After years of recording gravity-defying growth, auto majors in India are finally feeling the heat. It’s no longer an easy zip on those hot wheels. Will the survival story be written soon? Pawan Chabra writes...
For long now, India and Indians have debated over the
repercussions of ever-increasing oil prices. There were two wheelers and four wheelers rolled out of the assembly lines all across the country and auto financers were running after prospective ‘drivers’ and ‘riders’, everywhere… Cheap funds, cheap bikes, cheaper cars (with that ‘interest’ string attached), but ‘expensive’ oil! That was the buzz around, and India was worried (and so were the Americans, of course!). It felt like wartime, with guns but no bullets, with automobile engines all around but perhaps no oil to vroom around! And the financials of the auto majors? Oh! They stood tall and pretty, prouder than bearing the ‘seal of the eagle’! Happy Capitalism was the dream word, but no more a reverie!
Then came the turmoil, and happy faces soon faded into the background; many of them belonging to the automaker community. And 4Ps B&M spoke, last issue (dated November 7 – November 20, 2008) through its cover feature titled, ‘Bechara Bajaj’ commenting on the deplorable 34% fall in sales figures (in units) reported for October 2008 as compared to the same month the previous year. We thought, it was just the ailing Bajaj (and hence ‘Bechara’) that was getting its pockets ripped apart by the recessionary jackals. But then came some more shockers – Hero Honda and TVS, the other two two-wheeler players also reported a fall in sales units over the previous year. And if that wasn’t enough to convince us all of the melancholic environment in their factories, the Society of Indian Automobile Manufacturers (SIAM) disclosed that sales figures for the entire auto industry (including the four wheeler giants) had plummeted by a 14.2% during the month of October 2008 (compared to the previous year). That meant a reduction in monthly sales by 145,817 units for the industry! And suddenly, it feels like the war times are back, with no guns available this time… Yes, oil prices have stabilized globally and there is good news everywhere when it comes to this ‘liquid gold’ at the moment. But there are cut downs reported all across the sector with players announcing reduction in production volumes… No engines, but oil… no guns, just bullets!!!
Undoubtedly, auto majors are not going through their best times and with problems like auto financing and constant input cost rise ailing the sector, the end of this dark tunnel is not yet within reach. So when will the sector bounce back? SIAM had projected a growth rate of 12-15% earlier this year. It was later revised to a more modest 8-10% in September, a figure which looks bloated witnessing what is happening all around at the moment, globally. “The economic slowdown and auto financing issues are the main reasons for the slump in the automobile sector. It happens with all sectors every 4-5 years, though the effect is very severe at this point,” asserts Vaishali Jajoo, Auto analyst, Angel Broking. The report released by SIAM for the month of October clearly showed that the units produced were higher than units sold for almost all major auto players like Bajaj, Maruti Suzuki and Hyundai. Indeed, the dry festive season has rubbed salt on their wounds. “By mid-October, it was clear that there is going to be a major fall in number of units sold of auto majors. The sales during Diwali were very disappointing this year,” says auto expert Murad Ali Baig.
So is the worst happening in India? Well, not really. The situation for auto players in India looks far better than in other global markets. As in the United States, the bailout package from the Fed and survival strategies for the auto majors has been the hottest topic of debate from the past many days.
The good news is that there are still some players in the Indian market which are insulated from the global heatstroke. Surprised? Sample this: Yamaha with the launch of its R15 and FZ16 made the most of this ‘rather cold summer for its competitors’ and successfully captured significant market share in the premium category (most of which was snatched away from Bajaj) even as a company spokesperson confidently assets, “Yamaha has launched the R15 and FZ16, and our commitment to provide international quality and lifestyle attributes of Yamaha brand to Indian consumers has enabled the company to rebuild the Yamaha brand in India.” And then there is Toyota Kirloskar which has made a rather lucky strike with its timely Corolla Altis attack. “The Altis has been able to achieve a market share of 47% in October 2008, thereby retaining the market leadership in the premium sedan segment,” asserts Sandeep Singh Dty. Managing Director, Marketing, Toyota Kirloskar Motors (TKM) Pvt. Ltd. The company considers this sl owdown as just a temporary lowdown and hopes that it will fade away in the mid-term. But while we say that Toyota has been able to ward off evil eye, it also doesn’t mean that it has been a happy ride for the company. Toyota has extended the time limit to attain a 10% market share in India by another 5 years i.e. from 2010 to 2015. Though, the company officials cite its disputes with the suppliers as the main reason behind the recent problems, yet we all know – it’s the slump in the sector that didn’t spare the rod as was evident when Vikram Kirloskar, Vice Chairman, Toyota Kirloskar confessed, “Demand is very weak in the market at present and tightening of interest rates have affected the auto market as a whole.”
For long now, India and Indians have debated over the
repercussions of ever-increasing oil prices. There were two wheelers and four wheelers rolled out of the assembly lines all across the country and auto financers were running after prospective ‘drivers’ and ‘riders’, everywhere… Cheap funds, cheap bikes, cheaper cars (with that ‘interest’ string attached), but ‘expensive’ oil! That was the buzz around, and India was worried (and so were the Americans, of course!). It felt like wartime, with guns but no bullets, with automobile engines all around but perhaps no oil to vroom around! And the financials of the auto majors? Oh! They stood tall and pretty, prouder than bearing the ‘seal of the eagle’! Happy Capitalism was the dream word, but no more a reverie!Then came the turmoil, and happy faces soon faded into the background; many of them belonging to the automaker community. And 4Ps B&M spoke, last issue (dated November 7 – November 20, 2008) through its cover feature titled, ‘Bechara Bajaj’ commenting on the deplorable 34% fall in sales figures (in units) reported for October 2008 as compared to the same month the previous year. We thought, it was just the ailing Bajaj (and hence ‘Bechara’) that was getting its pockets ripped apart by the recessionary jackals. But then came some more shockers – Hero Honda and TVS, the other two two-wheeler players also reported a fall in sales units over the previous year. And if that wasn’t enough to convince us all of the melancholic environment in their factories, the Society of Indian Automobile Manufacturers (SIAM) disclosed that sales figures for the entire auto industry (including the four wheeler giants) had plummeted by a 14.2% during the month of October 2008 (compared to the previous year). That meant a reduction in monthly sales by 145,817 units for the industry! And suddenly, it feels like the war times are back, with no guns available this time… Yes, oil prices have stabilized globally and there is good news everywhere when it comes to this ‘liquid gold’ at the moment. But there are cut downs reported all across the sector with players announcing reduction in production volumes… No engines, but oil… no guns, just bullets!!!
Undoubtedly, auto majors are not going through their best times and with problems like auto financing and constant input cost rise ailing the sector, the end of this dark tunnel is not yet within reach. So when will the sector bounce back? SIAM had projected a growth rate of 12-15% earlier this year. It was later revised to a more modest 8-10% in September, a figure which looks bloated witnessing what is happening all around at the moment, globally. “The economic slowdown and auto financing issues are the main reasons for the slump in the automobile sector. It happens with all sectors every 4-5 years, though the effect is very severe at this point,” asserts Vaishali Jajoo, Auto analyst, Angel Broking. The report released by SIAM for the month of October clearly showed that the units produced were higher than units sold for almost all major auto players like Bajaj, Maruti Suzuki and Hyundai. Indeed, the dry festive season has rubbed salt on their wounds. “By mid-October, it was clear that there is going to be a major fall in number of units sold of auto majors. The sales during Diwali were very disappointing this year,” says auto expert Murad Ali Baig.
So is the worst happening in India? Well, not really. The situation for auto players in India looks far better than in other global markets. As in the United States, the bailout package from the Fed and survival strategies for the auto majors has been the hottest topic of debate from the past many days.
The good news is that there are still some players in the Indian market which are insulated from the global heatstroke. Surprised? Sample this: Yamaha with the launch of its R15 and FZ16 made the most of this ‘rather cold summer for its competitors’ and successfully captured significant market share in the premium category (most of which was snatched away from Bajaj) even as a company spokesperson confidently assets, “Yamaha has launched the R15 and FZ16, and our commitment to provide international quality and lifestyle attributes of Yamaha brand to Indian consumers has enabled the company to rebuild the Yamaha brand in India.” And then there is Toyota Kirloskar which has made a rather lucky strike with its timely Corolla Altis attack. “The Altis has been able to achieve a market share of 47% in October 2008, thereby retaining the market leadership in the premium sedan segment,” asserts Sandeep Singh Dty. Managing Director, Marketing, Toyota Kirloskar Motors (TKM) Pvt. Ltd. The company considers this sl owdown as just a temporary lowdown and hopes that it will fade away in the mid-term. But while we say that Toyota has been able to ward off evil eye, it also doesn’t mean that it has been a happy ride for the company. Toyota has extended the time limit to attain a 10% market share in India by another 5 years i.e. from 2010 to 2015. Though, the company officials cite its disputes with the suppliers as the main reason behind the recent problems, yet we all know – it’s the slump in the sector that didn’t spare the rod as was evident when Vikram Kirloskar, Vice Chairman, Toyota Kirloskar confessed, “Demand is very weak in the market at present and tightening of interest rates have affected the auto market as a whole.”
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