unique exercise which is without parallel in the Indian automotive industry. The World MotoGP Championship is also the one which is beamed across the globe, just as F1 is, and it closely follows F1 in the audience it caters to.
The 2011 season will be the last for the 125cc two-stroke class for in 2012 this class changes to the Moto3 category for four-stroke motorcycles and this would also be a good test bed for the firm to perfect its approach to small capacity mass-produced bikes which are penciled into the Mahindra product range around the same time. Factor in the fact that there would be an Indian MotoGP Grand Prix in 2012 at the Jaypee circuit in Noida, this Mahindra move may be coincidental but it dovetails well in the overall scheme of things.