Following the 20% stake acquisition in Suzuki (the parent group of Maruti Suzuki) by Volkswagen, the two giants have started looking at synergies. As expected, India is the prime market for this european – japanese tie-up and things have started unfolding. NDTV reports that Maruti may produce cars based on Ritz and new Wagon-R (2010) for Volkswagen and Skoda brands. Maruti will produce cars for Volkswagen group and re-badged as Volkswagen/Skoda. It adds that Volkswagen will also source DDIS (diesel) and K-series engine (petrol) for these cars. Going through the details, it lookalike Maruti – Nissan deal might be replicated (Maruti produces A-star for Nissan which is re-badged as Nissan Pixo and being sold across europe.)
Maruti to increase its production
Maruti Suzuki, which enjoys 50% of the Indian car market, is setting a new level to increase its production- 70000 units in 2010- to feed the demand. The utilization of employees in full swing and wiping out wasteful operations is the need of the hour, said its Executive Officer. The Manesar facility will be expanded to produce 2.5 lakh units per year before 2012 since the waiting for Swift [images] and Swift D’zire [images] has gone to even six months. However, the car market is to get a growth of 10-12% in this fiscal year. Already the company has the production capacity of 1 lakh and the increase will be by the same volume.
Maruti’s plants –one at Gurgaon and the other at Manesar -are in full potential, operating with 100% capacity utility, both having ability to deliver 8 lakh units together. Maruti has done an excellent export market- 1.4 lakh cars to Europe and it seeks the repeat of it this year. There is a possibility to phase out a favorite model in 2012 to be replaced by a new design in terms of body and interiors. The company is making a study on R&D for a CNG / LPG version of WagonR.
After Nano, it would be 800cc small car from Tata
The intermodel between Nano [images] and Indica [images] is to be offered by Tata in the form of a small car with 800cc. code named as Dolphin, it is expected to roll down in 2012 to be powered by an 800cc or 1000cc engine to set in the A2 segment(WagonR [images] and Hyundai i10 [images]). The pricing may be around R3.5 lakh and the company is still tightlipped about the proposal. Dolphin may roll down from a new platform as Indica comes in a 1.3lit diesel and a 1.1l petrol version while Nano got 663cc petrol engine. This A2 segment is the major segment having 70% of the country’s passenger cars, containing 20 various models of different makers.
Maruti Suzuki is the major player in this segment having 6 models whereas Tata has got just one. The segment gets much focus among the cars and the companies vie with one another to get their due share. Tata has one each in A2 segment(hatchback) and 2 vehicles in mid-size segment. Safari and Sumo [images] are the marks of utility vehicles. It is this gap needs to be filled by Tata with a possible small car. This segment may become void if Maruti recalls its 800 and Alto models in future.
Alto [images] sells like hot cakes now and the implementation of BS –IV norms has made Maruti to withdraw M800 [images] in 13cities and introduce Alto. The set up is temporary and Maruti may discontinue Maruti 800 at any time, a rare adieu to the 25 year old model. With the latest 1l engine there will be a new small car to replace Alto under 800cc category. Tata makes the launch of its small car on a slow pace and there is no clear indication of the car is available from the company source. In the meantime, the company’s share index rose by 1% at Rs844.45.
Maruti faces export decline to Europe
The present is not as potential as past for Maruti in the case of export sales to Europe. The earlier sale was due to the incentive offered on scrappage scheme for dispensing with old cars for new ones. Now the scheme is since withdrawn there is no point in lamenting the consistent sale. The decline accounts about 20-30% in this FY and the company pins on revival of sale soon as Europe is always a good market for Maruti , said its CEO and MD. In 2009-10 the company exported 1.2lakhs to Europe availing the incentive scheme.(Export market for Indian cars to face downhill task)
Maruti introduced Wagon R in the range of Rs3.38 – Rs3.97 lakhs and is the outcome of the latest platform utilized in Japan. Maruti has fit in BS-IV compliant 998cc K-series engine for this refined WagonR [images]. The car is getting 80% localization and the company intends to make it 100% soon. Maruti relies heavily on the K-series engines that it could muster a sale of 3 lakh engines thereby consolidating its position in the global automotive segment. K-series comes in two variants – 998cc 3-cylinder K10B (found in A-Star [images], Estilo [images], and the new WagonR) and 1.2 lit, 4-cylinder K12 M petrol engine which is fitted for Ritz [images], Swift [images] and Swift D’zire [images].
Honda Motorcycle Scooter company and Hero Honda likely to face crisis
This time the trouble visits Honda group of companies – Hero Honda and Honda Motorcycle and Scooter Ltd- with the suppliers facing problem by way of their labor strike. The major hitch is in the supply of battery , from Exide Industries Ltd, which faces problem in its Bawal factory. Hero Honda is exploring the alternative source by getting the required battery from other suppliers despite having stock of 5000-8000 units to be fitted with battery.(Honda’s second 2-wheeler unit in Raj at Rs 1,100 cr)
The factories of Hero Honda at Haryana and Uttarakhand have the capacity of 5.4 million vehicles. The factory of Honda Motorcycle is in Haryana and the companies are in a dirge to manage this crisis resulting with late deliveries. The source of battering the free flow is on the search for these two companies.
Fiat
Fiat is fixing a target of 130000 cars by the period reaching 2014, which is likely to include the new B-segment car(coming out in 2102), two models of Grande Punto [images] and Linea (C segment). The move is to hike the share of Fiat to 5% by 2014 at 2.6 million cars and utility vehicles. In the meantime there will be a modification in Linea [images] in 2013 costing Rs4 lakhs, to be the key driver of the future auto industry in India. Fiat is in association with Tata Motors for acquiring facility usage in Ranjangaon. By making use of this facility, Fiat is likely to come out with 60000 cars by the end of 2010-11.
Sources indicate that Fiat is eyeing on converting its plant in India as the global hub for small cars in the near future. Similar projects are projected for the markets of Russia and China, as Fiat enjoys the supremacy in Brazil with the target reaching the mark of one million cars and pick ups in 2014. This would make the share of Fiat in those markets to 24%. Russia and China will get Chrysler cars from Fiat, which the latter got the stake from the American company (in tie up with Daimler) at the time of recession in 2009. Russian market, according to the projections, would get 280000 vehicles (of which 50000 LCVs). There will be two sports utility vehicles – Grand Cherokee and Wrangler- in 2011, followed by a compact hatch in 2012, a compact sedan in 2013 and a large one in 2014. For the Chinese market, the target is 3 lakh vehicles for the next 5 years during the time there will be the rolling down of two Fiat C segment cars (in 2012 and 2013) followed by a D segment sedan in 2014.(Fiat’s small car @Rs3-3.5lakh in India next year)
Renault to invest in car engine facility in India
Not brooding over the financial instability, Renault is on the verge of setting up an engine facility in India. The proposed facility may come off near the company’s complex situated in Oragadam in Chennai. The move is to make free flow of engines and transmissions for the low profile Logan sedan which is to be under the control of M&M India. The move will further reduce the cost of the car when M&M would manufacture Logan on its platform. In normal practice, engine and transmission share 35-40% of the total cost of the vehicle. M& is currently getting engines and transmissions from Renault’s Romania and Spain units allied with the import levies.
The engines which M&M imports are of 1.4 lit and 1.6 lit diesel engines and 1.5 lit petrol engines. In the meantime, M&M has come out with a slash of Rs80000 on Logan though no technical modifications have been labeled on the car. Effective last week, M&M has got exclusive control of the JV Mahindra Renault Pvt Ltd. Subsequently, Renault will go ahead with manufacturing engines on its own specifications and M&M would procure such engines and transmissions for the refined Logan [image]. Renault thus will fulfill its mission of having an engine unit in India despite its financial instability, said its official. A final word about the proposed launch of this engine facility would be made public soon, he added. A normal engine facility may involve an investment of Rs900-1200crore based on the size of the facility.
Once the facility gets started it will feed engines to Renault, Nissan and M&M. of these companies, Renault and Nissan have the freedom to choose the engines of their choice along with the flexibility to tweak them. In addition these two companies are in the form of sharing the platform for making cars by saving costs. The plant in the South India costs Rs4500 crore investment with the production capacity of 4 lakh units a year. M&M will utilize the platform mainly for making Logan sedan by availing the technical know-how from Renault. M&M gets engines and transmissions from Renault’s Spain and Romania facilities by shelling mammoth import levies. Renault supplies 1.4 lit and 1.6 lit diesel engines and 1.5 lit petrol engine to M&M, which made M&M to slash the price of Logan by Rs80000. However, the vehicle does not undergo any technical modifications.
Renault is contemplating on initiating an engine facility in India and would like to source engines for Logan made by M&M. the financial crisis is no way connected to Renault’s move in this regard. The move by both Renault and M&M would end up in the reduction of the cost of the vehicle. The plant initiated by Renault would invite an investment of Rs4500 crore at an annual capacity of 4 lakh units.
Kawasaki launches India Kawasaki Motors
Kawasaki today officially entered the Indian market with the launch of its subsidiary called India Kawasaki Motors. India Kawasaki Motors is expecting its release of several supersport, sport and cruiser models primarily in the 250 cc class or greater to drive sales up to around 1,000 units in 2010. Kawasaki entered into a technical assistance agreement with Bajaj Auto Ltd. (BAL) in 1984. Under the agreement, BAL has produced and sold motorcycles in collaboration with Kawasaki. Kawasaki’s new imports and sales subsidiary, IKM will consign the production of CKD*1 motorcycles to BAL’s Chakan plant. The locally made motorcycles will then be sold together with imported complete motorcycles through BAL’s Probiking shops.
In 2009, motorcycle sales in India reached approximately 7.8 million units, making it the second largest motorcycle market in the world after China. The market for mid to large size motorcycles in the 201 cc class or greater (approximately 30,000 units) is expected to keep pace with India’s booming economic growth. Kawasaki will leverage the strong brand power of its mid to large size motorcycles in entering the Indian market.
Hero Honda face a threat from Bajaj in 100 cc race
The hot spell of summer is best reflected in the ongoing race between Hero Honda and Bajaj in the 100cc segment. The situation is quite contra to note that it was this segment from which Bajaj withdrew some time back. But the reverse gear from Bajaj has given it the reversal of fortune. Normally the major chunk of motorcycles is occupied by the below 125cc segment and the present tussle between Hero Honda and Bajaj is on the 100cc sector.
Hero Honda is still relying much on its Splendor and Passion brands while Bajaj could capitalize much on its Discover [images] and Pulsar [images] bikes. However, Hero Honda shares a majority in 125cc segment while Bajaj regains its lost momentum in 100cc with the launch of Discover. Hero Honda lost 6% from its 80% share accrued in the fiscal of 2008-09 while Bajaj increased almost similar volume – to 17% from 10.5% in the 125cc segment. Hero Honda secured an increased sale volume of 40.55lakh while Bajaj could muster a whooping 9.28 lakh units.
The industry analysts feel that the race in 100 cc segment is contra to the view that one company alone can dominate any specified segment. The trend gets reversed once the rivals introduce right product at right price. The trend, however, has not made any impact on Hero Honda, said its VP for sales and marketing. The company still enjoys good response for Splendor and Passion [images], which had the criticism as the old models. He added that the company is now and then refining the models and getting consistent sale volume. The recent increased sale volume of Bajaj with its Discover and Pulsar ranges irks Hero Honda. Bajaj secures a good profit and increased sale volume out of this 100 cc segment.
An alarming drive by Tata to overtake Hyundai
The status as the second largest car maker in India is on the peril for Hyundai. The other premier car maker Tata, whose Nano [images] is spreading the wave of popularity for the cheapest car, is on the verge of launching new plant at Sanand. The facility will start producing Nano in a week’s time with the capacity of 250000 units a year. This accounts for nearly 80% of the net sale of Hyundai last year fiscal. Tata has already got advance booking for 1 lakh Nanos and the operation of Sanand unit may take the company to the position of the second largest in another five years.(Nano from Sanand may roll out on the land’s Day)
Also in the small car fray would be Renault-Nissan (-Bajaj), Suzuki, and Toyota. Tata is fully aware that real profit will emulate from Nano only when the volume gets rise and the occasion is expected at the earliest, said the company official. The sad incident of two Nanos getting fire is no threat for Tata as the technicians are on the way tracing the flaw. Tata is now focusing on making the car as damage-control vehicle since the global view has considerably focused on this car. It is projected that by 2016, 1 million people may buy this Nano- which sold 30350 units during July-March this fiscal. Hyundai has the capacity of producing 600000 vehicles of bigger models from its Chennai factory.(Bajaj to launch cars on Renault platform)
The company is totally devoid of making any room for entering into the Nano segment, said its director. Tata has the blessings in the sensex index too with its share increasing to 809.4 rupees( an increase of 2.2%). At the time of announcement of Nano, Tata received advance bookings of 206703 units out of which 1 lakh customers were chosen by lot. The car has no radio nor airconditioner and has a single windshield wiper, costing Rs123,360 rupees (ex-showroom New Delhi). Tata secured a profit margin from Jaguar Land Rover, during the quarter ending December 2009. Tata got right of this car from Ford for $2.5 billion. The sale reversed the company’s image as to get rated B2 by Moody’s Investors Service.
By selling 20000 units of Nano every month, Tata foresees the increase in revenue so as to outcast Hyundai. Tata started selling cars from 1999 and got an increase of 26% in sale of vehicles(201399 units) in the fiscal year. That made the company the third largest passenger car maker, when Suzuki topped the list with 50% followed by Hyundai with 21%. The others in the fray in the small car segment are Ford and Volkswagen who target India and China to secure more income. China is the world’s largest auto market during 2009 when the sale hike by 49%.
The central bank estimate reveals that the sale of automobiles in India prompted to increase the economy with $1.2 trillion. From the start of this fiscal, it is expected, India will enjoy an increase of 8%. After Tata, the tripartite JV among Renault- Nissan-Bajaj is coming out with $3000 small car. The car is slated for manufacture in Maharastra plant at a capacity of 4 lakh units. Tata’s Nano has come a long way to reach the customers. The car is made in Pantnagar facility at 50000 units a year; Tata initiated the process of facility at Singur(West Bengal) which has to be abandoned due to the public protest. This followed with the unit at Sanand, which has the capacity of 5 lakh units with the man power of 10000. The facility is getting an investment of 20billion rupees for expansion, said the Chairman Ratan Tata. Tata’s Nano making the way, India will emerge as the most sought after market for cars, said the director of Helsinki-based Fim Asset Management.(Nissan pins on $3000 car in India)