Honda's sales numbers in November at 1.99 lakh motorcycles and scooters did not just catapult it to the third slot in the market after Hero MotorCorp and Bajaj Auto. It is the beginning of a new India strategy which will focus on a rapid product rollout at aggressive prices.
By March next year, Honda Motorcycle & Scooter India (HMSI) will commission its second production line at the newly commissioned Rajasthan plant. Along with the Manesar unit, the company's monthly output will then go up to 2.4 lakh units or nearly three million two-wheelers annually. This number will be sustained through 2012-13 by which time work on the third facility in Karnataka will have begun.
Reports have been doing the rounds that HMSI is already scouting for a fourth plant though this may seem a bit farfetched for the moment. It could well be a reality post 2014-15 when all three facilities – Haryana, Rajasthan and Karnataka – are at optimal production levels and rolling out over four million units annually.
Sources say Honda will be keen to prove a point after its recent split with the Hero Group which has, since, taken over the two-wheeler leadership mantle. The Japanese automaker has realised that quite unlike the 1980s, when it first entered the two-wheeler market (in two separate partnerships with the Firodias and Munjals), the landscape has changed considerably.
For one thing, local competition has just got a lot stiffer. Not only will it have to contend with its former ally, the Hero Group, but Bajaj Auto has also staged a strong comeback over the last two years. TVS Motor, likewise, would be keen to get back the third slot from HMSI.
Its global CEO, Mr Takanobu Ito, had referred to this in a recent presentation. “Today, key competitors in those (emerging) markets are Chinese and Indian makers. In order for Honda to remain a market leader, it must not only maintain the high attractiveness and quality of products but also further improve cost-competitiveness to match the low prices of these competitors,” he had said.
Rivals say Honda will pull out all stops to ensure that it emerges triumphs in the pricing game. Having been associated with the Hero Group for over two decades, it is not unaware of the fact that it will have to target the Splendor and Passion motorcycles to make a difference in the leadership game.
“The only way to do this is to offer a superior product at a lower price. Honda is a global company that can leverage economies of scale to make this a reality. It can afford to take a beating on its India bottomline quite unlike other locally listed companies,” an industry veteran told Business Line.
Hero MotoCorp, muthoot Pappachan Group tie up
Hero MotoCorp Ltd has tied up with Muthoot Capital Services Ltd (MCSL), a division of Muthoot Pappachan Group, to offer instant ‘Need based Financial Services' for its two-wheeler customers. The tie-up will enable Hero MotoCorp offer its products in the semi-urban and rural markets using the services of Muthoot Pappachan Group's retail outlets and dedicated manpower at every Hero MotoCorp Dealer/authorised outlets of Kerala, Tamil Nadu, Andhra Pradesh, Karnataka and Goa. MCSL and Hero MotoCorp Ltd will work closely to bring in operational efficiency, optimise the turn around time (TAT) and enhance customer satisfaction. The financing option will be offered to customers purchasing two-wheelers at the authorised Hero MotoCorp retail outlets on EMI under the innovative flexi repayment options.
Mr R. Balakrishnan, Vice-President of Muthoot Capital Services Ltd division, said the two-wheeler segments is picking up quite well despite the difficult market conditions, and the company is looking at having a decisive stake in this growing auto finance segment in this region.
Mr R. Balakrishnan, Vice-President of Muthoot Capital Services Ltd division, said the two-wheeler segments is picking up quite well despite the difficult market conditions, and the company is looking at having a decisive stake in this growing auto finance segment in this region.
Pulsar, now 10 helped bajaj ride to big league
36 months and Rs100 crore. That’s what took Bajaj Auto to develop the Pulsar.
And the seeds of a game-changer were sown for what was then India’s largest scooter maker.
Ten years ago, on November 23, 2001 to be precise, Bajaj launched Pulsar, marking its foray into the sports premium bike segment.
It was an enormous leap of faith for the company which was then betting on a segment that virtually had no volumes to
speak of.
Many people including the company’s own research firm had dissuaded Rajiv Bajaj, managing director, Bajaj Auto, from entering the segment as it was not expected to ring in volumes. Ten years ago, 150cc and above bikes were only 5% of the market with very few players offering them.
Also, for the first time, Bajaj was marketing a bike under the Bajaj brand. Before that all its motorcycles were co-branded with Kawasaki of Japan, with which it had a technical collaboration.
The bike was developed in-house by Bajaj Research & Development.
The stakes were also high because Bajaj Auto was in the process of shedding its image as a scooter maker and was making efforts to become a large player in motorcycles.
And the gamble paid off handsomely.
Pulsar went on to change the dynamics of the Indian motorcycle segment, which was then dominated by 100cc bikes, with Hero Honda firmly in the lead.
The bike firmly entrenched Bajaj as India’s second-largest motorcycle maker, with a dominant 45% share in the 150cc and above segment.
When Pulsar was launched, it was pitted against Hero Honda’s (now Hero MotoCorp) CBZ, which was at least Rs10,000 expensive than the Pulsar.
“Pulsar was a killer product for Bajaj Auto. There was a huge gap between the 100cc and the higher-end bikes. Pulsar filled the gap and killed all the products around it over the years,” said V G Ramakrishnan, director at Frost & Sullivan.
However Bajaj’s other bikes including Caliber, Caliber, Croma and Aspire did not really make a mark owing to the strong domination of Hero Honda.
“The brand Pulsar became synonymous for the high-powered sports bikes. It became an aspirational product for the youth. Whether it was styling or pricing, it was an attractive package that connected with the youth,” said Ramakrishnan.
In 2001-2002 the company sold on an average 1,000 units of Pulsar a month. Today it sells around 61,000.
“Pulsar is one product that worked well for the company. It showed company’s aggressiveness and at the same time garnered profits for Bajaj. Pulsar’s profitability was at least 6-8 times higher than the regular 100cc products available in the market,” said Mahantesh Sabarad, senior vice-president, equity research, Fortune Equities.
Bajaj Auto started with introducing two engine capacities for the Pulsar brand, which included 180cc and 150cc models. The company currently has four variants with engine capacities of 135cc, 150cc, 180cc and 220cc.
“Over the years we have introduced five upgrades. The only challenge for us was how do we beat the previous Pulsar model,” said R Chandrasekar, general manager, marketing and sales for Bajaj Auto.
The company is in the process of introducing a brand new Pulsar, which is expected to be launched in the Auto Expo in January.
“The new Pulsar will be 100% brand-new and will come with technology better than the current DTS-i. The new technology is the next level for motorcycles, not just the next level for Bajaj,” Rajiv Bajaj had said during the second-quarter results.
And the seeds of a game-changer were sown for what was then India’s largest scooter maker.
Ten years ago, on November 23, 2001 to be precise, Bajaj launched Pulsar, marking its foray into the sports premium bike segment.
It was an enormous leap of faith for the company which was then betting on a segment that virtually had no volumes to
speak of.
Many people including the company’s own research firm had dissuaded Rajiv Bajaj, managing director, Bajaj Auto, from entering the segment as it was not expected to ring in volumes. Ten years ago, 150cc and above bikes were only 5% of the market with very few players offering them.
Also, for the first time, Bajaj was marketing a bike under the Bajaj brand. Before that all its motorcycles were co-branded with Kawasaki of Japan, with which it had a technical collaboration.
The bike was developed in-house by Bajaj Research & Development.
The stakes were also high because Bajaj Auto was in the process of shedding its image as a scooter maker and was making efforts to become a large player in motorcycles.
And the gamble paid off handsomely.
Pulsar went on to change the dynamics of the Indian motorcycle segment, which was then dominated by 100cc bikes, with Hero Honda firmly in the lead.
The bike firmly entrenched Bajaj as India’s second-largest motorcycle maker, with a dominant 45% share in the 150cc and above segment.
When Pulsar was launched, it was pitted against Hero Honda’s (now Hero MotoCorp) CBZ, which was at least Rs10,000 expensive than the Pulsar.
“Pulsar was a killer product for Bajaj Auto. There was a huge gap between the 100cc and the higher-end bikes. Pulsar filled the gap and killed all the products around it over the years,” said V G Ramakrishnan, director at Frost & Sullivan.
However Bajaj’s other bikes including Caliber, Caliber, Croma and Aspire did not really make a mark owing to the strong domination of Hero Honda.
“The brand Pulsar became synonymous for the high-powered sports bikes. It became an aspirational product for the youth. Whether it was styling or pricing, it was an attractive package that connected with the youth,” said Ramakrishnan.
In 2001-2002 the company sold on an average 1,000 units of Pulsar a month. Today it sells around 61,000.
“Pulsar is one product that worked well for the company. It showed company’s aggressiveness and at the same time garnered profits for Bajaj. Pulsar’s profitability was at least 6-8 times higher than the regular 100cc products available in the market,” said Mahantesh Sabarad, senior vice-president, equity research, Fortune Equities.
Bajaj Auto started with introducing two engine capacities for the Pulsar brand, which included 180cc and 150cc models. The company currently has four variants with engine capacities of 135cc, 150cc, 180cc and 220cc.
“Over the years we have introduced five upgrades. The only challenge for us was how do we beat the previous Pulsar model,” said R Chandrasekar, general manager, marketing and sales for Bajaj Auto.
The company is in the process of introducing a brand new Pulsar, which is expected to be launched in the Auto Expo in January.
“The new Pulsar will be 100% brand-new and will come with technology better than the current DTS-i. The new technology is the next level for motorcycles, not just the next level for Bajaj,” Rajiv Bajaj had said during the second-quarter results.
Don't be surprised if growth rate slips below 7% next year
The signs were visible for a while, but reality has finally hit home. Worse, corporate India has almost resigned to the idea of a further slowdown ahead, in spite of the government’s predictable assurance that from here growth will begin to improve.
Some see clear signs of a slowdown where it would hurt the most – rural India. R Seshasayee, executive vice-chairman, Ashok Leyland, says: “This was totally unexpected. While ground realities have been pointing to this trend, demand was strong on the rural side. Had it continued like that, there would not have been any major problem. But now rural demand does not appear to be on a firm ground. In other words, demand is slowing down in the rural markets. This is significant.”
Seshasayee should know. Ashok Leyland, the second-largest commercial vehicle maker in India, has seen its sales fall by close to eight per cent from April to October. Ashok Leyland’s performance mirrors the industry’s performance. This year, the automobile sector has grown at a slower pace than last year. The growth rate stood at 12 per cent from April to October, compared to 30 per cent in the same period last year.
The trend is no different in other sectors of the core industry; mining, for example. “Low mining output, particularly of thermal coal, has significant implications on various manufacturing sectors, too.
Essentially, it’s been a vicious cycle. To be fair, severe monsoon and ban on iron ore mining in Karnataka have also had roles in pulling down mining output,” said Subhrakant Panda, MD, Indian Metals & Ferro Alloys Ltd.
Some see the full-year GDP growth at 7 per cent. “That is clearly not good enough and a cause for worry,” says Ficci President and Marico Chairman & Managing Director Harsh Mariwala.
Godrej Group Chairman Adi Godrej says the situation could worsen if the government does not hasten reforms like the Goods & Services Tax and the manufacturing policy or stay firm with FDI in retail. “Don’t be surprised if GDP growth is below the 7 per cent mark next year,” he says.
TVS Motors Chairman & Managing Director Venu Srinivasan thinks, going forward, manufacturing will remain in the low range of 2-3 per cent, impacting indirect tax collections. He sees the GDP growth closing at 7 per cent this year, and dipping to 6.7 per cent in the next.
India Inc is quick to point at the factors. H M Bharukha, managing director, Kansai Nerolac, says: “The monetary policy of the Reserve Bank of India has been a key contributor to the slowdown. Instead of taming inflation, it has actually impeded growth.” Godrej agrees, but says the inability to take decisions on key reforms has also impacted the sentiment.
In the last one year, there has been a logjam in Parliament over key issues ranging from 2G to price rise, corruption, and, now, FDI in retail.
This sense of policy paralysis has clearly hit the sentiment, with most in industry wondering whether they should make investments for the future or not. Add to this the worsening global economic scenario, most appear to have withdrawn steps to undertake major expansions for now.
While company executives have been cautious, saying they have put their plans on hold, some have suggested indirectly. Prabal Banerjee, CFO, Adani Power, says: “Rising cost of capital is not the only hindrance, even with capital markets, there is no chance of raising money. Money markets are tight, exports are affected. Globally, everything has been coming down.”
In the last 18 months, RBI has raised policy rates by 375 basis points, and, consequently, interest rates by around 250 basis points. The capital markets have been in a tailspin, with the key indices — BSE Sensex and NSE Nifty — in the red.
What is the way out? Industry captains propose that the government begin sending out positive signals that things are in control. “You have to somehow take the political parties all along or simply show that you are committed to reforms,” says Godrej.
“The government has to get back into the business transaction mode. Policy stances will have to be cleared and consensus has to be built on important issues pertaining to land acquisition, environment, coal mining, gas prices, among others,” says R Shankar Ram, chief financial officer, Larsen & Toubro.
Most say aggressive rate increases by RBI over the past 20 months to cool inflation have crimped industrial expansion, adding to the pressure from a gloomy global economy, which has hurt Indian exports. The slow pace of economic reforms and a series of graft charges against the government have further soured sentiments, hurting foreign investment.
The growth slowdown has also cemented the expectations that RBI will hold its policy rate steady at its next review on December 16, and may even begin to cut rates in the first half of next year.
SAIL Chairman C S Verma, is, however, more optimistic. “The dip is temporary. The GDP data cannot be compared on a quarterly basis. It must be compared on an annual basis to assess the actual growth .In our country, the projected investment in infrastructure for the 12th Plan is $1 trillion and this kind of investment has never been proposed before,” he says.
Ranjit Shahani, vice-chairman & MD, Novartis India, and president, Organisation of Pharmaceutical Producers of India (OPPI), says the spend on pharmaceuticals is non-discretionary. So, a fall in GDP from 7.7 per cent to 6.9 per cent is unlikely to make an impact. “However, if the GDP growth falls further —we hope it will not — some discretionary spend on over-the- counter products may reduce, as was the case in the US,” he adds.
Some see clear signs of a slowdown where it would hurt the most – rural India. R Seshasayee, executive vice-chairman, Ashok Leyland, says: “This was totally unexpected. While ground realities have been pointing to this trend, demand was strong on the rural side. Had it continued like that, there would not have been any major problem. But now rural demand does not appear to be on a firm ground. In other words, demand is slowing down in the rural markets. This is significant.”
Seshasayee should know. Ashok Leyland, the second-largest commercial vehicle maker in India, has seen its sales fall by close to eight per cent from April to October. Ashok Leyland’s performance mirrors the industry’s performance. This year, the automobile sector has grown at a slower pace than last year. The growth rate stood at 12 per cent from April to October, compared to 30 per cent in the same period last year.
The trend is no different in other sectors of the core industry; mining, for example. “Low mining output, particularly of thermal coal, has significant implications on various manufacturing sectors, too.
Essentially, it’s been a vicious cycle. To be fair, severe monsoon and ban on iron ore mining in Karnataka have also had roles in pulling down mining output,” said Subhrakant Panda, MD, Indian Metals & Ferro Alloys Ltd.
Some see the full-year GDP growth at 7 per cent. “That is clearly not good enough and a cause for worry,” says Ficci President and Marico Chairman & Managing Director Harsh Mariwala.
Godrej Group Chairman Adi Godrej says the situation could worsen if the government does not hasten reforms like the Goods & Services Tax and the manufacturing policy or stay firm with FDI in retail. “Don’t be surprised if GDP growth is below the 7 per cent mark next year,” he says.
TVS Motors Chairman & Managing Director Venu Srinivasan thinks, going forward, manufacturing will remain in the low range of 2-3 per cent, impacting indirect tax collections. He sees the GDP growth closing at 7 per cent this year, and dipping to 6.7 per cent in the next.
India Inc is quick to point at the factors. H M Bharukha, managing director, Kansai Nerolac, says: “The monetary policy of the Reserve Bank of India has been a key contributor to the slowdown. Instead of taming inflation, it has actually impeded growth.” Godrej agrees, but says the inability to take decisions on key reforms has also impacted the sentiment.
In the last one year, there has been a logjam in Parliament over key issues ranging from 2G to price rise, corruption, and, now, FDI in retail.
This sense of policy paralysis has clearly hit the sentiment, with most in industry wondering whether they should make investments for the future or not. Add to this the worsening global economic scenario, most appear to have withdrawn steps to undertake major expansions for now.
While company executives have been cautious, saying they have put their plans on hold, some have suggested indirectly. Prabal Banerjee, CFO, Adani Power, says: “Rising cost of capital is not the only hindrance, even with capital markets, there is no chance of raising money. Money markets are tight, exports are affected. Globally, everything has been coming down.”
In the last 18 months, RBI has raised policy rates by 375 basis points, and, consequently, interest rates by around 250 basis points. The capital markets have been in a tailspin, with the key indices — BSE Sensex and NSE Nifty — in the red.
What is the way out? Industry captains propose that the government begin sending out positive signals that things are in control. “You have to somehow take the political parties all along or simply show that you are committed to reforms,” says Godrej.
“The government has to get back into the business transaction mode. Policy stances will have to be cleared and consensus has to be built on important issues pertaining to land acquisition, environment, coal mining, gas prices, among others,” says R Shankar Ram, chief financial officer, Larsen & Toubro.
Most say aggressive rate increases by RBI over the past 20 months to cool inflation have crimped industrial expansion, adding to the pressure from a gloomy global economy, which has hurt Indian exports. The slow pace of economic reforms and a series of graft charges against the government have further soured sentiments, hurting foreign investment.
The growth slowdown has also cemented the expectations that RBI will hold its policy rate steady at its next review on December 16, and may even begin to cut rates in the first half of next year.
SAIL Chairman C S Verma, is, however, more optimistic. “The dip is temporary. The GDP data cannot be compared on a quarterly basis. It must be compared on an annual basis to assess the actual growth .In our country, the projected investment in infrastructure for the 12th Plan is $1 trillion and this kind of investment has never been proposed before,” he says.
Ranjit Shahani, vice-chairman & MD, Novartis India, and president, Organisation of Pharmaceutical Producers of India (OPPI), says the spend on pharmaceuticals is non-discretionary. So, a fall in GDP from 7.7 per cent to 6.9 per cent is unlikely to make an impact. “However, if the GDP growth falls further —we hope it will not — some discretionary spend on over-the- counter products may reduce, as was the case in the US,” he adds.
Look East policy for auto sector
It couldn't have been a worse year for Toyota and Honda, with a double blow of the tsunami in Japan and the flooding in Thailand. Both countries are supply hubs for a host of critical components, and operations across the globe, including India, were severely hit.
For many years, Thailand remained a key hub for these Japanese automakers in the ASEAN region, but this is slowly changing. Even before the tsunami and flooding, Indonesia was already on the radar as the new strategic pillar, while Honda has also zeroed in on Malaysia. Clearly, this decision has been motivated by the growing potential of these markets, as well as the imperatives of global platforms for the future.
FREE TRADE AGREEMENT
However, the Thai floods will add yet another dimension in prompting Toyota and Honda to build a new de-risk business model for the future, where Indonesia and Malaysia (along with Vietnam), will play an important role. It is here that the role of India comes under the scanner. Here is a country which, after China, is the next big thing in the automobile industry, along with Brazil and Russia. However, it is still, in a sense, divorced from the ASEAN region, largely because there is no full-fledged free trade agreement (FTA) in place.
Will this be a heavy price to pay in the future? Honda, for instance, already supplies car components from India to its plants in Malaysia and Thailand.
It plans to grow this business in the future, but clearly there are limitations from the viewpoint of logistics and freight costs. People believe there could be some cultural issues too, which could be an impediment. “For all we know, some of these countries wouldn't be too kicked regarding imports from India. The bonding just isn't there,” they say.
It is no secret that Japanese automakers have been trying hard for FTAs with India, simply because the overall costing structure, sans tariffs, works out to everyone's advantage. Yet, they also acknowledge that the Indian market, on its own, is a lot larger, which assures enough demand for their products. In addition, companies like Toyota are already planning to leverage the benefits here for their operations in Brazil for the Etios.
One wonders, though, if the Indian auto sector isn't losing out on some big opportunities in ASEAN, especially when Indonesia, Vietnam, and Malaysia are poised to take the lead from Thailand as the growth drivers of the future. Japanese automakers will increasingly look at higher platform synergies, and this is where India could play a big role as the ‘mother country', which supplies a host of critical components in the ASEAN region.
Ammar Master, Manager of the Thailand-based LMC Automotive (which specialises in vehicle forecasting and intelligence), agrees that India will benefit from closer trade relations with ASEAN. “FTAs are one way to achieve this, though I'm not certain if the countries here, with their own domestic automotive markets, will open the auto sector in a big way for India. While engines and transmission components are part of the early harvest scheme in the Indo-Thai FTA, I don't think this will be expanded further,” he says.
Companies like Nissan and Honda already have near-identical models in the form of the Micra and Brio, in India as well as in Thailand for its eco-car project. Toyota and Suzuki are poised to follow suit, though specific details still haven't been spelt out. Mitsubishi, likewise, could look for a similar play in both India and Thailand, which means the scope for supply of parts is immense. Once Indonesia and Vietnam join the fray, the sky will be the limit.
AUTOMOTIVE INDUSTRY
Master is of the view that India's automotive industry shouldn't wait for FTAs to expand its business in ASEAN. He believes ancillary suppliers have the quality, but perhaps not the capacity, to supply to automakers in this region.
“They may want to set up operations instead, which would allow them to circumvent the otherwise high import duties on non-ASEAN imports,” he says.
What cannot be wished away is the fact that Chinese automakers will also be gauging the situation carefully. SAIC Motor Corp, which is already gearing up for a big India play with General Motors, will next look at entering Thailand, Malaysia and Indonesia. This could be equally true for some other Chinese companies, which could expand operations in ASEAN and have a supplier base which will work on an aggressive costing structure. It is here that the Indian auto industry may need to be extra vigilant, and ensure it doesn't miss the bus.
Indonesia is clearly going to emerge a force to reckon with in the ASEAN automotive arena. According to Master, carmakers will now strive to find a balance in operations, both here and in Thailand.
This will also help as a de-risking model, so that a supply disruption in one location (as with the flooding in Thailand), can be supplemented by a second operation.
He cautions, though, that a lot of this will depend on the Indonesian government's stability and long-term investment policies. “For instance, Thailand's success hinges largely on stable investment policies, regardless of changes in government. This is perhaps why manufacturers remain confident in the country,” Master avers.
Vietnam could be the next big thing to happen, once it brings down its import duties to be at par with Thailand, Malaysia, Indonesia and the Philippines. This is expected to happen by 2018, which means Vietnam could emerge an important automotive market in ASEAN.
What does this integration among countries in Southeast Asia imply to India? There is no question that our automotive industry has the potential to offer a lot in the region, irrespective of FTAs. With Europe going through a crisis, and the US just beginning to show signs of recovery, India's automakers may want to start looking further southwards in Asia. It could also be a pragmatic de-risk model, especially when there is uncertainty all around.
For many years, Thailand remained a key hub for these Japanese automakers in the ASEAN region, but this is slowly changing. Even before the tsunami and flooding, Indonesia was already on the radar as the new strategic pillar, while Honda has also zeroed in on Malaysia. Clearly, this decision has been motivated by the growing potential of these markets, as well as the imperatives of global platforms for the future.
FREE TRADE AGREEMENT
However, the Thai floods will add yet another dimension in prompting Toyota and Honda to build a new de-risk business model for the future, where Indonesia and Malaysia (along with Vietnam), will play an important role. It is here that the role of India comes under the scanner. Here is a country which, after China, is the next big thing in the automobile industry, along with Brazil and Russia. However, it is still, in a sense, divorced from the ASEAN region, largely because there is no full-fledged free trade agreement (FTA) in place.
Will this be a heavy price to pay in the future? Honda, for instance, already supplies car components from India to its plants in Malaysia and Thailand.
It plans to grow this business in the future, but clearly there are limitations from the viewpoint of logistics and freight costs. People believe there could be some cultural issues too, which could be an impediment. “For all we know, some of these countries wouldn't be too kicked regarding imports from India. The bonding just isn't there,” they say.
It is no secret that Japanese automakers have been trying hard for FTAs with India, simply because the overall costing structure, sans tariffs, works out to everyone's advantage. Yet, they also acknowledge that the Indian market, on its own, is a lot larger, which assures enough demand for their products. In addition, companies like Toyota are already planning to leverage the benefits here for their operations in Brazil for the Etios.
One wonders, though, if the Indian auto sector isn't losing out on some big opportunities in ASEAN, especially when Indonesia, Vietnam, and Malaysia are poised to take the lead from Thailand as the growth drivers of the future. Japanese automakers will increasingly look at higher platform synergies, and this is where India could play a big role as the ‘mother country', which supplies a host of critical components in the ASEAN region.
Ammar Master, Manager of the Thailand-based LMC Automotive (which specialises in vehicle forecasting and intelligence), agrees that India will benefit from closer trade relations with ASEAN. “FTAs are one way to achieve this, though I'm not certain if the countries here, with their own domestic automotive markets, will open the auto sector in a big way for India. While engines and transmission components are part of the early harvest scheme in the Indo-Thai FTA, I don't think this will be expanded further,” he says.
Companies like Nissan and Honda already have near-identical models in the form of the Micra and Brio, in India as well as in Thailand for its eco-car project. Toyota and Suzuki are poised to follow suit, though specific details still haven't been spelt out. Mitsubishi, likewise, could look for a similar play in both India and Thailand, which means the scope for supply of parts is immense. Once Indonesia and Vietnam join the fray, the sky will be the limit.
AUTOMOTIVE INDUSTRY
Master is of the view that India's automotive industry shouldn't wait for FTAs to expand its business in ASEAN. He believes ancillary suppliers have the quality, but perhaps not the capacity, to supply to automakers in this region.
“They may want to set up operations instead, which would allow them to circumvent the otherwise high import duties on non-ASEAN imports,” he says.
What cannot be wished away is the fact that Chinese automakers will also be gauging the situation carefully. SAIC Motor Corp, which is already gearing up for a big India play with General Motors, will next look at entering Thailand, Malaysia and Indonesia. This could be equally true for some other Chinese companies, which could expand operations in ASEAN and have a supplier base which will work on an aggressive costing structure. It is here that the Indian auto industry may need to be extra vigilant, and ensure it doesn't miss the bus.
Indonesia is clearly going to emerge a force to reckon with in the ASEAN automotive arena. According to Master, carmakers will now strive to find a balance in operations, both here and in Thailand.
This will also help as a de-risking model, so that a supply disruption in one location (as with the flooding in Thailand), can be supplemented by a second operation.
He cautions, though, that a lot of this will depend on the Indonesian government's stability and long-term investment policies. “For instance, Thailand's success hinges largely on stable investment policies, regardless of changes in government. This is perhaps why manufacturers remain confident in the country,” Master avers.
Vietnam could be the next big thing to happen, once it brings down its import duties to be at par with Thailand, Malaysia, Indonesia and the Philippines. This is expected to happen by 2018, which means Vietnam could emerge an important automotive market in ASEAN.
What does this integration among countries in Southeast Asia imply to India? There is no question that our automotive industry has the potential to offer a lot in the region, irrespective of FTAs. With Europe going through a crisis, and the US just beginning to show signs of recovery, India's automakers may want to start looking further southwards in Asia. It could also be a pragmatic de-risk model, especially when there is uncertainty all around.
Honda Motorcycle zooms past TVS, takes No. 3 position
Less than a year after its parent company broke ties with the Hero Group, Honda Motorcycle and Scooter India (HMSI) has set off on a rather smooth ride. The Indian subsidiary of the Japanese auto giant has overtaken TVS Motors to become the number three player in the domestic two-wheeler segment for the first time ever.
According to November sales figures, while HMSI clocked domestic sales of close to 190,000 units, TVS Motors sold a little more than 150,000 units in the same month.
Hero MotoCorp (formerly Hero Honda Motors) remains the leader in two-wheeler sales with 45 per cent market share, followed by Pune-based Bajaj Auto, makers of the Pulsar brand of premium motorcycles.
With a flurry of new product launches, including economy bikes and scooters — both big and small capacity — and more fuel-efficient engines, Honda is looking to gain market share quicker than earlier expected.
The company, which makes the popular Activa automatic scooter and the Unicorn motorcycle, is confident of achieving sales of more than 2.1 million units this financial year. HMSI’s domestic sales grew to 189,454 units last month, an increase of 35 per cent compared to 140,059 units sold in the same month last year.
TVS Motors, meanwhile, has said its two-wheeler sales in the domestic market are expected to close at 2.04 million units in the current financial year, subject to macroeconomic factors. The Chennai-based company grew only eight per cent at 150,406 units in November, against 139,541 units sold during the same month previous year.
Naresh Rattan, vice-president, sale and marketing, HMSI, said, “Our aim is to provide the Indian buyers the best of products we have. What position we will gain in the market will only come later. The new capacity at Bangalore, where work has begun, will provide the added capacity boost.”
Honda, which wasn't able to add incremental capacity for more than a year as its existing capacity was running to full proportions, opened a new facility in Rajasthan, thus allowing it to add 1.2 million units in capacity.
In addition, the company is also spending Rs 1,350 crore on a new plant, which will come up near Bangalore and will bring 1.2 million units per annum in capacity. According to Honda officials, the Bangalore plant, which will open in the first half of 2013, will allow the company cover more areas affectively in various states. The southern markets contribute to about 30 per cent of the overall two-wheeler demand in the country.
Honda is also gearing up to enter the economy segment (100cc category) where market leader Hero MotoCorp has a stranglehold. It is readying to launch a 100cc bike, which will be showcased at the Auto Expo and will carry a price tag in the bracket of Rs 40,000-45,000.
Hero MotoCorp's top selling bike Splendor, which sells more than a million units every year, comes with a price tag of Rs 43,400 (ex-showroom, Mumbai). Industry sources say Honda aims to launch 3-4 new models of scooters and motorcycles next year. TVS Motors too is scripting a fight back. The Venu Srinivasan-led company has upped its production capacity by 33 per cent to 2.8 million units from 2.1 million units per annum, after spending Rs 200 crore. According to reports, TVS Motors is working on a new automatic scooter which is due for launch next year. The company, which currently has four scooters spread over two brands in its portfolio, trails HMSI in market share of automatic scooter at 21 per cent, compared to 45 per cent of the Japanese firm.
In addition a new motorcycle is also in the works and is due to hit markets in 2013. Meanwhile, new product developmental work on mopeds is also going on, according to a senior company official. TVS Motors is the only company in India which makes mopeds.
H S Goindi, President (Marketing), TVS Motor Company, said, "The installed capacity is sufficient to cater to the demand at the moment. As and when the market picks up and there is a requirement for additional capacity, we will look at it accordingly. We hope to launch new products in due course and will revert with details closer to the launch date".
According to November sales figures, while HMSI clocked domestic sales of close to 190,000 units, TVS Motors sold a little more than 150,000 units in the same month.
Hero MotoCorp (formerly Hero Honda Motors) remains the leader in two-wheeler sales with 45 per cent market share, followed by Pune-based Bajaj Auto, makers of the Pulsar brand of premium motorcycles.
With a flurry of new product launches, including economy bikes and scooters — both big and small capacity — and more fuel-efficient engines, Honda is looking to gain market share quicker than earlier expected.
The company, which makes the popular Activa automatic scooter and the Unicorn motorcycle, is confident of achieving sales of more than 2.1 million units this financial year. HMSI’s domestic sales grew to 189,454 units last month, an increase of 35 per cent compared to 140,059 units sold in the same month last year.
TVS Motors, meanwhile, has said its two-wheeler sales in the domestic market are expected to close at 2.04 million units in the current financial year, subject to macroeconomic factors. The Chennai-based company grew only eight per cent at 150,406 units in November, against 139,541 units sold during the same month previous year.
Naresh Rattan, vice-president, sale and marketing, HMSI, said, “Our aim is to provide the Indian buyers the best of products we have. What position we will gain in the market will only come later. The new capacity at Bangalore, where work has begun, will provide the added capacity boost.”
Honda, which wasn't able to add incremental capacity for more than a year as its existing capacity was running to full proportions, opened a new facility in Rajasthan, thus allowing it to add 1.2 million units in capacity.
In addition, the company is also spending Rs 1,350 crore on a new plant, which will come up near Bangalore and will bring 1.2 million units per annum in capacity. According to Honda officials, the Bangalore plant, which will open in the first half of 2013, will allow the company cover more areas affectively in various states. The southern markets contribute to about 30 per cent of the overall two-wheeler demand in the country.
Honda is also gearing up to enter the economy segment (100cc category) where market leader Hero MotoCorp has a stranglehold. It is readying to launch a 100cc bike, which will be showcased at the Auto Expo and will carry a price tag in the bracket of Rs 40,000-45,000.
Hero MotoCorp's top selling bike Splendor, which sells more than a million units every year, comes with a price tag of Rs 43,400 (ex-showroom, Mumbai). Industry sources say Honda aims to launch 3-4 new models of scooters and motorcycles next year. TVS Motors too is scripting a fight back. The Venu Srinivasan-led company has upped its production capacity by 33 per cent to 2.8 million units from 2.1 million units per annum, after spending Rs 200 crore. According to reports, TVS Motors is working on a new automatic scooter which is due for launch next year. The company, which currently has four scooters spread over two brands in its portfolio, trails HMSI in market share of automatic scooter at 21 per cent, compared to 45 per cent of the Japanese firm.
In addition a new motorcycle is also in the works and is due to hit markets in 2013. Meanwhile, new product developmental work on mopeds is also going on, according to a senior company official. TVS Motors is the only company in India which makes mopeds.
H S Goindi, President (Marketing), TVS Motor Company, said, "The installed capacity is sufficient to cater to the demand at the moment. As and when the market picks up and there is a requirement for additional capacity, we will look at it accordingly. We hope to launch new products in due course and will revert with details closer to the launch date".
Duke Power
Nothing succeeds like success. In the first six months since its launch in Europe, the new KTM 125 Duke four-stroke single-cylinder entry-level hotrod has sold no less than 9,370 examples. The 125 Duke is manufactured in India by KTM’s partner (and 39.30 per cent shareholder) Bajaj Auto. It has proved that the shrewd gamble made by KTM president Stefan Pierer and his colleague Rajiv Bajaj in developing such a bike is paying off. Big time.
For the duo’s dare in producing a range of cool, affordable, entry-level bikes which, in showcasing the youthful KTM brand image, will help attract the next generation of European riders to choose motorcycling over other forms of leisure pursuit, has so far proved a smart move. KTM and Bajaj intend to hook youngsters to motorcycles and one can only do that by getting them on the bikes to begin with. And then, keeping them riding, preferably with KTM, as they progress through life and up the capacity scale.
Creating the 125 Duke has successfully addressed that objective in terms of KTM’s most youthful entry-level target group, which has developed as a result of the new EU regulations which allow 16-year-olds to ride 125 cc bikes with a maximum horsepower of 15 bhp. But it is interesting that KTM dealer statistics abroad show an even 50/50 split in 125 Duke buyers between 16-18 year-old customers and those over 18. This shows the concept works for older riders, too — perhaps including returnees to two wheels, or car drivers who want something cooler and more fun than a scooter to convert to. In any case, the new, downsized Duke has been the first fruit, in terms of hard product, of the link between the second-largest motorcycle manufacturers in both India and Europe, which has been progressively strengthened since November 2007 when Bajaj Auto took an initial 14.5 per cent stake in KTM.
But now the time has come to introduce the next model in KTM’s growing family of made-in-India street singles. The 200 Duke, which made its debut at the EICMA Show in Milan in November, has been developed in parallel with the 125 version. “From the beginning it was clear that the 200 Duke would be made for the Indian and other developing markets, where the 125 is not so interesting, because there isn’t the low-power legislation that we have in Europe,” says Andreas Wimmer, KTM’s project leader for all street singles. “So we developed both models in tandem, using a common platform, so that the chassis and almost all the running gear are shared by both bikes, and the engine is essentially the same, with a few tweaks.”
Could be — but there’s only one way to find out, and that is to take the keys of one of the pre-production prototypes and head off on an exclusive 100 km first ride on KTM’s muscled-up mini-mono through the hills and valleys surrounding its Mattighofen factory. Like the 125, this bigger-engine variant was primarily developed in India on the basis of an Austrian design, with input from KTM engineers in Mattighofen. This took place in Bajaj Auto’s own magnificent, standalone, 165-acre Akurdi R&D setup 20 km north of its Pune HQ — a facility fully on par in terms of size, facilities and technology with, for example, Harley-Davidson’s Capitol Drive Product Development Centre in Milwaukee.
To produce the 200 Duke’s liquid-cooled twin overhead cam four-valve single-cylinder motor, robustly engineered for durability as well as performance, the Bajaj-KTM R&D team bored and stroked the 125 cc for a capacity of 199.5 cc. The resulting step up in output from the 125’s Euro-strangled 15 bhp peak output at 9,500 rpm to the new 200 Duke’s 26 bhp, delivered at higher peak revs of 10,000 rpm, already produces a significant increase in power that transforms the KTM junior hotrod into a serious piece of riding kit. However, it’s not that a 73 per cent hike in horsepower alone makes the 200 motor so much more fun. It’s the commensurate 68 per cent lift in torque from the 125’s slightly weedy 1.2 kgm at 8,000 rpm, to the 200’s considerably more muscular 2 kgm at the same revs.
Indian motorcyclists will be happy with KTM’s provisional fuel consumption figures for the two bikes, claimed to be an already frugal 34.5 kmpl for the 125, and 30 kmpl for the 200 in spite of the larger 38 mm Dell’Orto throttle body, compared to the 125’s 33 mm unit. So, 12 per cent more fuel consumption for around 70 per cent more power and torque, and the bikes weigh the same. Sounds like a good tradeoff to me.
But this liquid-cooled KTM four-stroke single motor is built in Pune, not Mattighofen. The Bosch ECU is well mapped, also made in India by a subsidiary of the German firm, and no longer limits top speed to 100 kmph, as on the 125. That motor is installed once again as a semi-stressed component in an identical trademark trellis frame to the 125, still with relatively conservative steering geometry.
The 43 mm upside-down forks were developed by WP in Austria, but are made in India by their suspension partners Endurance. There’s a 150 mm cushion of wheel travel at both ends, to cope with rough road conditions in key target markets, and even though non-adjustable, the full-size front suspension gives added visual substance to the entry-level package. However, the rear direct-action shock that’s the product of the same partnership is adjustable for spring preload, to allow for a passenger or luggage. The good-looking black-painted, Chinese-made Jingfi wheels carry a single 300 mm ByBre steel disc up front gripped by a radially mounted four-piston calliper, with a single-piston rear gripping the 230 mm rear brake. In case you wondered — yes, ByBre is the Indian division of a certain Italian brake manufacturer, as in By Brembo!
The 200 Duke’s potential customers in India, Brazil, and South-east Asia who will be receiving deliveries first, and for whom street cred will be vital, can rest assured that the KTM will very definitely be the local mass-market king of the road. But when customers in developed markets — first Europe, then elsewhere — get hold of the bike, they will find that beneath the iconic Kiska Design styling it is a full-size motorcycle (the 1,350 mm wheelbase is proof of this), with the substantial 810 mm high seat, incorporating space for a passenger, delivering a pretty natural-seeming riding stance that’s comfortable even for a 6 ft-tall rider. Another Indian connection is the 17-inch tyres, 110/70R17 front and 150/60R17 rear radials fitted as standard, specially developed for the Dukes by MRF.
Oh, and the distinctive, sonorous, great-sounding exhaust note that you hear when you thumb the electric-start button to bring the Duke’s twincam engine to life is just icing on the cake. Definitely deeper than the 125’s, it makes the cubed-up 200 Duke sound potent and rorty. As it is.
Production of the 200 Duke will commence early in January at Bajaj Auto’s Chakan factory, with deliveries to Indian customers beginning toward the end of that same month. European models (minus any sari-guard, front numberplate, or other Asian-market idiosyncrasies) will be available with dealers from April onward. And with KTM and Bajaj already hard at work on the 350 Duke, due to be launched a year from now and to enter production early in 2013, the steps up the staircase to single-cylinder streetbike sales supremacy are continuously being carved. And once again, the Austro-Indian partners have created the kind of bike that nobody else can offer right now — complete with chameleon cool, but now with added zest.
For the duo’s dare in producing a range of cool, affordable, entry-level bikes which, in showcasing the youthful KTM brand image, will help attract the next generation of European riders to choose motorcycling over other forms of leisure pursuit, has so far proved a smart move. KTM and Bajaj intend to hook youngsters to motorcycles and one can only do that by getting them on the bikes to begin with. And then, keeping them riding, preferably with KTM, as they progress through life and up the capacity scale.
Creating the 125 Duke has successfully addressed that objective in terms of KTM’s most youthful entry-level target group, which has developed as a result of the new EU regulations which allow 16-year-olds to ride 125 cc bikes with a maximum horsepower of 15 bhp. But it is interesting that KTM dealer statistics abroad show an even 50/50 split in 125 Duke buyers between 16-18 year-old customers and those over 18. This shows the concept works for older riders, too — perhaps including returnees to two wheels, or car drivers who want something cooler and more fun than a scooter to convert to. In any case, the new, downsized Duke has been the first fruit, in terms of hard product, of the link between the second-largest motorcycle manufacturers in both India and Europe, which has been progressively strengthened since November 2007 when Bajaj Auto took an initial 14.5 per cent stake in KTM.
But now the time has come to introduce the next model in KTM’s growing family of made-in-India street singles. The 200 Duke, which made its debut at the EICMA Show in Milan in November, has been developed in parallel with the 125 version. “From the beginning it was clear that the 200 Duke would be made for the Indian and other developing markets, where the 125 is not so interesting, because there isn’t the low-power legislation that we have in Europe,” says Andreas Wimmer, KTM’s project leader for all street singles. “So we developed both models in tandem, using a common platform, so that the chassis and almost all the running gear are shared by both bikes, and the engine is essentially the same, with a few tweaks.”
Could be — but there’s only one way to find out, and that is to take the keys of one of the pre-production prototypes and head off on an exclusive 100 km first ride on KTM’s muscled-up mini-mono through the hills and valleys surrounding its Mattighofen factory. Like the 125, this bigger-engine variant was primarily developed in India on the basis of an Austrian design, with input from KTM engineers in Mattighofen. This took place in Bajaj Auto’s own magnificent, standalone, 165-acre Akurdi R&D setup 20 km north of its Pune HQ — a facility fully on par in terms of size, facilities and technology with, for example, Harley-Davidson’s Capitol Drive Product Development Centre in Milwaukee.
To produce the 200 Duke’s liquid-cooled twin overhead cam four-valve single-cylinder motor, robustly engineered for durability as well as performance, the Bajaj-KTM R&D team bored and stroked the 125 cc for a capacity of 199.5 cc. The resulting step up in output from the 125’s Euro-strangled 15 bhp peak output at 9,500 rpm to the new 200 Duke’s 26 bhp, delivered at higher peak revs of 10,000 rpm, already produces a significant increase in power that transforms the KTM junior hotrod into a serious piece of riding kit. However, it’s not that a 73 per cent hike in horsepower alone makes the 200 motor so much more fun. It’s the commensurate 68 per cent lift in torque from the 125’s slightly weedy 1.2 kgm at 8,000 rpm, to the 200’s considerably more muscular 2 kgm at the same revs.
Indian motorcyclists will be happy with KTM’s provisional fuel consumption figures for the two bikes, claimed to be an already frugal 34.5 kmpl for the 125, and 30 kmpl for the 200 in spite of the larger 38 mm Dell’Orto throttle body, compared to the 125’s 33 mm unit. So, 12 per cent more fuel consumption for around 70 per cent more power and torque, and the bikes weigh the same. Sounds like a good tradeoff to me.
But this liquid-cooled KTM four-stroke single motor is built in Pune, not Mattighofen. The Bosch ECU is well mapped, also made in India by a subsidiary of the German firm, and no longer limits top speed to 100 kmph, as on the 125. That motor is installed once again as a semi-stressed component in an identical trademark trellis frame to the 125, still with relatively conservative steering geometry.
The 43 mm upside-down forks were developed by WP in Austria, but are made in India by their suspension partners Endurance. There’s a 150 mm cushion of wheel travel at both ends, to cope with rough road conditions in key target markets, and even though non-adjustable, the full-size front suspension gives added visual substance to the entry-level package. However, the rear direct-action shock that’s the product of the same partnership is adjustable for spring preload, to allow for a passenger or luggage. The good-looking black-painted, Chinese-made Jingfi wheels carry a single 300 mm ByBre steel disc up front gripped by a radially mounted four-piston calliper, with a single-piston rear gripping the 230 mm rear brake. In case you wondered — yes, ByBre is the Indian division of a certain Italian brake manufacturer, as in By Brembo!
The 200 Duke’s potential customers in India, Brazil, and South-east Asia who will be receiving deliveries first, and for whom street cred will be vital, can rest assured that the KTM will very definitely be the local mass-market king of the road. But when customers in developed markets — first Europe, then elsewhere — get hold of the bike, they will find that beneath the iconic Kiska Design styling it is a full-size motorcycle (the 1,350 mm wheelbase is proof of this), with the substantial 810 mm high seat, incorporating space for a passenger, delivering a pretty natural-seeming riding stance that’s comfortable even for a 6 ft-tall rider. Another Indian connection is the 17-inch tyres, 110/70R17 front and 150/60R17 rear radials fitted as standard, specially developed for the Dukes by MRF.
Oh, and the distinctive, sonorous, great-sounding exhaust note that you hear when you thumb the electric-start button to bring the Duke’s twincam engine to life is just icing on the cake. Definitely deeper than the 125’s, it makes the cubed-up 200 Duke sound potent and rorty. As it is.
Production of the 200 Duke will commence early in January at Bajaj Auto’s Chakan factory, with deliveries to Indian customers beginning toward the end of that same month. European models (minus any sari-guard, front numberplate, or other Asian-market idiosyncrasies) will be available with dealers from April onward. And with KTM and Bajaj already hard at work on the 350 Duke, due to be launched a year from now and to enter production early in 2013, the steps up the staircase to single-cylinder streetbike sales supremacy are continuously being carved. And once again, the Austro-Indian partners have created the kind of bike that nobody else can offer right now — complete with chameleon cool, but now with added zest.