India’s second-largest motorcycle maker Bajaj Auto Ltd plans to manufacture commercial vehicles as well on a new platform it is developing in Waluj, Maharashtra, for its small car project, said two people familiar with the development.
“Bajaj Auto Ltd intends to develop a multidimensional platform through which it can manufacture commercial vehicles and passenger cars,” said an industry expert, requesting anonymity.
A Bajaj Auto executive confirmed the plan.
“What we are trying to do is to develop a four-wheeler platform, and then we will see what else can we get out of the new platform,” said the executive, who also did not want to be named.
A company spokesperson declined comment.
The Waluj plant is being set up at a cost of Rs.500 crore, the company has earlier stated.
Of this, Rs.225-250 crore has been earmarked for investment in the current fiscal, said the expert cited above.
India’s largest two-wheeler manufacturer had announced plans to launch a small car this year that will rival the Nano, the world’s cheapest car built by Tata Motors Ltd. The launch was later deferred to 2012.
Bajaj Auto is developing the small car project in partnership with Renault SA and Nissan Motor Co. Ltd. While Bajaj Auto will handle design, engineering, sourcing and manufacturing, Renault-Nissan will take care of marketing and sales.
The alliance wants to sell the car for $2,500, or Rs.1.10 lakh, compared with the Nano’s ex-showrom price of around Rs.1.5 lakh in Mumbai.
Bajaj Auto has also said it hopes to make the car engine twice as fuel efficient as the best available in the market.
Small cars in India have an average fuel efficiency of 17km per litre. Bajaj wants to lift that to around 30km per litre.
Nano’s fuel efficiency is 23.6km per litre, according to Automotive Research Association of India.
Yamaha FZ1 coming in December
After launching the iconic Yamaha R1 and MT-01 , India Yamaha Motors is now planning to introduce Yamaha FZ1 in India in a bid to corner the high-margin power bike market. The super bike will be launched in December and will be priced between Rs 8-9 lakh.
Yamaha FZ1, with its 1000cc and four cylinders , would compete with the recentlylaunched Honda CB1000R. It is pitted in the same category as the Suzuki Bandit and Kawasaki Z1000S in the international market.
Superbikes are big-performance bikes with engine capacity of 500 cc and above. Japanese automakers such as Honda, Yamaha and Kawasaki are top players in superbikes space along with Ducati and BMW . Most of them are now present in India.
Japanese bike manufacturer is believed to have sent the FZ1 for homologation. “The bike is priced cheaper than the Honda CB1000R, which is the cheapest imported superbike currently sold. The bike will be imported as CBU from Australia or Japan,” said people close to development. It is also believed to be considering the semi-knocked down (SKD) route for the FZ1. This will help Yamaha to price the FZ1 competitively.
Yamaha, which sells super bikes in the range of Rs 14-24 lakh, plans to sell over 80-100 super bikes in India in 2010. The company hopes bike enthusiasts will overlook the cost factor and lap up its products just for the iconic value they have gained on other markets, said people close to the development. Such bikes are often featured in local automobile magazines which are read by most bike enthusiasts, who are a target market.
“There will be fierce competition in coming time, so we are gearing up for that. the company is following top to bottom strategy to conenct to the youth,” said a senior official from India Yamaha . Besides, the company is firming up plans to enhance capacity at its existing plant in Uttar Pradesh and Haryana. “We have a order backlog of 10,000 every month and plans to debottle the manufacturing plant to cater to the growing demand ,” said the official. Currently it has the capacity to manufacture 3.5 lakh bikes, this can be ramped up to 8 lakhs.
Yamaha FZ1, with its 1000cc and four cylinders , would compete with the recentlylaunched Honda CB1000R. It is pitted in the same category as the Suzuki Bandit and Kawasaki Z1000S in the international market.
Superbikes are big-performance bikes with engine capacity of 500 cc and above. Japanese automakers such as Honda, Yamaha and Kawasaki are top players in superbikes space along with Ducati and BMW . Most of them are now present in India.
Japanese bike manufacturer is believed to have sent the FZ1 for homologation. “The bike is priced cheaper than the Honda CB1000R, which is the cheapest imported superbike currently sold. The bike will be imported as CBU from Australia or Japan,” said people close to development. It is also believed to be considering the semi-knocked down (SKD) route for the FZ1. This will help Yamaha to price the FZ1 competitively.
Yamaha, which sells super bikes in the range of Rs 14-24 lakh, plans to sell over 80-100 super bikes in India in 2010. The company hopes bike enthusiasts will overlook the cost factor and lap up its products just for the iconic value they have gained on other markets, said people close to the development. Such bikes are often featured in local automobile magazines which are read by most bike enthusiasts, who are a target market.
“There will be fierce competition in coming time, so we are gearing up for that. the company is following top to bottom strategy to conenct to the youth,” said a senior official from India Yamaha . Besides, the company is firming up plans to enhance capacity at its existing plant in Uttar Pradesh and Haryana. “We have a order backlog of 10,000 every month and plans to debottle the manufacturing plant to cater to the growing demand ,” said the official. Currently it has the capacity to manufacture 3.5 lakh bikes, this can be ramped up to 8 lakhs.
Honda's exit from Hero depends on returns
A private equity (PE)-assisted buyout of Honda Motor Co. Ltd’s stake in motorcycle maker Hero Honda Motors Ltd hinges on the Indian promoters, the Munjal family, being able to guarantee returns once the new entity comes into being, said three persons familiar with the discussions, who did not want to be identified.
This return is determined by the discount the Munjals are willing to offer on the current share price to the PE firms. Hero Honda’s shares closed at Rs. 1,953 apiece on the Bombay Stock Exchange on Tuesday.
Japanese auto maker Honda’s 26% stake in the 26-year-old joint venture (JV), Hero Honda, is worth approximately $2 billion (Rs. 9,120 crore) at the company’s current market cap of Rs. 38,853 crore.
The negotiations, which could extend over the next 6-12 months, are aimed at narrowing the gap with valuations by PE funds, said to include Warburg Pincus Llc, Kohlberg Kravis Roberts and Co. and the Carlyle Group, the same persons said.
A Hero Honda spokesperson refused to comment, as did the PE investors, while a Honda spokesperson said he was not authorized to comment on the issue.
“Hero (the Munjal family) has to guarantee returns somehow,” said a senior official with a top consultancy firm familiar with the development. “The expected purchase will go through only if the Munjal family is able to guarantee results once the new entity comes into being.”
The same person said Honda’s evaluation of its 26% share “is on the table and unlikely to change. The Japanese party is sitting pretty. The terms being debated are by Hero and the PEs”.
Meanwhile, the structure of the deal is still being finalized, an investment banker familiar with the development has said. “Private equity funds, the only ones who can provide the kind of liquidity required for the purchase”, will be paying $500 million each. The person did not want to be identified.
“The promoters will borrow a further $500 million for picking up the remaining shares, which will be used as collateral in case the new entity fails,” the investment banker said.
Another detail being discussed is a non-compete agreement between the Indian and Japanese parties, said a management consultant familiar with the deal.
Meanwhile, Hero Honda, which is the market leader in two-wheeler sales, is facing an erosion in market share. In the quarter ended September, this fell to 52.9% from 60.4% in the same period last year, according to data from the Society of Indian Automobile Manufacturers.
Analysts say the firm is losing ground to Bajaj Auto Ltd, which re-entered the 100cc motorcycle segment in July 2009. It has also not been able to keep pace with the spurt in demand because of capacity constraints. Bajaj Auto’s market share increased to 34% from 29% a year earlier.
Honda’s exit from Hero is not the first such separation between Japanese and Indian partners. In 2000, Suzuki Motor Corp. pulled out of its JV with TVS Motor Co., which bought the 25.97% stake of the Japanese company for Rs. 9 crore, much lower than an estimated Rs. 52.4 crore it was worth based on the prevailing share price.
Honda has previously exited its JV with the Firodias and sold its stake in Kinetic Honda to the Indian promoter. LML had problems with Piaggio, resulting in the Indian promoter buying out the stake held by the Italian partner. Yamaha bought out its Indian partner’s stake in the Escorts Yamaha JV.
Both Suzuki and Honda are present in the Indian two-wheeler market through fully owned subsidiaries.
This return is determined by the discount the Munjals are willing to offer on the current share price to the PE firms. Hero Honda’s shares closed at Rs. 1,953 apiece on the Bombay Stock Exchange on Tuesday.
Japanese auto maker Honda’s 26% stake in the 26-year-old joint venture (JV), Hero Honda, is worth approximately $2 billion (Rs. 9,120 crore) at the company’s current market cap of Rs. 38,853 crore.
The negotiations, which could extend over the next 6-12 months, are aimed at narrowing the gap with valuations by PE funds, said to include Warburg Pincus Llc, Kohlberg Kravis Roberts and Co. and the Carlyle Group, the same persons said.
A Hero Honda spokesperson refused to comment, as did the PE investors, while a Honda spokesperson said he was not authorized to comment on the issue.
“Hero (the Munjal family) has to guarantee returns somehow,” said a senior official with a top consultancy firm familiar with the development. “The expected purchase will go through only if the Munjal family is able to guarantee results once the new entity comes into being.”
The same person said Honda’s evaluation of its 26% share “is on the table and unlikely to change. The Japanese party is sitting pretty. The terms being debated are by Hero and the PEs”.
Meanwhile, the structure of the deal is still being finalized, an investment banker familiar with the development has said. “Private equity funds, the only ones who can provide the kind of liquidity required for the purchase”, will be paying $500 million each. The person did not want to be identified.
“The promoters will borrow a further $500 million for picking up the remaining shares, which will be used as collateral in case the new entity fails,” the investment banker said.
Another detail being discussed is a non-compete agreement between the Indian and Japanese parties, said a management consultant familiar with the deal.
Meanwhile, Hero Honda, which is the market leader in two-wheeler sales, is facing an erosion in market share. In the quarter ended September, this fell to 52.9% from 60.4% in the same period last year, according to data from the Society of Indian Automobile Manufacturers.
Analysts say the firm is losing ground to Bajaj Auto Ltd, which re-entered the 100cc motorcycle segment in July 2009. It has also not been able to keep pace with the spurt in demand because of capacity constraints. Bajaj Auto’s market share increased to 34% from 29% a year earlier.
Honda’s exit from Hero is not the first such separation between Japanese and Indian partners. In 2000, Suzuki Motor Corp. pulled out of its JV with TVS Motor Co., which bought the 25.97% stake of the Japanese company for Rs. 9 crore, much lower than an estimated Rs. 52.4 crore it was worth based on the prevailing share price.
Honda has previously exited its JV with the Firodias and sold its stake in Kinetic Honda to the Indian promoter. LML had problems with Piaggio, resulting in the Indian promoter buying out the stake held by the Italian partner. Yamaha bought out its Indian partner’s stake in the Escorts Yamaha JV.
Both Suzuki and Honda are present in the Indian two-wheeler market through fully owned subsidiaries.
TVS launches TRU4 engine oil
Two wheeler manufacturer TVS Motor Company today launched semi-synthetic 4stroke engine oil 'TRU4 Premium' offering better fuel economy, longevity of engine life and lower emission levels.
TRU4 comes with higher standard of certification from Japanese Automotive Standards Organisation - JASO MA2 and American Petroleum Institute-API SL, TVS Motor Company said in a statement here.
TVS TRU4 Premium is blended with highly purified water-white, high viscosity index base oils. It uses an advanced formulation technology for extreme thermal conditions to establish superior thermal stability both at high and low temperatures, it said.
The product is available in one litre and 900 ml packs and is priced Rs 235 per litre, the statement added.
TRU4 comes with higher standard of certification from Japanese Automotive Standards Organisation - JASO MA2 and American Petroleum Institute-API SL, TVS Motor Company said in a statement here.
TVS TRU4 Premium is blended with highly purified water-white, high viscosity index base oils. It uses an advanced formulation technology for extreme thermal conditions to establish superior thermal stability both at high and low temperatures, it said.
The product is available in one litre and 900 ml packs and is priced Rs 235 per litre, the statement added.
Bajaj to add dealers, upgrade centres
Two-wheeler maker Bajaj Auto Ltd plans to add 130 new dealerships, largely in small towns, taking its total dealerships to 600, and upgrade 1,100 service centres over the next one year to meet its growth targets.
Mr S. Sridhar, President, Motorcycle Business, BAL said, “We are well-placed in terms of distribution as far as Pulsar – a premium brand, with an urban focus – is concerned. Discover, which is a mass commuter, has huge potential in the smaller towns.
“While its growth in terms of volumes and market share has been outstanding, the next big boost will come from increasing the share in these towns and in rural India which accounts for more than 50 per cent sales of this category. These new dealerships will help the company to increase the share that this model has in the smaller towns, which are today inadequately catered to by only the secondary network.”
The 10 proposed new dealerships in Maharashtra will be in Sagamner, Chalisgaon, Bhandara, Nagpur, Hingoli, Aurangabad, Icchalkaranji, Washim, Pune and Solapur.
Design focus
He added, “We are also working with a reputed international retail design agency to enhance the experience at our dealerships. The new showroom design will also incorporate the twin brand strategy of the company. This showroom upgradation plan will be implemented phase-wise across all our dealerships over the next year.” The company is simultaneously upgrading service centres to support the advanced technology used in Discover and Pulsar. “Around 1,100 service centres are being upgraded at an investment of more than Rs 18 crore,” Mr Sridhar said. A typical Bajaj dealership in these towns requires 1,800 sq. ft. of showroom space, 2,200 sq ft. of workshop space, and has potential to employ around 50 people.
Mr S. Sridhar, President, Motorcycle Business, BAL said, “We are well-placed in terms of distribution as far as Pulsar – a premium brand, with an urban focus – is concerned. Discover, which is a mass commuter, has huge potential in the smaller towns.
“While its growth in terms of volumes and market share has been outstanding, the next big boost will come from increasing the share in these towns and in rural India which accounts for more than 50 per cent sales of this category. These new dealerships will help the company to increase the share that this model has in the smaller towns, which are today inadequately catered to by only the secondary network.”
The 10 proposed new dealerships in Maharashtra will be in Sagamner, Chalisgaon, Bhandara, Nagpur, Hingoli, Aurangabad, Icchalkaranji, Washim, Pune and Solapur.
Design focus
He added, “We are also working with a reputed international retail design agency to enhance the experience at our dealerships. The new showroom design will also incorporate the twin brand strategy of the company. This showroom upgradation plan will be implemented phase-wise across all our dealerships over the next year.” The company is simultaneously upgrading service centres to support the advanced technology used in Discover and Pulsar. “Around 1,100 service centres are being upgraded at an investment of more than Rs 18 crore,” Mr Sridhar said. A typical Bajaj dealership in these towns requires 1,800 sq. ft. of showroom space, 2,200 sq ft. of workshop space, and has potential to employ around 50 people.
Two-wheeler capacities may touch 15 m next fiscal
Two-wheeler plant capacities across India are projected to be close to 15 million units in 2011-12, as manufacturers plan to go flat out in a buoyant market. This would translate into a 25 per cent jump from this fiscal, which is expected to close at a little over 12 million units.
Despite this impressive number, India is still behind China whose annual output of two-wheelers is in the range of 20 million units, but sources say that it is only a matter of time before the leadership equations change. “China is rapidly moving towards cars and bikes will see a gradual decline in the process. On the other hand, demand in India is literally growing by the day,” they add.
Hero Honda, Bajaj
In 2011-12, market leader, Hero Honda is expected to finalise the location of its fourth plant which means its overall capacity could end up being over 5.5 million units. Its closest rival, Bajaj Auto, has planned around 4.5 million units for its three plants, with three-wheelers taking up the balance 500,000 units.
TVS Motor Company and Honda Motorcycle & Scooter India could have around 4.5 million units between themselves. Other players like Mahindra, Suzuki and Yamaha are also planning to increase capacities though their combined numbers would be well under a million units.
While motorcycles continue to dominate the landscape, gearless scooters have been doing brisk business, too. The wave started in the mid-1980s with Kinetic Honda but since then, HMSI and TVS Motor have been the clear frontrunners in this product category. The Activa continues to be the market leader, while the recently introduced TVS Wego has caught the fancy of customers. M&M's scooters, likewise, have been averaging reasonable numbers each month.
Gearless scooters
Gearless scooters are the best option in chaotic traffic conditions and have ceased to be a gender-specific option as was the case decades ago when they first hit the roads. There is no question, though, that women have emerged a critical buyer base, which explains why top celebrities from Bollywood (Priyanka Chopra, Preity Zinta and Kareena Kapoor) endorse scooters from the stables of Hero Honda, TVS and M&M.
Relatively poor public transport in most Tier-2 and-3 centres has also prompted working women to go in for gearless scooters. The fact that cities are paying more attention to building better roads has helped improve connectivity and fuelled demand in the process.
In motorcycles, the executive commuter segment (Rs 40,000-45,000) continues to be the top seller, with monthly sales closer to the 4.5 lakh mark. The top brands here include the Splendor, Discover and Passion. Manufacturers believe that the near future could see more customers gravitating towards higher-end bikes such as the Pulsar, Unicorn and Apache which are priced upwards of Rs 60,000.
This possibly explains why companies like HMSI are bringing in bikes like the CBR 250cc which will retail at less than Rs 1.5 lakh and endeavour to build a new customer base. “India is the youngest market in the world for bikes and these buyers with higher aspiration levels are willing to spend more money,” an industry official said.
Despite this impressive number, India is still behind China whose annual output of two-wheelers is in the range of 20 million units, but sources say that it is only a matter of time before the leadership equations change. “China is rapidly moving towards cars and bikes will see a gradual decline in the process. On the other hand, demand in India is literally growing by the day,” they add.
Hero Honda, Bajaj
In 2011-12, market leader, Hero Honda is expected to finalise the location of its fourth plant which means its overall capacity could end up being over 5.5 million units. Its closest rival, Bajaj Auto, has planned around 4.5 million units for its three plants, with three-wheelers taking up the balance 500,000 units.
TVS Motor Company and Honda Motorcycle & Scooter India could have around 4.5 million units between themselves. Other players like Mahindra, Suzuki and Yamaha are also planning to increase capacities though their combined numbers would be well under a million units.
While motorcycles continue to dominate the landscape, gearless scooters have been doing brisk business, too. The wave started in the mid-1980s with Kinetic Honda but since then, HMSI and TVS Motor have been the clear frontrunners in this product category. The Activa continues to be the market leader, while the recently introduced TVS Wego has caught the fancy of customers. M&M's scooters, likewise, have been averaging reasonable numbers each month.
Gearless scooters
Gearless scooters are the best option in chaotic traffic conditions and have ceased to be a gender-specific option as was the case decades ago when they first hit the roads. There is no question, though, that women have emerged a critical buyer base, which explains why top celebrities from Bollywood (Priyanka Chopra, Preity Zinta and Kareena Kapoor) endorse scooters from the stables of Hero Honda, TVS and M&M.
Relatively poor public transport in most Tier-2 and-3 centres has also prompted working women to go in for gearless scooters. The fact that cities are paying more attention to building better roads has helped improve connectivity and fuelled demand in the process.
In motorcycles, the executive commuter segment (Rs 40,000-45,000) continues to be the top seller, with monthly sales closer to the 4.5 lakh mark. The top brands here include the Splendor, Discover and Passion. Manufacturers believe that the near future could see more customers gravitating towards higher-end bikes such as the Pulsar, Unicorn and Apache which are priced upwards of Rs 60,000.
This possibly explains why companies like HMSI are bringing in bikes like the CBR 250cc which will retail at less than Rs 1.5 lakh and endeavour to build a new customer base. “India is the youngest market in the world for bikes and these buyers with higher aspiration levels are willing to spend more money,” an industry official said.
Scooters post over 52% sales jump during Apr-Oct
New Delhi: Hamara Bajaj may have driven into the sunset believing that scooters are unviable business but the segment is proving the sceptics wrong, posting over 52 percent jump in sales in the first 7 months this fiscal over the same period last year.
According to Society of Indian Automobile Manufacturers (SIAM), the domestic scooter segment witnessed sales of 11,63,127 units during April-October, 2010-11 compared to 7,64,643 units in the year-ago period.
Repositioning of products, targeting new customer segments and entry of new players led by firms such as Honda Motorcycle & Scooter India (HMSI) has resulted in revival of the scooter market in the country.
"At one point, people had written off scooters. However, scooters have been repositioned and it has helped. It is doing exceedingly well by targeting a different segment of customers," SIAM Director General Vishnu Mathur said.
In October alone, the segment witnessed 104.27 percent jump in sales to 1,88,633 units compared to 92,346 units in the month last year.
Mathur said the demand from urban areas, mainly women and young people, is driving the robust revival of the scooter market.
During 2009-10, scooter sales in the domestic market stood at 14,62,507 units compared to 11,48,007 units in the previous fiscal, up 27.40 per cent.
The current market leader HMSI sold 5,20,466 units in the first 7 months of this fiscal, a jump of 35.41 percent over 3,84,369 units in the same period last year, SIAM said. The firm commands 44.75 percent market share at present.
"The latent demand for scooter was always there because of its utility value; it was a question of bringing the right product. When the scooter market was down, it needed a leader to revive the segment," HMSI Operating Head (Sales and Marketing) NK Rattan said.
In December 2009, Bajaj Auto had said that it would stop making scooters as it was no longer a viable business with motorcycles taking over the Indian two-wheeler market. However, industry observers say that HMSI and other companies may be proving Bajaj Auto's decision wrong as scooter sales continue to surge.
"By catering to different segments and by introducing new products and continuously upgrading them, we have played the role of leader in reviving the scooter market," Rattan said.
Chennai-based TVS Motor Co has registered 44.82 percent rise in scooter sales this fiscal at 2,54,812 units as against 1,75,953 units. It has a market share of 21.91 percent.
The country's largest motorcycle maker Hero Honda also witnessed 58.26 percent growth during April-October period in scooter sales to 1,76,950 units compared to 1,11,811 units. It commands market share of 15.21 percent.
"Scooter is a product whose time has come. Many other players have also come into the market and is helping in expanding the segment," Hero Honda Senior vice president (Marketing and Sales) Anil Dua said.
The company's scooter market is 70 per cent dominated by women as they find it more convenient, he added
According to Society of Indian Automobile Manufacturers (SIAM), the domestic scooter segment witnessed sales of 11,63,127 units during April-October, 2010-11 compared to 7,64,643 units in the year-ago period.
Repositioning of products, targeting new customer segments and entry of new players led by firms such as Honda Motorcycle & Scooter India (HMSI) has resulted in revival of the scooter market in the country.
"At one point, people had written off scooters. However, scooters have been repositioned and it has helped. It is doing exceedingly well by targeting a different segment of customers," SIAM Director General Vishnu Mathur said.
In October alone, the segment witnessed 104.27 percent jump in sales to 1,88,633 units compared to 92,346 units in the month last year.
Mathur said the demand from urban areas, mainly women and young people, is driving the robust revival of the scooter market.
During 2009-10, scooter sales in the domestic market stood at 14,62,507 units compared to 11,48,007 units in the previous fiscal, up 27.40 per cent.
The current market leader HMSI sold 5,20,466 units in the first 7 months of this fiscal, a jump of 35.41 percent over 3,84,369 units in the same period last year, SIAM said. The firm commands 44.75 percent market share at present.
"The latent demand for scooter was always there because of its utility value; it was a question of bringing the right product. When the scooter market was down, it needed a leader to revive the segment," HMSI Operating Head (Sales and Marketing) NK Rattan said.
In December 2009, Bajaj Auto had said that it would stop making scooters as it was no longer a viable business with motorcycles taking over the Indian two-wheeler market. However, industry observers say that HMSI and other companies may be proving Bajaj Auto's decision wrong as scooter sales continue to surge.
"By catering to different segments and by introducing new products and continuously upgrading them, we have played the role of leader in reviving the scooter market," Rattan said.
Chennai-based TVS Motor Co has registered 44.82 percent rise in scooter sales this fiscal at 2,54,812 units as against 1,75,953 units. It has a market share of 21.91 percent.
The country's largest motorcycle maker Hero Honda also witnessed 58.26 percent growth during April-October period in scooter sales to 1,76,950 units compared to 1,11,811 units. It commands market share of 15.21 percent.
"Scooter is a product whose time has come. Many other players have also come into the market and is helping in expanding the segment," Hero Honda Senior vice president (Marketing and Sales) Anil Dua said.
The company's scooter market is 70 per cent dominated by women as they find it more convenient, he added