Auto Monitor - 18 February 2013

Auto Monitorwww.amonline.in18 February 2013Vol. 13 No. 04 24 Pages `50

I N D I A ’ S N O . 1 M A G A Z I N E F O R A U T O M O T I V E N E W S , V I E W S & A N A LY S I S

Top 5 Car Makers

Company Jan-12 Jan-13 Change

Maruti 1,01,047 1,03,026 1.96%

Hyundai 33,900 34,302 1.19%

M&M 22,444 29,334 30.70%

Tata Motors 40,213 23,915 -40.53%

TKM 17,395 13,329 -23.37%

Top 5 Car Exporters

Company Jan-12 Jan-13 Change

Hyundai 16,001 17,722 10.76%

Maruti 14,386 11,179 -22.29%

Nissan 14,403 8,454 -41.30%

Toyota 0 1791 #DIV/0!

Ford 1,649 1,053 -36.14%

* Source: SIAM/ ** Excluding exports/ *** all sub segments considered/ ^ excluding MRPL

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As pressure mounts on the automotive industry, the honchos in the business are pinning all hopes

on the upcoming union budget. However, the finance minister has a tough task ahead narrow-ing the fiscal deficit down as well as boosting the mood of the com-mon man, who remains perturbed by the rise in cost of living.

The automotive industry expects radical change in policy, which will at least revive some of the severely hurt segments. “We need immediate interven-tion from the government”, said Sugato Sen, a senior official at Society of Indian Automobile Manufacturers (SIAM). While the government must also make an effort to improve its own sink-ing popularity, maligned by a

series of scams, giving away too much to the industry may hurt its mission to deal with increas-ing deficit. The fiscal deficit between April and December 2012 was $76 billion. A recent report from Japanese brokerage firm Nomura has warned that India’s savings rate may dip to a decades’ low 27 percent in FY12-13.

According to the same report the domestic savings rate, which touched a high of 36.9 per cent in 2007-2008, fell to 30.8 per cent of GDP in FY 11-12, down from 34 per cent in 2010-11. The report further said that the cur-rent account deficit may touch 5 percent in FY12-13. Considering the situation, radical changes in government policy to support the industry seem unlikely. But it will certainly get some respite to help build the long-term environment.

The government cannot ignore the automotive industry because

it is one of the frontrunners of the manufacturing sector, and con-tributes around 22 percent of the country’s manufacturing GDP -- although it is a little behind the target of 25 percent of total man-ufacturing GDP. While the recent policy rate cuts announced by RBI and partial de-regulariza-tion of diesel have given reasons for hope, some also feel that sud-den fluctuations in policy may put off investors. “We need to have a stable policy. What if a sudden change in the diesel policy proves adverse to those who wanted to invest in diesel engine plants? We need to have a long term policy,” said Mohit Arora of J D Power.

The automobile industry is labour-intensive, and is thus one of the major job providers. The government itself, under its Automotive Mission Plan, expects the industry to provide employ-ment to over 25 million people by

2016. The automobile retail indus-try, which includes unorganized mechanics, dealers, motor insur-ers, etc., provides employment to over 3.5 million people.

The apex body of automo-bile manufacturers, SIAM, recently handed over a list 16 demands from the union budg-et which will help the industry. The demands include the long pending introduction of GST across all states, sharing of draft modalities and procedures in advance, and subsuming all indirect tax, R&D cess and octroi in the proposed GST to prevent a cascading effect. Taxation of used vehicles should be cov-ered, and taxes such as road tax should be subsumed under GST. Currently, taxes on cars (includ-ing all types) range between 57 percent and 82 percent.

Almost a year after its global debut, Honda has launched the fourth generation of its premi-

um SUV, CR-V in India. Honda has priced the SUV aggressively offering a 2.0 litre manual vari-ant at ̀ 19.95 lakhs (ex-showroom Delhi). Honda will assemble locally the CKD kit in Thailand to take advantage of the FTA, thus allowing the company to price the CR-V aggressively. The new CR-V is almost `2 lakh cheaper than the outgoing model, variant by variant. “Since the FTA permits only reduction of duty, we will still need to incur the logistics costs. And having taken that into consideration, we have based the pricing,” said Hironori Kanayama, President & CEO,

Honda Cars India Ltd. He believes that this strategy has enabled Honda to offer both price benefit and additional value to custom-ers this time round. Clarifying that the reduction in prices of the CR-V wasn’t a factor of the FTA he elaborated, “I’m not sure of the percentage but most of the kit is coming from Thailand. However, this is not the main reason for the pricing factor. A lower duty on CKD makes it feasible for us.” Honda seems to have learnt from its previous mistakes of over-stocking cars in anticipation of sales that has even forced the company at times to offer dis-counts to attract buyers. In the last 10 years of CR-V’s stint in India, Honda has sold 13,739 units which is well over 1,000 units per annum, a relatively moder-ate self-set target for Honda for the 4th generation CR-V in India. Kanayama said, “We are looking

at about 1,000 cars per annum and will make cars as per demand.” While the CR-V in Europe is pow-ered by a 2.2 litre diesel motor, Honda is clear it has no plans to offer a diesel engine with the new CR-Vs. “As per Honda’s market study,” Jnaneshwar Sen Senior VP, Sales and Marketing,

Honda Car India Ltd, believes “that only five percent of the SUV market is powered by pet-rol engines (going by last year’s data) but aggressive pricing and additional value will be the man-tra for CR-V’s success in India.”

Hopes Pinned On The Budget

4th Gen Honda CR-V For `19.95 Lakh

The automobile industry is counting on the upcoming Union Budget 2013 to revive flagging sales.

Takes CKD route; no diesel on offer

Nabeel A Khan New Delhi

Jagdev Kalsi New Delhi

Pg 08 Pg 10

Maintaining Competitiveness A Major Challenge

Bridgestone India Opens Chakan Plant

NEWS NEWS

Contd. on Pg 16

Contd. on Pg 16

By this time, most companies have declared their Q4 results. Some have fared well, others poorly. Generally, there is a certain level of depression in the market. Whatever the efforts, some manufacturers

have not been able to sell as well as they did. There’s a general inclination to blame the poor market conditions prevailing across the globe.

And realizing the sorry state of the industry, various asso-ciations and industry bodies affiliated with the auto industry have suddenly started coming to their rescue. Demands are being made on behalf of the companies. SIAM has called for government intervention in the form of reduction in excise duties in the Budget and special schemes for commercial vehicles under Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to boost the sector. Similarly, Heavy Industries and Public Enterprises Minister Praful Patel plans on making a separate set of demands to the Finance Minister P Chidambaram to suggest a stimulus to revive the sector.

While most agree that some impetus needs to be given the industry, most OEMs are seeking a growth trend. They are spending millions on launching new products and worry about phasing out older ones. Most times because they have

not caught on. And we are not talking only of the passenger car segment.

OEMs are also hopeful that the government will take some initiatives to improve investment and infrastructure. A gen-eral level of improvement for people will also be beneficial.

The feeling that we get is, while the Budget will not ignore the automotive industry, it will definitely alleviate the sus-pense. Meanwhile, next week we will give you a detailed outline of the sort of demands that the industry is making.

Time For Demands

QUOTESPhilippe Varin, CEO, PSA/Peugeot-Citroen Dan Akerson, Chairman and CEO, General Motors Co.

Peugeot cars will be upgraded to differentiate them more from Citroen models and average volume will double through the automaker’s alliance with General Motors.

This year our priorities will be executing flawless new vehicle launches, controlling costs and delivering more vehicles to our customers at outstanding value.

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Bridgestone India Opens Chakan Plant 10The Chakan facility will have the capacity to produce 10,000 passenger car radials, and 3,000 bus and truck radials once it becomes completely operational.

Tata Motors Bags Defence Contracts 10Tata Motors to supply 6x6 multi-axle vehicle to mount radar equipment for Indian Air Force

CONTENTS

Small Is Big For Infor 12The world’s largest automotive ERP systems provider is targeting small and medium enterprises in India for its customised ERP solutions.

Go Local To Combat Downturn 14Care Report: Sourcing locally will help combat low auto demand; strong vehicle population will augment replacement market demand.

Suzuki Reports A Good Quarter 16Following a good quarter, Suzuki has forecast strong consolidated operating results for the full year.

Challenges & Opportunities II 18The second and concluding part of our series on electric vehicles.

A New Ice Age? 09SIAM forecasts a decline in automotive sales for 2013. A first since 2003.

NEWSMaintaining Competitiveness A Major Challenge 08The recently concluded Automechanika exhibition saw panel discussions on labour problems, countering counterfeits, and a few product launches.

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22THE OTHER SIDE

Hironori Kanamaya, President and CEO of Honda Cars India Ltd. Mr. Hironori Kanayama has been associated with Honda almost four decades, having started his career at Honda Motor Company Ltd., Tokyo, Japan in 1976. He has worked with Honda ventures in China, Taiwan and Japan, and has spent significant years in China.

Trend in turnover

Source: ACMA & CARE Research

Raw MaterialSuppliers

TraditionalComponentSuppliers

BatterySuppliers

Infrastructure/Utilities

OEMS

Auto Monitor

N E W S818 FEBRUARY 2013

One of the biggest chal-lenges facing the manufacturing sec-tor in general, and

the automotive industry in particular, is availability of man-power at a competitive price, said Soumitra Bhattacharya, Joint Managing Director, Bosch Ltd, on the sidelines of ACMA Automechanika, New Delhi 2013. He was responding to a query about the repeated strikes and labour related disruptions at automobile and auto component manufacturing facilities across the country.

Many seminar participants during the seminars organ-ised at ACMA Automechanika New Delhi 2013 pointed out that urgent attention needs to be paid to the disturbing labour scenario before it gets out of hand. In addi-tion to loss of confidence in India

as a competitive manufactur-ing destination, such instances of labour strife can also lead to higher manufacturing costs and re-evaluation of investments flows into India.

“The instances of labour unrest have the potential of damaging India’s reputation as a competitive manufacturing loca-tion. The major worrying factor is that the labour productivity

is unlikely to rise commensu-rately with wages,” said Surinder Kanwar, Chairman & Managing Director, Bharat Gears Ltd, and President, Auto Component Manufacturers Association of India (ACMA).

Another dominant theme at the recently held ACMA Automechanika New Delhi, the trade show dedicated to the auto-component aftermar-ket, was the campaign against counterfeit spare parts in the automotive aftermarket. ACMA’s Bhattacharya stressed the important of making fake spare parts distribution a cognisable and non-bailable offence in order to create sufficient deterrence for the aftermarket dealers.

ACMA also released a two-volume survey-cum-study on the Indian automotive aftermar-ket covering the latest trends, factsheets, and outlook on the aftermarket in India. While unveiling the publication, Vinnie

Mehta, Executive Director, ACMA, said that a key concern for the players in the Indian automotive aftermarket was the gap in the information flow and growing threat of spurious parts. ACMA is actively seeking co-operation from organisations like Automechanika to spread awareness and share knowledge on the best practices in counter-ing the menace of counterfeits.

The trade show was organ-ised from 7 – 10 February 2013 at Pragati Maidan, New Delhi, and brought together leading auto component manufacturers and service equipment manufactur-ers and dealers. It covered parts and systems, accessories and tuning, tyres and batteries, repair and maintenance, IT and man-agement, service station and car wash, and the latest automobile services. Around 250 exhibitors from 12 countries gathered for the show, spread over 9,500 sq m of exhibition space.

Our Bureau New Delhi

Maintaining Competitiveness A Major ChallengeThe recently concluded Automechanika exhibition saw panel discussions on labour problems, countering counterfeits, and a few product launches.

“A show like ACMA Automechanika New Delhi is very important for the entire automo-tive sector, which is equivalent to 22 percent of India’s manufacturing GDP,” said Praful Patel, Union Minister of Heavy Industries during his inaugural address. He also emphasised the need for the automotive industry to maintain its edge as a cost competitive destination in the global context.

“ACMA’s reach within the Indian auto compo-nent and the aftermarket, and Messe Frankfurt’s experience of organising international trade fairs makes this an ideal partnership”, said Michael Johannes, Vice President, Brand Management Automechanika, Messe Frankfurt Exhibition GmbH.

A key theme at the show was organisers ACMA and Messe Frankfurt’s effort to combat counterfeiting of auto components. ACMA has established a campaign dubbed ‘Asli-Naqli’, while Messe Frankfurt‘s global initiative ‘Messe Frankfurt Against Copying’ provided global assistance in ensuring the intellectual property of the fair’s exhibitors and spread awareness on the benefits of using genuine auto components.

ACMA will also mobilise participation and business delegations to Automechanika’s twelve other worldwide fairs held in Asia, Europe, North America, South America, and Africa, according to an official from the organising committee.

As an integral part of the trade show, the seminar aimed at helping attendees understand current and future trends in the aftermarket industry, as well as examine the challenges and opportunities the sector has to offer. As the aftermarket services sector has evolved, the distribution channels necessary to meet buyer needs have grown accordingly, in tune with evolving market forces and changing consumer preferences.

Some of the key highlights of the exhibition were product launches by domestic and inter-national exhibitors. These included BASF’s Glysantin range of automotive radiator cool-ant, EuroLUB GmbH’s new EUROLUB Additive Program, Aisin kicking off its aftermarket oper-ation in India, PCL-SUMO’s N2 Generator cum inflator in its new nitrogen inflator range, and Benara Udyog ‘s launch of brake disc pads for cars and two/three wheelers.

Auto Monitor

N E W S 918 FEBRUARY 2013

For the first time since 2003, car sales in India may post a negative growth in 2013, according

to a Society of Indian Automobile Ma nu f a c t u r er s ( SI A M ) report. The Medium & Heavy Commercial Vehicle (M&HCV) segment has already been huge-ly impacted by the slowdown of the past few quarters, and in the last three months passenger car sales have also followed suit and moved south. Seeing the trend, we fear passenger car sales may register negative growth,” Vishnu Mathur, Director General, SIAM, told Auto Monitor.

Dipping further into the red for the worst performance in ten years, car sales declined by (-) 12.5 percent to 1,73,420 units in January, its third consecutive slide, and the fifth in six months.

SIAM has been making nega-tive revisions of sales projections since July last year. The apex body of vehicle makers last month pro-jected a 0-1 percent growth for car sales this fiscal, from 1-3 per

A New Ice Age?SIAM forecasts a decline in automotive sales for 2013. A first since 2003. Nabeel A Khan reports.

cent and 9-11 percent announced in October and July 2012, respectively. Last April it had forecast a growth of 10-12 percent for 2012-13.

Passenger car sales have remained in the negative from August 2012 (-18. 56 percent com-pared to the same month in the previous year) to January 2013, except for October, 2012 (please see table). The Utility Vehicle (UV) segment grew by 87 percent in October and 69 per-cent in November, moderating to 41 percent in December. The moderating trend continued in January 2013, with the UV segment growing only 40 percent compared to the same month previ-ous year.

Last week SIAM further downgraded projec-tions for the entire industry, including passenger cars. While the Utility Vehicle segment, which was growing above 50 percent in past months began moderating last month, cars sales fell by (-) 2.1 percent in 2012-13. Commercial vehicles have been continuously recording double-digit negative growth for the past few months. The Two Wheeler “bellwether” segment has also been moderating. Growth in this segment has fallen to 3.27 percent in January. The segment remained north only due to high sales in the scooter seg-ment. “The situation can get better only with government intervention,” Mathur said.

SIAM seeks immediate action from the gov-ernment for the recovery of the M&HCV segment, which has been posting continuous negative growth since March 2012. The segment has shrunk by over 30 percent in the last three months.

Domestic SalesOverall growth in domestic sales during April-

January 2013 was 4.66 percent over the same period last year. In January 2013, overall sales grew only by 5.31 percent over January 2012.

The Passenger Vehicles segment grew 6.80 percent during April-January 2013 over the same period last year. Passenger Cars declined by (-) 1.80 percent, Utility Vehicles grew by 56.87 percent, and Vans grew by 2.63 percent during April-January 2013, as compared to the same period last year. However, in January 2013 pas-senger car sales further declined by (-) 12.45 percent over January 2012. Total passenger vehi-cles sales also declined by (-) 4.62 percent in January 2013 over the same month last year.

The Commercial Vehicles segment registered an overall decline of (-) 0.37 percent in April-January 2013 as compared to the same period last year. While Medium & Heavy Commercial Vehicles (M&HCVs) declined by (-) 21.37 percent, Light Commercial Vehicles grew 15.48 percent. In January 2013, M&HCVs sales further declined by (-) 38.96 percent over January 2012.

Three Wheelers sales grew by 5.10 percent in April-January 2013. Passenger Carriers grew by 9.07 percent during April-January 2013 and Goods Carriers registered a decline of (-) 10.09 percent during this period.

Two Wheelers registered a growth of only 4.53 percent dur-ing April-January 2013. Scooters, mopeds, and motorcycles grew by 17.76 percent, 2.44 percent and 1.43 percent respectively over same period last year. However, in January 2013 scooters, motor-

cycles, and mopeds grew by 12.24 percent, 7.45 percent and 8.26 per-cent, respectively.

ExportsDuring April-January 2013,

overall automobile exports reg-istered a fall of (-) 3.01 percent

compared to the same period last year. Passenger Vehicles grew by 7.79 percent, while the other segments like Commercial Vehicles, Three Wheelers, and Two Wheelers fell by (-)10.51 percent, (-) 18.97 percent, and (-) 2.43 percent respectively. In

January 2013 Passenger Vehicles and Commercial Vehicles declined by (-) 13.53 and (-) 46.94 percent respectively. The Two and Three Wheelers seg-ment grew only marginally, by 1.26 percent and 1.00 percent respectively.

Category Year April May June July Aug Sep Oct Nov Dec Jan Feb March

Passenger Cars 2011-12 13.52 7.32 1.96 -15.30 -9.74 -1.48 -23.18 7.85 9.80 8.33 13.12 19.662012-13 4.22 3.48 8.28 6.71 -18.56 -5.36 23.09 -8.25 -12.51 -12.45

UVs 2011-12 6.63 3.16 1.64 13.37 10.02 12.86 -0.23 32.39 25.53 15.69 30.04 33.632012-13 50.18 57.68 44.81 61.57 70.53 50.89 87.74 69.45 41.11 40.68

MPVs 2011-12 38.41 23.53 28.42 14.39 6.70 10.86 -17.57 -8.29 -11.62 14.15 25.34 10.002012-13 6.74 -16.09 -18.58 -21.31 3.58 16.71 30.12 15.67 29.06 -5.91

PV 2011-12 14.42 8.19 4.03 -9.10 -5.87 1.43 -19.87 8.98 9.86 9.75 16.07 20.592012-13 10.19 8.32 10.72 11.80 -3.94 4.88 33.65 3.86 -1.13 -4.62

M&HCV 2011-12 0.47 8.60 6.26 10.44 9.83 2.22 22.97 19.04 9.03 12.80 5.45 -1.122012-13 -11.60 -10.56 -13.59 -14.84 -8.91 -14.80 -22.94 -33.22 -38.34 -38.96

LCV 2011-12 14.91 22.22 29.14 35.64 34.30 34.46 16.00 47.85 18.92 14.13 31.02 31.612012-13 15.83 24.43 19.45 12.99 13.49 11.67 31.20 9.55 6.07 14.37

3W 2011-12 1.96 8.59 4.32 -3.13 -8.58 0.94 -1.99 5.72 -3.41 -3.48 -13.58 -9.112012-13 -5.35 3.32 3.77 0.77 -0.18 0.62 12.58 20.67 5.91 6.32

2W- Scooters 2011-12 18.00 11.10 10.79 22.81 24.45 50.17 11.96 38.38 15.91 24.73 27.99 37.292012-13 30.29 34.40 22.98 20.39 9.95 10.17 32.39 6.64 6.40 12.24

2W- Motorcycles 2011-12 23.26 14.12 15.28 10.16 15.03 19.32 0.36 22.39 6.92 10.40 8.01 1.15Total 2W 2011-12 21.90 14.31 14.80 12.32 15.73 23.71 1.75 25.04 8.19 13.52 11.96 8.27

Auto Monitor

N E W S1018 FEBRUARY 2013

Bridgestone India has opened its second tyre manufacturing facil-ity in the country at

Chakan in Maharashtra. This new facility is spread over an area of 187 acres and is likely to gener-ate employment for 1800 people. With an estimated investment of Rs. 2600 crore, the Chakan facility will have the capacity to produce 10,000 passenger car radials, and 3,000 bus and truck radials once it becomes com-pletely operational.

The Chakan facility was inau-gurated by Prithviraj Chavan, Chief Minister of Maharashtra, along with Kazuhisa Nishigai Kazuhisa Nishigai, COO and Representative Board Member, Bridgestone Corporation and Kiyoshi Asako, Consul General of Japan in Mumbai.

In his speech, Hiromi Tanigawa, Managing Director, Bridgestone India Private Limited said, “We started searching for an appropriate place in India in 2008. We faced many difficulties in tak-ing the project forward once the MoU was signed with the state government of Maharashtra. But the support extended by the gov-ernment has made the project possible. We will now start the production of tyres at our second plant in India.”

Speaking about plans for India, Kazuhisa Nishigai, COO and Representative Board Member, Bridgestone Corporation said, “It is a memorable day not only for Bridgestone India but also for the Bridgestone Group. Our first plant

was set up in Indore, Madhya Pradesh, and has been growing consistently. The Chakan plant is our 48th manufacturing facil-ity globally and will be one of the largest in the world. India is grow-ing rapidly and will be a major contributor in the future. We are going to focus more on the Indian market than before. Establishing the Chakan plant is just the begin-

ning towards achieving our goal.“After being in India for some

time, Bridgestone realized the importance of having a presence in Chakan, Maharashtra, which is emerging as the next automo-bile hub in the country. Chakan has become a multicultural auto hub with MNCs from different nations having a presence here. With a population of twelve mil-lion, Maharashtra presents a large market, a large amount of human resource, and many eco-nomic opportunities, which is why it is emerging as the next big auto hub,” said Ashok Chavan, Chief Minister of Maharashtra.

With a global market share of 16.1 percent, Bridgestone Corporation claims to be the world’s largest tyre and rub-ber company. Headquartered in Tokyo, it also manufactures a broad range of diversified prod-ucts which include industrial rubber, chemical products and sporting goods.

Despite a percepti-ble uncertainty and signs of slowdown, Mumbai-based

Bharat Gears is looking to raise its manufacturing capacity in anticipation of an upturn in demand from the CV and agricul-tural equipment segment. The downturn afflicting its key cus-tomer segment, as well as muted growth in North America and the European markets has creat-ed uncertainty in the production planning process of many auto component manufacturers, and that includes Bharat Gears.

“There is a slowdown in gov-ernment spending and that is affecting the demand for com-ponents. We are utilising this cyclical downturn in our key cus-tomer segment (CVs) to reorient our processes, identify and elim-inate wastages in operations, and emerge as a more competi-tive organisation,” said Surinder Kanwar, CMD, Bharat Gears Ltd. He added that the government needed to address the infra-structure bottlenecks with road and port related investments that could in turn lead to a recovery.

Bharat Gears is looking to

increase its manufacturing capacity by around 30 percent in the first phase, and may further increase capacity depending on market conditions.

The company is also setting up a new power train components manufacturing facility at Lonand near Satara, Maharashtra. It is looking to invest around ̀ 30 crore in the first phase, and will evalu-ate further expansion options depending on requirements. The company manufactures and sup-plies around 600,000 transmission units per month, in addition to around 300,000 hypoid ring gears and pinions each from Mumbra and Faridabad per annum, and around a million differential gear units per annum.

Kanwar added that one of the major challenges for the company going forward is high energy costs, logistics, and manpower. “We are looking at the current downturn as a period of reorientation, and learning or upgrading skillsets. It is critical to prepare ourselves for future challenges with a positive frame of mind,” he added.

The company manufactures and supplies transmission sys-tems and components including ring gears and pinions, transmis-sion gears and shafts, differential gears, and gear boxes to Ashok

Leyland, Bharat Earth Movers, Mahindra & Mahindra, Indian Railways, Tata Motors, Sundaram Fasteners, Bajaj Auto, and others manufacturers.

Over the years, the company has emerged as a global suppli-er of automotive gears and heat treatment furnaces. Its strength lies is in its capability to manu-facture all systems of gears.

For FY11-12, total income from operations (net of excise) increased by 28 percent to `431 crore, from ̀ 335 crore in FY10-11. The company sees promise in the export market for tractor compo-nents. It expects the CV market to grow at eight to ten percent, with the major volume contribution coming from the LCV segment. The off-highway vehicles and construction equipment sector is expected to maintain satisfac-tory growth.

Pradeb Biswas Mumbai

After being in India for some time, Bridgestone realized

the importance of having a presence in Chakan. The Chakan

plant is the company’s 48th manufacturing

facility globally and is one of the largest in

the world.

Abhishek Parekh Mumbai

Bridgestone India Opens Chakan Plant

Gearing Up For GrowthBharat Gears is expanding manufacturing capacity anticipating increased demand.

Kinetic Group Completes Restructuring

Pune-based Kinetic group has announced the merger of its group companies Kinetic Motor Company Limited (KMCL) and Kinetic Engineering Limited (KEL). The restructuring is

aimed at creating synergies across its various businesses and divi-sions. Speaking on the developments, Ms. Sulajja Firodia Motwani, Vice Chairperson, Kinetic Engineering Ltd, said, “We are pleased to announce the culmination of the initiatives undertaken that aims at streamlining our business and aids in executing our strategic plan that will focus upon the enormous opportunities prevailing in Indian and global market place. Innovation, leveraging synergizes, acceleration of profitable growth, and increasing shareholder value has been the company’s primary objective”.

The stake of the promoters in Kinetic Engineering will stand at 53%, from the current stake of 57%, with the rest held by public and finan-cial institutions. Following the merger, the investment of 6,12,00,000 shares of Rs 10 each in Mahindra Two Wheelers Limited will be direct-ly held by KEL, valued at a face value of around Rs 61 Crores. The merger is the culmination of restructuring activities undertaken by the Kinetic group to streamline its manufacturing and engineering entities into a focused player in the automotive systems and compo-nents business, with powertrain systems as the focal point.

KEL also announced the extension of its conversion/redemption of US$ 18 million FCCB till February 2014, which received Reserve Bank of India (RBI) approval within a YTM of 5.83% set as per the Mid Swap ratio benchmark. KEL bondholders also consented to the restructuring with a 100% favourable vote through the Clearstream voting system. The restructuring envisages extension of the tenure for conversion/redemption by a year, without a change in the con-version price, which was fixed at Rs 156 per share at the time of issue of FCCBs. Current market price of the KEL scrip is around Rs 120.

KEL also announced the appointment of Mr. Harjit Bhatia as an additional director on the board of directors of the company, replac-ing Mr. Santosh Senapati.

Tata Motors Bags Defence Contracts

Tata Motors has bagged an order

for the fully indig-enous Tata 6x6 multi-axle high mobility mobile platforms, from Bharat Electronics Limited (BEL), Bengaluru, to mount radar equipment for the Indian Air Force.

The Tata 6x6 versatile multi-axle vehicle platform will give BEL’s radar system the mobility to be placed strategically, at almost any location, to detect low-flying aircraft, and spy planes or unmanned aerial vehi-cles, and detect other intrusions. Tata Motors will supply 26 Tata 6x6 multi-axle vehicles to BEL Bangalore.

Tata Motors is also in the process of delivering 96 specialist tractors for the Indian Defence forces’ Akash missile programme. Mr. Vernon Noronha, Vice President – Defence & Government Business, Tata Motors, said “Tata Motors offers a full range 6x6, 8x8, and 12x12 multi-purpose high mobility carriers, designed especial-ly for integrating specialist rocket and missile systems. The Tata 2038 6x6 vehicle platform also stands qualified by the Indian Army for GRAD BM21 Multi Barrel Rocket Launcher (MBRL) application after rigorous field firing evaluation trials.”

Tata Motors’ portfolio includes various applications on its mul-ti-axle range, from missile carrier systems to a water purification system. Advanced missile programs like Brahmos, Pinnaka, and Akash have been demonstrated on Tata Motors multi-axle platforms.

Tata Motors offers its defence customers a wide range of vehicles in the light, medium, and heavy category, having created a focused division to design and develop defence technologies and products at its manufacturing facilities in Jamshedpur and Pune. Tata Motors also has a dedicated service team and network for defence products across the length and breadth of the country.

The company has the capability to mobilise manufacturing capacity for defence requirements, along with dedicated exclusive infrastructure, manufac-turing facilities, and trained manpower to ensure fast-er delivery of its defence vehicles.

Tata Motors recently delivered around 40 MPVs to the Jharkhand and Maharashtra State Police, and over 150 Tata Light Armoured Troop Carriers (LATC) to the Central Reserve Police Force (CRPF) and Gujarat State Police.

Snippets

Kiyoshi Asako, Consul General of Japan, K. Nishigai, COO, Bridgestone Corporation and Shri. Prithviraj Chavan at the ribbon cutting ceremony.

Auto Monitor

N E W S1218 FEBRUARY 2013

Consider a time when logs were made in ledgers when the leaf springs for the car’s suspension

arrived from the supplier. Flip a few pages in that same ledger and it showed the dates when a batch of front windshields was received from the glass manufacturer. There are more ledgers some-where in the office for finance/accounting, manufacturing, sales and service, and a few more verticals. It all had to be in sync with every department back then, which meant a number of sleepless nights for people who just couldn’t adapt to changing conditions quickly enough.

In manufacturing, output is the name of the game. The faster you deliver the more money you make. To keep pace with manu-facturing, companies have had to get systems in place to maintain a flow of information between all the departments inside the company and manage the con-nections with businesses directly

linked to the company. Cue in ERP.

The automotive industry is in the age of information tech-nology. There is arguably no automotive OEM/component manufacturer that doesn’t rely on some or the other form of tech to run its business. More often than not, these businesses run ERP systems. ERP is an acro-nym for Enterprise Resource Planning. ERP systems are quite common around the world and in India too, major companies have ERP processes in place but it’s the small and medium busi-nesses who still haven’t adopted ERP. The industry has over 35,000 manufacturers of which majorities are tier 2 and tier 3 manufacturers.

This is the segment Infor is targeting. Infor is the third larg-est ERP systems provider in the world after SAP and Oracle. In the automotive space though, Infor’s ERP systems are most sought after. The US based com-pany has honed its ERP modules for the automotive industry with years of experience working with

OEMs and component manufac-turers around the globe.

In India, Infor has had a lot of catching up to do. The company entered India only in 2006 by the time its competitors had lapped up major businesses. In order to make inroads in the highly competitive ERP market, Infor is targeting small and medium enterprises. Unlike most coun-tries around the world, India has a very complex taxation structure that makes ERP development

challenging. Souma Das, RVP Sales and Managing Director, Infor India says, “Major automo-tive markets around the world have a uniform tax structure but in our case, it is not uni-form.” India is the only country that uses 2D barcoding systems according to Infor. “That’s why the company has designed and built a 2D barcoding solution for the Indian market” said Souma.

An interesting feature of ERP systems is studying patterns

formed in the system so you can react to it. For example, you notice that a particular colour is more popular according to the

software, you can produce more of them a nd t hus react faster to the demand increasing sales in the process by just creating availability.

The most visible areas where ERP can be effec-tive in the automotive industry are increased

op er at ion a l e f f ic ienc y, business visibility, better cus-tomer relationship management, streamlined production, opti-mized IT investment, regulations compliance, cost cuts, quicker product churning, monitoring and controlling expenses and reducing errors. Information used is real time makes reaction time shorter thus you can exploit positive market conditions to the fullest and take precautions dur-ing a sluggish period.

Anand Mohan Mumbai

Small Is Big For Infor

Tata Motors has been showing signs of losing passenger car market share for some time now. Competition in the CV sector is increasing and the M&HCV

segments are on a major decline, which means Tata’s commercial vehicle business is also doing poorly. TaMo has consequently been relying on Jaguar Land Rover (JLR) to keep consolidated profits and revenues in the green.

JLR’s latest quarterly results haven’t been as strong as in the same period last year due to high-er marketing costs, launch cost of the new Range Rover, discontinuation of the previous model, and investment in new product development. JLR Chief Financial Officer Ken Gregor described JLR’s previous margins as extraordinary. The Q3 operating margin for last year was 17 percent, whereas it is 14 percent this year. As a result, con-solidated profits for the group for the quarter were `1,628 crores compared to `3,406 crores for the corresponding quarter of the previous year.

Commercial vehicle sales for Q3 stood at 1,38,963 units, driven mainly by the growing LCV segment, keeping the CV market share at 62.6 percent for the quarter. Passenger vehicle sales stood at 54,675 units for the same quarter.

In the coming year Tata Motors will be invest-ing `3,000 crores on new product development, of which a little over `1,500 crores will be allo-cated for the passenger car segment with the remaining targeted at the CV business. JLR will invest 2.75 billion pounds in new product intro-ductions, an engine plant in the UK, and the JV business in China.

Tata Motors Profits In Decline Anand Mohan

Mumbai

TaMo has consequently been relying on JLR to keep profits and

revenues in the green.

Auto Monitor

R E P O R T1418 FEBRUARY 2013

After witnessing a decline in 2009, auto component industry bounced back strongly

in 2010 and 2011 with a turno-ver growth of 28 per cent and 35 per cent respectively. Growth was pushed by strong vehicle demand across the categories of automotive industry. However, growth rate softened to 16 per cent in 2012 as the auto sales were strangulated with high interest rates and towering fuel prices coupled with general eco-nomic slowdown. Of the total industry size of around Rs. 2,014 billion in 2012, 70 per cent was contributed by domestic OEM, 14 per cent by replacement mar-ket, and the balance 16 per cent by exports. The giant share of

domestic OEM demand in total turnover clearly indicates that domestic OEM sales shape the fate of Indian auto component industry. CARE Research fore-sees the growth in 2012-13 to remain tepid as compared to the past few years on account of demand pressure from auto sec-tor which is witnessing turbulent phase since 2011-12 due to high interest rate scenario coupled with spiralling fuel prices and slowdown in economy.

In absence of strong auto demand, rising level of indigenisation will drive auto component growth.

Indian auto component man-ufacturers offer advantages like low-cost and adequate produc-tion capacity with world class technology. Domestic auto component manufacturers are increasingly complying with the internationally accepted quality standards like six sigma, ISO, etc which has caught the attention of global OEMs. Global OEMs with presence in India are increasing level of localisation

in products offered them in the Indian markets. The level of indi-genisation is being increased in phased manner to keep costs low without compromising qual-ity. Furthermore, depreciating rupee is resulting in increase of import bill for global OEMs, who source a large proportion of their inputs from overseas markets. In order to curtail the burden of growing import bill global OEMs are resorting to increased local sourcing. Although indigenisa-tion level of domestic players is already around 95 per cent in 2011-12, indigenisation level of foreign OEMs stands between 65-70 per cent, CARE Research expects it to reach around 80 percent by the end of 2014. CARE Research believes that growing levels of indigenisation in next couple of years will drive growth of auto component manufactur-ers in the next couple of years regardless of slowdown in auto-mobile demand.

Trade gap to narrow in next five years on the back of growing indigenisation

by global OEMsIn 2011-12 imports stood

at `514 billion as compared to exports of `334 billion, howev-er, we believe that the trade gap would narrow going ahead due to continuously rising rate of growth in exports and expected

decline in growth rate of imports due to increase in levels of indi-genisation. In 2011 and 2012 exports have grown by 55 per cent and 41 per cent respective-ly compared to imports which have witnessed a growth of 33 per cent in both 2011 and 2012.

Go Local To Combat DownturnTrend in turnover

Increasing number of global OEMs are moving substantial part of their manufacturing opera-tions to India so as to make India their export base. The entry of foreign OEMs and auto com-ponent manufacturers has pushed domestic manufacturers to enhance their product as well as manufacturing technology. Indian auto component manufacturers have gradually started to enjoy level playing field with glob-al auto component manufacturers in terms of quality and scale. A considerable rise in invest-ments towards research and development has been observed during the last one decade which is helping Indian auto component indus-try to built reputation in overseas markets and bag global orders. India is seen as the hub for sourcing auto components by the leading global OEMs.

Strong vehicle population to augment replacement market demand

The replacement market, where price plays a critical role as compared to quality, is dom-inated by the highly fragmented unorganized sector. Smaller component manufacturers, counterfeits and cheap imports cater to this price-sensitive replacement market segment. Large organized players are able to garner rela-tively small pie of this segment. Replacement demand is dispersed across the length and breadth of the country, while the players in the organized segment are concentrated in select-ed clusters, which have proximity to the OEMs.

Irrespective of slowdown in auto demand, CARE Research expects replacement market to witness high growth in 2012-13 on the back of huge vehicle population. The pileup in vehicle population due to strong growth in the domes-tic market during the last one decade would continue to weather the effect of muted auto sales in the short term.

Source: ACMA & CARE Research

Share in turnover

Source: ACMA & CARE Research

Revati KastureHead, CARE Research

Vishal SrivastavManager

Samay GanharAnalyst

Auto Monitor

N E W S1618 FEBRUARY 2013

The Japanese domestic net sales for the period April 2012 to December 2012 increased by ¥65.4

billion (9.5%) to ¥749.7 billion compared to the correspond-ing period of the previous fiscal year. For overseas markets, the net sales decreased by ¥40.6 bil-lion (3.6%) to ¥1,073.1 billion year-on-year mainly because of the impact of the exchange rate due to yen appreciation as well as economic stagnation in Europe. As a result, the overall consoli-dated net sales increased by ¥24.8 billion (1.4%) to ¥1,822.8 billion year-on-year.

In terms of consolidated income, the operating income increased by ¥5.2 billion (5.9%) to ¥92.9 billion year-on-year, and ordinary income increased by ¥4.9 billion (5.2%) to ¥101.3 billion year-on-year. The Group was able to increase operating income by covering the factors of income decrease such as the impact of exchange rate and sales decrease in Europe. Factors for this included an increase of Japanese domestic automobile sales as well as an overall reduc-tion in costs.

Net income increased by ¥7.8 billion (19.2%) to ¥48.4 billion year-on-year, although there was an allocation of ¥15.5 billion to allow for loss on liquidation of subsidiaries and affiliates as an extraordinary loss.

Operating Results by Segment

In the automobile business, the Japanese domestic net sales increased year-on-year, as a result of expanding its sales and strengthening products which included the launch of the new

model Wagon R. Overseas net sales decreased year-on-year mainly due to the impact of the exchange rate of the yen as well as a decrease in sales in Europe. As a result, the overall net sales of the automobile business increased by ¥52.3 billion (3.3%) to ¥1,626.5 billion year-on-year. The operating income increased by ¥13.0 billion (15.2%) to ¥98.8 billion year-on-year which marked the highest operating income ever for the third quar-ter, mainly due to the increase of income in India, Indonesia, and the Japanese domestic automo-bile market.

In other geographical areas, Japan and Asia increased sales and income due to increased automobile sales. Although Japan is having difficulty in export profitability, it marked the highest operating income ever for the third quarter due to an increase in the Japanese domestic automobile business.

Following the second quarter, Europe marked an operating loss due to the persisting eco-nomic stagnation.

Forecast for consolidated operating results - full year

As for the forecasts for the consolidated operating results, as a result of reviewing figures such as the foreign exchange rate, the Group has made an upward revision for the full year forecasts of the operating and the ordinary income.

There is no change to the target of the net income from the previous forecast due to an allocation of ¥15.5 billion for provision for loss on liquidation of subsidiaries and affiliates as an extraordinary loss in the third quarter.

The Group has stated that it will work as one to reform in every field to accomplish more than the stated forecasts for the consolidated operations.

While the company has retained the wheelbase, it has managed to squeeze in plenty in terms of engine, space and comfort. The new CR-V’s 2.0 litre SOHC i-VTEC engine churns out a maximum power of 156PS at 6500 rpm, a 13PS more output with a fuel effi-ciency of 13.7 kmpl. The 2.4 litre DOHC i-VTEC engine churns out a maximum power of 190PS at 7000 rpm which is 29 PS more than the outgoing model. Honda has also offered an automatic trans-mission with the 2.0l CR-V previously absent. The new CR-V is also 30mm shorter in length than the earlier generation and stands 5mm taller. But on the other hand it has reduced drag by eight percent. For a smoother ride, the company has increased the capacity of the rear damper by 10 percent and the responsiveness index of the vehi-cle by 40 percent as compared to the outgoing model. Cargo bay is bigger by 30mm with increased seat height of 10mm and corre-sponding 10mm increase in tilt and telescopic steering adjustment. While Honda believes that the 4th generation CR-V will cater to a wider audience and overlap other segment of saloon cars, the CR-V also encapsulates the Accord’s pricing, the base model of which currently retails at `20.29 lakhs (ex-showroom Delhi). Accord has seen a dip in sales in the last year with the Skoda Superb leading the segment. CR-V’s aggressive pricing and India’s love affair with SUVs is bound to further dent sales of Honda’s own Accord. Mr. Sen has confirmed that there’ll be no price revisions for the Accord portfolio after the fourth generation CR-V comes and the cars will co-exist. He however hinted that Honda will now be more focused on its new baby (the CR-V).

The other main demand is that excise duty on chassis for CVs should be reduced from 14 percent to 12 percent. The government increased this duty in the last budget. SIAM also insisted that the government lift the current (partial) embargo on buying vehicles placed on institutions such as municipal corporations, state trans-port, paramilitary forces, and introduce more schemes along the lines of the Jawahar Lal Nehru National Urban Renewal Mission (JNNURM). The government recently accepted the recommenda-tion of extending the Automotive Mission Plan by ten years to 2026, after it fell short by over $35 billion in achieving revenue targets.

Auto component manufacturers want stringent legislation against spurious products to be made top priority. They want the offence be made cognizable and non-bailable. Interestingly, contrary to the demand by carmakers to roll back excise duty, a spokesperson from a Japanese firm wants the government to con-tinue with the same duty structure, in order to narrow the fiscal cliff being created. He believes this will create a better environment for the industry in the long run.

Suzuki Reports A Good QuarterForecast for consolidated operating

results (full year)Net Sales ¥2,600.0 billion (up 3.5%

year-on-year)

Operating Income ¥130.0 billion

(up 9.0% year-on-year, up ¥10.0 bil-

lion from the previous forecast)

Ordinary Income ¥145.0 billion

(up 11.1% year-on-year, up ¥10.0 billion

from the previous forecast)

Net Income ¥70.0 billion (up 29.9% year-on-year)

(Foreign Exchange Rate) ¥81/US$ (Jan.-Mar. ¥85/US$)

¥105/Euro (Jan.-Mar. ¥115/Euro)

Contd. from Pg 1

Contd. from Pg 1

4th Gen Honda CR-V...

Hopes Pinned On...

Auto Monitor

R E P O R T1818 FEBRUARY 2013

Sustainable transport systems aim to reduce emissions, fossil fuel consumption and minimize the land area requirements, while providing easy access to peo-ple to enable efficient mobility. Vehicles that run on alternative sources of energy such as solar, bio-fuels, fuel cells and batteries have been developed, demon-strated and in some cases they have entered markets and are already on the roads.

Technological Innovations

Electric Vehicles (EV)EV’s utilize electric motors to

induce propulsion. The key dif-ferentiator between EV’s and conventional ICE vehicles is that the electricity that they consume can be derived from differ-ent sources or a combination of energy sources, particular-ly renewables such as solar and wind energy. Charging EV’s in India remains a challenge, where 60 percent of electricity is gener-

ated from fossil fuels fired coal power plants.

Electricity can be transmitted to EV’s wirelessly through induc-tion or directly using an electrical cable. EV’s utilize on-board bat-teries to store electricity. Unlike ICE’s, EV’s are capable of regen-erative braking whereby they are able to recover the energy that is lost during braking as electric-ity that is then stored back into the on-board battery. There are almost 40 new production ready electric vehicles and hybrid vehi-cles launching by 2013.

Bio-fuelsBioethanol and biodiesel are

the two most commonly avail-able types of biofuels. The large scale production of bio-fuel for transportation would require large land areas; as a result its potential to replace fossil fuels is limited.

CNGVehicles are increasingly

using CNG, or less commonly LNG, as an alternative to conven-tional fuels as it is cheaper and cleaner. Existing petrol or diesel vehicles can be easily modified to run on CNG at an average cost of Rs 20,000 for petrol vehicles and about Rs 50,000 for diesel vehicles.

Hydrogen Fuel VehiclesHydrogen vehicles are divid-

ed by two different technological approaches, namely -i. Hydrogen-ICE: Existing cars

that run on petrol and diesel can be modified to use hydro-gen as a fuel in their internal engines.

ii. Hydrogen Fuel Cell: Hydrogen

fuel cell cars are essential-ly electric vehicles that use hydrogen fuel cells instead of battery packs for power.

Though HFVs are considered to be zero emission vehicles, they do have ‘well to wheel’ (total life-cycle) emissions, as most of the hydrogen used is produced from natural gas. Though HFCV’s tend to outperform battery electric vehicles in terms of range and refueling time, they yet face sig-nificant technical and economic hurdles.

The Electric Vehicle Value Chain

The stimulus for a technologi-cal shift towards electric vehicles

in India, as is the case among most comparable markets, depends on improved battery technologies, longer ranges, better charging infrastructure, lower prices, Government incen-tives and progressive regulation. While electric vehicles offer a great opportunity to diversi-fy across the value chain, they also pose significant risks as the technology could change the dynamics of the industry.

Traditional Component Suppliers

Most of the standard com-ponents required by the Indian automotive sector are domes-tically manufactured with an

import dependance estimate of about 13.5 per-cent of domestic demand. Manufacturers of EVs are likely to depend on traditional component manufacturers for all standardized parts that go into an EV and that are common to ICE vehicles.

Initiatives by Ministry of Heavy Industries and Public Enterprises

The Ministry of Heavy Industries is planning to approve a INR 20,000 - 23,000 cr. (USD 3.7bn – USD 4.25bn) plan under the National Electric Vehicle Mission policy to promote EV mobility over the next 8 years.

The various initiatives proposed by the Ministry of Heavy Industries in the draft National Mission for Hybrid and Electric Vehicles (NMHEV) are: 1. Proposing/ suggesting that Public Sector

Undertaking banks to offer loans to cus-tomers for purchasing EVs so that financing facilities are available for purchasing EVs.

2. Making mandatory the provision of charging points for electric vehicles in all upcoming housing complexes across the country.

3. Advising the Automotive Component Manufacturers Association of India to reduce shortages of spare parts by developing and producing components for EV.

4. Creating EV zones in certain “highly pollut-ed” cities as pilot projects

5. Funding research & development6. Providing charging infrastructure for EVs.7. Promoting indigenization8. Supporting the development of a cost-effec-

tive EV technology for a mass platform and starting operations

9. Setting a target of 6-7 million units of new vehicle sales of full range of EVs

A National Electric Mobility Mission Plan 2020 (NEMMP 2020) was formally launched by the National Council for Electric Mobility (NCEM) and the Prime Minister of India on January 14th, 2013.

EV Charging InfrastructureWhile there are a number of bottlenecks in

EV adoption, and R&D is being conducted by automobile manufacturers and research organ-isations to address them, one major issue that must be addressed urgently is the integration of appropriate charging infrastructure for EVs, before a rapid expansion in EV numbers can happen.

Some manufacturers have tried to address this issue by taking up the challenge of devel-oping charging infrastructure themselves. Electrotherm India Ltd., for instance, stated in 2010 that they would collaborate with local garage owners within a radius of 3 kilometres of major cities like Delhi, Mumbai, Chennai, Bangalore and Ahmedabad for installing charging stations. A similar plan was also artic-ulated by Hero Electric, with the aim of setting

Source: YES BANK Analysis

Electric Vehicles in India:

Challenges & Opportunities IIRaw MaterialSuppliers

TraditionalComponentSuppliers

BatterySuppliers

Utilities /Infrastructure

OEMS

The EV value chain

Auto Monitor

R E P O R T 1918 FEBRUARY 2013

up 10,000 charging stations by the end of 2009-10. However, involve-ment of the Government appears to be necessary, at least in the early stages, given the invest-ment of approximately Rs two lacs required for setting up a sin-gle charging station.

Emerging Business ModelsThere are a range of different

business models and financing structures that have emerged globally around the intersec-tion of three critical segments of the EV value chain – automotive, battery and charging infra-structure – that are resulting in innovative strategic partner-ships that aim to spread risk and make EVs an economical offer-ing for the end consumer. Some of the prime emerging business models include: Direct Vehicle Sales, EV Leasing, Battery Leasing and Swap Schemes, and Infrastructure Service Models.

Analysis & Thought

Short Term HorizonsThe 2W ICE market is growing

at a phenomenal pace, approx-imately 14 percent/annum in terms of volume sales in urban and rural India. We expect 2W ICE sales to continue expanding

along the same trajectory on the premise that as income levels rise and the Bottom of Pyramid (B-o-P) segment becomes more upwardly mobile, there will be a shift from using bicycles to 2W. This trend, backed by the encouraging growth in the 2W sales in urban India as com-pared to EV 4W sales indicates that the uptake of 2W in the shorter term (5-10 years) will be more robust as compared to the uptake of 4W. 2W EVs do not require as much electrical input as 4W EVs mainly due to smaller battery sizes. Considering the sporadic supply of electricity in semi rural and rural India, 2W may not experience robust sales in these markets. However, cost conscious urban dwellers may purchase an 2W as a second vehicle rather than a primary vehicle which can be used by family members to travel short dis-tances. A low price tag aided by state subsidies makes electric 2W affordable where there are a range of financing options available from finan-cial institutions. Due to higher sales volumes as compared to 4W, insurance companies are able to charge lower premiums. With a favourable policy/regulation climate and consumer appe-tite for 2W vehicles backed by readily available consumer finance and lower risk perceptions to facilitate corporate finance decision making, the growth story of the 2W EV market in India is sound.

Long Term HorizonsEV 4W manufacturers are addressing risk

concerns across the value chain with innovative business models and cautious capacity expan-sion. Although OEMS have taken some giant leaps forward in terms of technology, leap frog-ging the hybrid and alternative fuelled engines phases and jumping straight to EVs, still faces major infrastructural hurdles, in India, that impedes the dynamic growth of the 4W EV market.

India suffers from severe energy deficiency, power generation and supply capacity to meet rising demand to power from industrial and commercial activity as well as homes with a rising number of electrical appliances. Power outages still occur in major cities like Delhi NCR and Kolkata and they are an everyday reality in semi urban and rural India where 24 hour power outages are not uncommon. Furthermore, despite having one of the largest coal reserves in the world, India imports premium coal for effi-cient thermal power generation.

With over 59 percent of grid electricity being powered by coal, major transmission leakages due to outdated infrastructure, rising demand and insufficient supply, the pollution free, ener-gy efficiency and energy security perspectives of owning an EV simply do not hold weight in India. Considering existing ICE technology has successfully reduced toxic fume emissions and improved fuel consumption, whereas coal com-bustion for electricity generation continues to

be amongst the most environ-mentally offensive industrial activities, introducing EVs as a mainstream personal mobili-ty solution into this ecosystem could have a more detrimental impact on the environment as compared to existing and future ICE technologies.

Some OEMs have developed innovative solutions to offset the consumption of coal powered grid electricity by incorporating solar panels into the roof design of EV cars as well as supplement-ing electricity feeds into charging ports with renewable energy. However, renewable energy ret-rofitting for EV is still a relatively expensive proposition and a technical challenge for develop-ers, hence we can only expect to see such solutions becoming mainstream in the long term. RE retrofitting for EVs and EV charging stations have the poten-tial to earn OEMs and charging service providers CER) under Clean Development Mechanism ( and Bureau of Energy Efficiency (BEE), Energy Saving Certificates (under the Perform, Achieve and Trade ( which will facilitate faster RoIs and validate the claim of EVs being a clean mobility solution.

Concluding Thoughts

2W ICE vehicles will continue to dominate sales in the Indian personal mobility market where rising petrol prices may steer consumers towards exploring 2W EVs. Since 2W EVs are essential-ly used and ideal for short range travel and existing EV battery technology only allows limit-ed range travel on one charge, the consumer transition from ICE to EV in the 2W segment will be relatively smooth. In fact many 2W consumers are already migrating to 2W EVs due to the tremendous long term operat-ing cost savings and attractive chassis design, where the indus-try enjoyed growth rates of up to 200 percent in sales year on year. However, the recent withdrawal of consumer focused subsidies by MNRE for 2W EVs has signifi-cantly dented sales, which have dropped by over 70 percent (from 7000 per month to 2000-3000 per month) and leading to the wide-spread closure of dealerships.

Further, the key roadblock to EV market growth do not seem to be related to the value chain, lack of charging infrastructure, policy, economics or environ-ment related, but rather Indian consumer perception. More spe-cifically chassis design, range anxiety, concerns about battery

longevity, cabin capacity and high purchase costs are the key factors considered when a vehi-cle purchase decisions are made. Further, it is ‘competition’ which triggers product innovation and the presents ‘choice’ to the consumer. In the Indian 4W EV market there is simply no compe-tition. Currently, Mahindra REVA is the only OEM that is manufac-turing and selling 4W EV at scale in India, however, their offering cannot be compared by custom-ers to any other 4W ICE vehicle in the same price range/category. It is therefore unimaginable at this stage, and for the short term, that a buyer will purchase a 4W EV as a primary mode of mobility, but rather a secondary vehicle for short range travel, as the current consumer trends suggest.

YES BANK and TERI BCSD believe that a real turning point for 4W EV sales in India will come when it is considered as a primary vehicle. Increased OEM competi-tion in this space is critical as it will lead to further value chain efficiencies and product innova-tions with particular emphasis on attractive chassis design, improving battery technology leading to increased range and economies of scale, ultimately leading to lower purchase pric-

es. These developments will shape consumer perception of 4W EV as being a credible prima-ry mode of personal transport where environmental and oper-ating costs will not be the only factors considered. Finally, major multinational OEMs are launch-ing hybrid and hydrogen fuelled vehicles in the International markets to much fanfare. Oil and Gas majors are advocating bio-diesel and hydrogen as future fuels as they will be able to lev-erage their refinery, logistical and refuelling infrastructure, therefore sustaining their busi-ness models. Their influence on ICE design, shaping OEM strate-gic directions and Government policies are also well known. With these realities and trends in mind, OEMs will be wise to develop and implement alterna-tive business models to leverage an existing ecosystem and be a part of the incremental transition from ICE to EV, rather than going against the grain and pushing a disruptive technology, in a mar-ket, consumer landscape, and manufacturing ecosystem that is simply not ready for it, yet.

(This is an abridged version of the report. It is also the conclud-

ing section to Electric Vehicles)

2118 FEBRUARY 2013

A D V E R T I S E R S ’ L I S T

ACE Micromatic Group 1, BC

T: +91-80-40200555

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W: www.acemicromatic.net

Alfa Flexitubes Pvt Ltd 19

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E: [email protected]

W: www.alfa-flexitubes.com

Auto Parts & Machine Tools Expo 16

T: +91-9815396350

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Automotive Dealership Excellance Awards 20

T: +91-22-30034650

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Dhoot Transmission Pvt Ltd 13

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Ecocat India Pvt Ltd 17

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W: www.ecocat.com

Engineering Expo 14

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Fox Solutions 5

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G W Precision Tools India Pvt Ltd 8

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T: +91-124-4932900

W: www.hp.com

Igus India Pvt Ltd 12

T: +91-80-39127800

E: [email protected]

W: www.igus.in

Infomedia Yellow Pages 18

T: +1800-200-1010

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W: www.yellowpages.co.in

Jyoti CNC Automation Pvt. Ltd. BIC

T: +91-2827-287081

E: [email protected]

W: www.jyoti.co.in

Kamal CED Solutions Llp FIC

T: +91-9313137970

E: [email protected]

W: www.kamalenvirotechgroup.com

National Engineering Industries Ltd 15

W: www.nbcbearings.com

Puja Fluid Seals Pvt Ltd 21

T: +91-20-27112016

E: [email protected]

W: www.pujaseals.com

Tata Motors Ltd. 7

T: +91-22-66586195

E: [email protected]

W: www.tatamotors.com

Turbo Bearing Pvt Ltd 9

T: +91-281-2389087

E: [email protected]

W: www.turbobearings.com

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Getting Personalwith Hironori Kanayama, President & CEO, Honda Cars India Ltd.

In Real Life If not in the auto industry, where would you be?

I’ve never thought about it, but the reason why I joined it was simply that I wanted to work overseas. Therefore if I would not have been with Honda, I’d have been a diplo-mat.

Which car do you drive? What do you dream of driving? In Japan, I drive the CR-V.

What’s your most recent indulgence? I play guitar.

Which book are you currently reading? I’m reading books on the Indian economy and Indian industry.

What are you doing when not talking auto? I play music.

An outdoor activity you would miss office for? Driving cars, although I don’t get much time here in India for that.

Where did you go for your last holiday? Jaipur.

What is the one thing that makes you angry? When we fail to achieve targets.

What’s the one thing you’d like to change in yourself? Quit smoking.

Mr. Hironori Kanayama has been associated with Honda almost four decades, having started his career at Honda Motor Company Ltd., Tokyo, Japan in 1976. He has worked with Honda ventures in China, Taiwan and Japan, and has spent significant years in China.

He was President of Honda Automobile (China) Co. Ltd. from September 2003 onwards; General Manager -- China Operations, of Honda Motor Company Ltd., from October 2007; President of Guangqi Honda Automobile Co. Ltd, China, from April 2009 to March 2011. He took up his current position as President and CEO of Honda Cars India Ltd. on 1st April, 2012.

What’s the best thing to have happened to you? Assignment here in India.

One experience you’d never forget? Marriage to my wife.

24

Regn. No. MH/MR/WEST/20/2012-2014. RNI No. MAHENG/2000/11414 Licenced to post at Mumbai patrika channel sorting office G.P.O. Mumbai 400 001.Date Of Mailing: 1st & 2nd Fortnightly Issue. Date Of Publication: 28th of Every Month