TVS Motor, Sundaram Clayton to invest Rs. 770 crore in Hosur

TVS Motor and Sundaram Clayton Limited (SCL), part of the $5-billion TVS Group, together are planning to invest around Rs 770 crore in their facilities at Hosur in Tamil Nadu. A memorandum of understanding (MoU) to this effect is expected to be signed with the Tamil Nadu government shortly, according to sources. Meanwhile, TVS Motor has pumped an additional $5 million into its Indonesian subsidiary – PT TVS Motor Company, according to the Reserve Bank of India (RBI)'s data. When contacted, a TVS Motor Company spokesperson declined to comment saying that “the company is currently in a silent period.” Officials of Sundaram Clayton were unavailable for comment. SCL is one of the largest auto components manufacturing and distribution group in India. It is a leading supplier of aluminium die castings to the automotive and non-automotive sector. Recently, the company has said that it had received new orders from companies like Daimler and that the new orders accounted for 10-12 per cent of its total business. The company has witnessed good volume growth – from 32,000 tonne last year to 36,000 tonne this year. SCL has one plant at Hosur and two in Chennai. The proposed investment by the company will be for brown-field expansion, sources said. Investments by TVS Motor, the third-largest two-wheeler manufacturer in the country, will be for a brown-field expansion at Hosur, which will support its growth target of eight to 10 per cent for the whole year. The investment comes at a time when the company has lined up some new launches, including a 125-cc motorcycle during the July-August time frame. The company has reported a seven per cent growth in domestic sales during the month of April at 151,181 units, as against 141,619 units in April 2011. Total sales of the company grew four per cent in April 2012 with sales of 174,455 units, as against 167,744 units registered in April 2011

Suzuki may use Indian 2 wheeler unit as global export hub

Suzuki Motor Corporation may use India as an export hub for its mass segment two-wheelers, which has been launched by its Indian subsidiary Suzuki Motorcycle India Private Ltd (SMIPL). SMIPL National Head-Marketing Anu Anamika said here on Tuesday that “Yes, this is possible, but I cannot tell you which part of the country this would be located.” Ms. Anamika, who was here on the occasion of the launch of SMIPL's first mass segment motorcycle (in the 100-110cc category), The Hayate, said this in response to a question on this issue. Exports to neighbouring countries have already commenced from the Gurgaon plant and this is proposed to be stepped up in future with exports to Southeast Asian countries, too. The Gurgaon unit, on which a Rs.400-crore investment has been made since the company commenced operations at this unit in 2006, has an annual capacity of 3.6 lakh units (of scooters and motorcycles). This will be ramped up to 5.4 lakh units by 2013-14 when investment would increase to Rs.500 crore, according to Ms. Anamika. Indications were that by 2014-15, the capacity would be raised to 10 lakh units per annum. This may be through the setting up of a new unit at Rohtak where SMIPL shares space with Maruti Suzuki. SMIPL has a 22 per cent share in the Indian scooter market and 2 per cent in the motorcycle segment. Atul Gupta, Vice-President (Sales and Marketing), said that the 100-110 cc motorcycle market was a promising one and the launch of Hayate was an opportunity for addressing emerging markets in small-town clusters and in rural and semi-urban markets. Ms. Anamika said that a monthly sales target of 10,000 units had been fixed for Hayate and the dealership network would be doubled by 2014 to help fulfil this target.

Honda challenges Bajaj with low-cost, 110 cc motorcycle

New Delhi: Japan’s Honda Motor Co. Ltd, which ended a 26-year partnership with India’s Hero Group last year, has introduced the low-cost Dream Yuga in India to overtake local sales of the nation’s second-largest two-wheeler maker Bajaj Auto Ltd. Honda Motorcycles and Scooters India (HMSI), which introduced the 110cc Dream Yuga on Tuesday, expects its two-wheeler sales to rise 30% to 2.75 million units in the current fiscal, said Yadvinder Singh Guleria, operating head of sales and marketing at HMSI. “This kind of growth will be achieved by our new offering in the mass segment and other successful models.” In India, Bajaj Auto sold 2.56 million motorcycles in the year ended 31 March, registering a growth of 6.3% from a year earlier. Including exports, it sold 3.8 million units. The Indian two-wheeler industry is expected to grow at 11% in the current fiscal, according to Society of Indian Automobile Manufacturers’ forecast. At this rate, the Pune-based company will increase local sales to 2.85 million units. Bajaj Auto only sells motorcycles while more than 60% of HMSI sales come from scooters. “With Dream Yuga, the ratio of motorcycles versus scooters will be 50:50,” said Keita Muramatsu, president and chief executive of HMSI. “Honda is developing a low-cost motorcycle for the African market. But the product is not suited for introduction in India as customers here look for added features in motorcycles. We are working on introducing another product in the mass segment.” This would be the third motorcycle in the 100-110 cc segment in addition to the newly launched Dream Yuga and the existing CB Twister. The showroom price of the new motorcycle is Rs.44,642. “We don’t want to be in the rat race. That’s the reason why we stopped making some successful models. We don’t make cheap 100cc bike. We are in the volume game but not at any cost,” said Rajiv Bajaj, managing director, Bajaj Auto, on Honda Motorcycle’s new mass-segment bike. HMSI has a 13% market share in India. It trails behind Hero MotoCorp, which dominates the two-wheeler market with a 45% share, and Bajaj Auto Ltd, which has a 20% share. While Hero MotoCorp has the capacity to produce 6.4 million units a year, Bajaj’s capacity is 5.5 million units. The cumulative production capacity at HMSI’s three plants in India will reach four million units by the first half of next year. HMSI’s ambitious plans come at a time when inventory has piled up at its dealers and the company is offering discounts on it highest-selling model Activa, said an industry expert familiar with company’s plans. The expert did not want to be identified. Two HMSI dealers, present at the conference, also confirmed the inventory build-up and added that the dealers are offering a discount of as much as Rs.1,500. None of the dealers wanted to be identified. Guleria of HMSI agreed there is inventory at company’s dealerships. “But that is lower than the industry average,” he said. “As far as discounts are concerned, that might be happening at the dealer end. The company has nothing to do with that.” Guleria said that the company’s long-term target is to be the No.1 in India by 2020. HMSI aims to increase its contribution to its parent’s revenue from two-wheeler sales to 30% by 2020 from 13% in the last fiscal. “We have our capacity in place and have a wide range of products to offer,” Guleria said. “What we need to do is to increase our reach in the Indian market and connect with customers. That’s why we are launching a new brand campaign with a brand ambassador.” Mint reported this on 26 March. The company on Tuesday hired Bollywood actor Akshay Kumar as the brand ambassador for the company for the first time in the country. Targeted at the rural market, Honda’s campaign will be aired in all regional Indian languages with the company adopting its global tagline—Power of Dreams—for the first time in the Indian market. Currently, it uses this tagline for its car business in India. “We will be very aggressive in print and digital media,” said Guleria. “Besides, we will be taking the number of total dealerships to 2,000 in the future.” HMSI’s chief executive Muramatsu said that there is a systematic expansion plan in place, which will ultimately make India an export hub for Honda. “India will be the most important market and will continue to be in the focus for the next 10 years. We plan to manufacture most of the Honda products in India, not only for India but for the world,” Muramatsu said.

New Delhi: Japan’s Honda Motor Co. Ltd, which ended a 26-year partnership with India’s Hero Group last year, has introduced the low-cost Dream Yuga in India to overtake local sales of the nation’s second-largest two-wheeler maker Bajaj Auto Ltd. Honda Motorcycles and Scooters India (HMSI), which introduced the 110cc Dream Yuga on Tuesday, expects its two-wheeler sales to rise 30% to 2.75 million units in the current fiscal, said Yadvinder Singh Guleria, operating head of sales and marketing at HMSI. “This kind of growth will be achieved by our new offering in the mass segment and other successful models.” In India, Bajaj Auto sold 2.56 million motorcycles in the year ended 31 March, registering a growth of 6.3% from a year earlier. Including exports, it sold 3.8 million units. The Indian two-wheeler industry is expected to grow at 11% in the current fiscal, according to Society of Indian Automobile Manufacturers’ forecast. At this rate, the Pune-based company will increase local sales to 2.85 million units. Bajaj Auto only sells motorcycles while more than 60% of HMSI sales come from scooters. New Offering: Keita Muramatsu, president and chief executive of HMSI with Bollywood actor Akshay Kumar at the launch of a bike on Tuesday “With Dream Yuga, the ratio of motorcycles versus scooters will be 50:50,” said Keita Muramatsu, president and chief executive of HMSI. “Honda is developing a low-cost motorcycle for the African market. But the product is not suited for introduction in India as customers here look for added features in motorcycles. We are working on introducing another product in the mass segment.” This would be the third motorcycle in the 100-110 cc segment in addition to the newly launched Dream Yuga and the existing CB Twister. The showroom price of the new motorcycle is Rs.44,642. “We don’t want to be in the rat race. That’s the reason why we stopped making some successful models. We don’t make cheap 100cc bike. We are in the volume game but not at any cost,” said Rajiv Bajaj, managing director, Bajaj Auto, on Honda Motorcycle’s new mass-segment bike. HMSI has a 13% market share in India. It trails behind Hero MotoCorp, which dominates the two-wheeler market with a 45% share, and Bajaj Auto Ltd, which has a 20% share. While Hero MotoCorp has the capacity to produce 6.4 million units a year, Bajaj’s capacity is 5.5 million units. The cumulative production capacity at HMSI’s three plants in India will reach four million units by the first half of next year. HMSI’s ambitious plans come at a time when inventory has piled up at its dealers and the company is offering discounts on it highest-selling model Activa, said an industry expert familiar with company’s plans. The expert did not want to be identified. Two HMSI dealers, present at the conference, also confirmed the inventory build-up and added that the dealers are offering a discount of as much as Rs.1,500. None of the dealers wanted to be identified. Guleria of HMSI agreed there is inventory at company’s dealerships. “But that is lower than the industry average,” he said. “As far as discounts are concerned, that might be happening at the dealer end. The company has nothing to do with that.” Guleria said that the company’s long-term target is to be the No.1 in India by 2020. HMSI aims to increase its contribution to its parent’s revenue from two-wheeler sales to 30% by 2020 from 13% in the last fiscal. “We have our capacity in place and have a wide range of products to offer,” Guleria said. “What we need to do is to increase our reach in the Indian market and connect with customers. That’s why we are launching a new brand campaign with a brand ambassador.” Mint reported this on 26 March. The company on Tuesday hired Bollywood actor Akshay Kumar as the brand ambassador for the company for the first time in the country. Targeted at the rural market, Honda’s campaign will be aired in all regional Indian languages with the company adopting its global tagline—Power of Dreams—for the first time in the Indian market. Currently, it uses this tagline for its car business in India. “We will be very aggressive in print and digital media,” said Guleria. “Besides, we will be taking the number of total dealerships to 2,000 in the future.” HMSI’s chief executive Muramatsu said that there is a systematic expansion plan in place, which will ultimately make India an export hub for Honda. “India will be the most important market and will continue to be in the focus for the next 10 years. We plan to manufacture most of the Honda products in India, not only for India but for the world,” Muramatsu said.

Bajaj Auto plans Discover, Pulsar variants every year

Second largest two-wheeler maker Bajaj Auto plans to introduce a new variant of both its mainline brands Discover and Pulsar each year to boost sales and further add to the manufacturer’s sporty image. The Pune-based automaker continues to focus singularly on earning a fifth as profit on every motorcycle sold. It ruled out any further launches in the 100 cc to 110 cc mass segment claiming that the segment won’t allow the company to make such profits. New variants such as the Discover 125 ST (sports tourer) will go on sale from June, while the Pulsar 200 NS (naked sports) will go on sale in July, Rajiv Bajaj, managing director at Bajaj Auto, said on Monday. “Whether it is Pulsar, Discover or KTM, our aim is to move up the value chain while we keep on increasing our global market share. Its most important to ensure very good profitability,” Bajaj added. The two new products will be the first models derived from fresh platforms for both Discover and Pulsar and the upcoming variants will be rolled out using these platforms. The firm has ruled out any future products in the mass motorcycle segment except the Platina that it already sells currently, even as players such as Honda is slated to launch the 110-cc Dream Yuga on Tuesday, and Suzuki to launche the 110-cc Hayate later this month. The strategy also allows Bajaj Auto to distance itself from the market leader Hero MotoCorp that accounts for more than 80 per cent of models sold in the mass motorcycle segment. Bajaj Auto currently sells an average of 56,000 units Discover (110 cc to 135 cc) range every month and 85,000 units Pulsar (135 cc to 220 cc) apart from 50,000 units of 110 cc Platina. It also sells the 150 cc Boxer and KTM Duke 200 in comparatively smaller numbers. Bajaj, the third largest motorcycle maker globally by volumes behind Honda and Hero, plans to sell five million units including three wheelers and exports this financial compared with 4.35 million during 2011-12. With sales of 3.8 million motorcycles last financial year, Bajaj Auto’s market share stood at over 10 per cent of the 35 million plus global motorcycle market, he said.

Auto cos change gear to cut costs

Tamil Nadu’s newfound popularity among twowheeler investors may be the result of a new production strategy currently ruling the auto industry. Automobile companies are taking a leaf out of developed markets such as the US to look for a wider geographical spread while planning their plant locations. With transportation costs running as high as Rs 1,400 per motorcycle in some cases, producing from multiple locations not only saves cost but also ensures just-in-time and bottleneck-free movement of goods. “The southern markets command 30% share in twowheelers, the same as the north, while the west commands 35%,” said TVS MD Venu Srinivasan. “Having plants in multiple locations helps cut transportation costs and reduces chances of supply bottlenecks. It’s the same in America – once a state reaches critical mass, companies set up a new plant elsewhere to ensure wider spread.” In Chennai’s case, he said, a port facility for exports, skilled manpower and good industrial environment have all helped attract fresh investments, he added. Apart from the Rs 1,500-crore Yamaha announcement on Monday, Chennai has also attracted investments from the likes of Royal Enfield. Meanwhile two-wheeler market leader Hero Moto Corp is reportedly looking at a southern location – either Tamil Nadu or Karnataka – for its fourth plant though there’s no official confirmation yet. Company CFO Ravi Sud said at an analyst meet last week that the final announcement on the new plant could come in a couple of weeks. The attraction of the southern markets has also tied in with labour problems in the Gurgaon-Daruhera belt, the nerve centre of the two-wheeler industry. Labour has become prohibitively expensive in Gurgaon-Daruhera and it is also getting restive, said a top auto executive. Unsurprisingly, Hero Moto’s Haridwar plant now supplies the lion’s share of its soon-tohit 7 million units per annum total production, significantly higher than both Gurgaon and Daruhera. DERISK STRATEGY Auto companies set up more hubs to tap regional markets Spreading out factories means lowering of transport costs It also means fewer supply-chain bottlenecks Labour troubles get derisked Closer to a new market will better sales and marketshare

India Yamaha Motor to invest Rs 1,500 crore in new two-wheeler plant in Chennai

MUMBAI: India Yamaha Motor Pvt Ltd. plans to invest Rs 1,500 crore in a new two wheeler plant in Chennai over the next five years. The company on Monday signed an MoU with with the government of Tamil Nadu approving the construction and operation of a new two-wheeler factory in the state. The plant will kickstart operation in the beginning of 2014 and have an initial capacity of 4,00,000 units employing 1,800 people. The company can eventually scale up the production to 1.8 million units in phases by 2018. This expansion is part of the company's plans to achieve 2 million vehicle sales by 2016. Hiroyuki Suzuki, CEO & MD, India Yamaha Motor said, "We are very pleased with this development as this is in line with YMC's medium-term management plans of enhancing local production levels to meet the demand growth in emerging markets such as India and their export markets. The Indian two-wheeler industry has witnessed much growth in the last few years, attributable to increased disposable income levels among a rapidly expanding middle class. We expect the industry to attain 20 million units level by 2016 when we are targeting to sell 2 million units and achieve 10% market share." The company says, the aggressive introduction of new models in the 150cc+ deluxe & premium motorcycle segments have contributed to a strong growth in domestic sales and exports for India Yamaha Motor. Yamaha posted a 36% growth in 2011 by selling 5,20,000 units and for this year it is aiming at 23% growth and sell 6,40,000 units with an eventual goal of touching 1 million by 2013 and 2 million by 2016. To keep pace with this current growth in demand, plans have been implemented to boost the existing factory's annual production capacity of 600,000 units to One million units on an investment of approx. Rs 750 crore in 2012. With this new Chennai factory, India Yamaha Motor will have a combined two-wheeler production capacity of 2.8 million units by 2018. The new factory is to be constructed in Vallam Vadagal on the outskirts of the city of Chennai, Tamil Nadu with a total floor space of approx. 114,000 m2 and is scheduled to begin in September 2012.The new facility will join the currently operating factories of India Yamaha Motor Pvt. Ltd. (IYM) at Surajpur (UP) and Faridabad (Haryana) to meet the rising demand for two-wheelers in India. The new Chennai Factory will be the first in the Yamaha Motor group to have a "vendor park" in its nearby vicinity that will bring together the production operations of main external parts suppliers, thus enabling complete synchronization of external supplier parts production as well. This system will reduce losses in the areas of production management and distribution to extremely low levels in the overall engineering, manufacturing and marketing process, and make the new production base a highly efficient and profitable plant.