MARKET INSIGHTS – OCTOBER

AUTOMOTIVE

Kia Motors to build auto plant in India: ReportJan 07, 2011, Reuters

South Korea's Kia Motors Corp plans to build an auto plant in India with an annual production capacity of 300,000 cars, a media report said on Friday. Maeil Business Newspaper said the factory, whose construction will begin in the first half of this year in Gujarat, will start operations in early 2013, citing a key official at parent Hyundai Motor Co. A Kia spokesman said nothing has been decided on the plant, although it is considering building new factories in India and other countries.

Modi lures auto firms, TN fumesJan 17, 2011, Hindustan Times

Gujarat chief minister Narendra Modi, who got the Tatas Nano post the fracas in West Bengal, is now being accused of wooing away auto majors to shift their expansion projects from Tamil Nadu to Gujarat. The move, which is being finalized after Modi met the majors in Hyderabad, is causing alarm bells to ring in the poll bound Tamil Nadu. The auto companies had made Chennai’s neighbourhood Marmalainagar their base, giving it the nickname of “Detroit of India” when AIADMK supremo Jayalalithaa was chief minister between 2001 to 2006.

A Congress MP, K S Alagiri, has petitioned commerce minister Anand Sharma, but he has been told that the Centre couldn’t do much because Gujarat is offering “better power and labour environment.” Sharma, who spoke to the auto majors, told Alagiri that Tamil Nadu chief minister M Karunanidhi should step in to prevent an exodus from his state to Gujarat.

Proton gets ready for India; may use Nissan’s V platformMay 4, 2011, DNA

Proton, the Malaysian carmaker, hopes to announce its India plans in three to four months, according to group managing director Dato’ Haji Syed Zainal Abidin Syed Mohamed Tahir. “Since 2008, we have conducted a series of customer surveys and road tests in order to thoroughly understand market requirements and customer behaviour. We believe that our range of products is capable of satisfying the needs of the Indian market,” he told Brian de Souza of Autocar Professional.

It is learnt that Nissan may license its global compact V (for Versatile) platform to Proton which desperately wants a credible small car to gain a foothold in key markets like India. Built for emerging markets, the V platform is the basis of the Micra manufactured in India and Thailand. Alliance partner Renault also has access to this platform as a base to spin off its own range of compact cars expected in 2012

Pilote in JV with Delhi-based Mega GroupOct 5, 2011, The Economic Times

Pilote, the French firm that made the world's first caravan in 1962, is driving its luxury caravans into India through a joint venture with Delhi-based Mega Group to set up a distribution and service network across the country. Caravans - vehicles equipped for living in with built-in kitchen, bedroom and

washroom complete with furnishings and equipment-are popular in the US and Europe for long-distance holidays.

The joint venture, Mega Motoren & Lifestyles, will launch these vehicles on diesel engines and chassis coming from Mercedes-Benz and Fiat stable. Prices start at Rs 75 lakh and go up to Rs 2 crore, based on specifications and customisation. And their length could be 6 meters, going up to 8.59 meters. All the vehicles will be fully imported from France.

"We plan to launch these vehicles in Delhi, Chennai and Hyderabad initially and spread them to six cities by January, with all sales and service support," Mega Motoren CEO Mudit Srivastava said.

Honda Brio launched at a starting price of Rs 3.95 lakhSep 27, 2011, The Economic Times

Honda announced its foray into the highly competitive low-price compact car segment in India with the launch of its Brio model, priced between Rs 3.95 lakh and Rs 5.1 lakh (ex-showroom, Delhi).

Skoda Citigo: New small car for the cityOct 1, 2011, The Economic Times

The Skoda Citigo is the first small car from the Czech brand. Skoda plans to make it big in this growing segment and the Citigo should help them do just that

Small passenger car sales are hotting up world over and Skoda has decided to jump right into all the action with their all new Citigo. The new small car is a crucial model for Skoda as they are entering a new sector and must get everything right to secure its position in the small car market.

SKODA Board Chairman Prof. Dr. h.c. Winfried Vahland, said, "The Citigo is one of the pillars of our growth strategy. The car offers all of Skoda's values in a compact package and fits perfectly with our aims. The Citigo is literally a 'Simply Clever' car. Despite its small size, it offers ample interior space; it is agile while frugal.

Gujarat rolls out red carpet Oct 4, 2011, The Financial Express

Sanand: Along a dusty, traffic-choked road in Gujarat lies what may be India's industrial future. As labourers work under a blazing sun to widen the highway, auto giants Ford Motor Co and PSA Peugeot Citroen prepare to spend nearly $2 billion to build new plants in Sanand, a sparsely populated collection of villages about 40 kms west of Ahmedabad.

More automakers and suppliers are expected to follow, taking advantage of the state's business-friendly policies, including comparatively little bureaucratic red tape and, crucially in crowded India, ease of acquiring land. The Indian auto industry, which grew 30% last fiscal year before a recent slowdown, is a key growth engine for India's underdeveloped industrial sector. New Delhi wants to lift manufacturing's share of the economy to 25% over the next decade from about 16% now, a daunting target. Home to the world's biggest oil refinery, Gujarat accounts for 22% of India's total exports, according to KPMG, even though it is home to just 5% of the population. Gujarat's economy grew by 13.8% annually in the five fiscal years through March 2010, far in excess of the national average of 8.6% over the same period.

Suzuki effect: VW set to focus on premium carsOct 4, 2011, The Financial Express

With the much celebrated two-year old global alliance of Volkswagen and Suzuki on tenterhooks, the Indian subsidiary of the German carmaker has evolved a new strategy to position its range of products in the premium category across segments.

Analysts said that Volkswagen India was banking on Maruti Suzuki’s engineering capabilities to produce small cars that would have helped the company enter price sensitive small car segments to increase its volumes. However, since Suzuki has threatened to break out of the alliance, Volkswagen has been forced to restrict itself to premium categories. “They may have to re-look at their business strategy for India. The partnership with Suzuki would have allowed them to look at lower price point models. However, now they cannot be a volume player,” managing director with consultancy firm Protiviti Adithya Bhat

said.

Director (passenger cars) and board member of Volkswagen India Neeraj Garg said that in the last one year the company has increased local sourcing considerably in the Polo and the Vento. “For Polo and Vento it (local sourcing) is a little over 70%. We have increased (localisation) from 55%-70% at the beginning. This is a continuous process that purchase people are trying to do. The optimal level is 100%. That needs a lot of investment,” he said.

Honda plans to launch diesel cars in IndiaOct 4, 2011, The Financial Express

Japanese auto major Honda plans to launch diesel cars in India because of increase in demand for such vehicles against the backdrop of high petrol prices, a top company official said. The company is engaged in developing diesel engines back in Japan, Honda Siel Cars India Senior Vice-President (Sales

and Marketing), Jnaneswar Sen, said. Declining to reveal when diesel variants would be rolled out in India, he said the proposed diesel engine was being developed for a specific market like India as most of the markets worldwide prefer petrol cars.

VE Commercial Vehicle sales up 20 pc in SeptemberOct 4, 2011, The Financial Express

Auto-maker VE Commercial Vehicles today said it recorded a 19.75% jump in sales during the month of September, 2011, to 4,627 units. The joint venture between Volvo Group and Eicher Motors had sold 3,864 units in the same month last year, VE Commercial Vehicles (VECV) said in a statement.

VECV's domestic sales in September increased to 4,152 units from 3,665 units in the same month a year ago, a jump of 13.29%, the company added. On the other hand, exports shot up over two-fold to 475 units in the reporting month from 199 units in September, 2010.

Suzlon bags 25.5-MW wind turbines order from GAILOct 5, 2011, Business Standard

Wind power company Suzlon Energy today said it has bagged an order from GAIL for supply of wind turbines to the state-run gas distribution major's upcoming project in Karnataka. Suzlon received an order for supplying wind turbines with a combined generation capacity of 25.5 MW from GAIL India, the company said in a filing to the Bombay Stock Exchange. The order comprises 17 Suzlon wind turbines of 1.5-MW capacity each, to be commissioned in Karnataka in 2012, the company said,

without divulging the value of the order. GAIL is already sourcing equipment for two of its wind power projects in Gujarat from Suzlon Energy.

BHEL bags Rs 3,800-cr order from Dainik Bhaskar PowerOct 5, 2011, Business Standard

State-run BHEL today said it has bagged a Rs 3,800-crore order from Dainik Bhaskar Power for setting up a 1,320-MW thermal power plant in Madhya Pradesh. "BHEL has secured a contract from an independent power producer, Dainik Bhaskar Power, for setting up a 1,320-MW thermal power plant (2x660 MW) in Madhya Pradesh," the company said in a statement. BHEL is presently executing another contract for DBPL, involving the supply and commissioning of a 2x600 MW (boiler, turbine and generator) BTG package, along with associated auxiliaries for a 1,200-MW coal-based thermal power project in Chhattisgarh. BHEL's scope of work under the new contract envisages the design, engineering, manufacture, supply, erection, testing and commissioning of supercritical boilers, steam turbines and turbo-generators along with state-of-the-art controls and instrumentation (C&I) and other associated auxiliaries like transformers and a switchyard.

Kerala wants Vizhinjam on major port listOct 5, 2011, Business Standard

The Kerala government wants to convert Vizhinjam Port near Thiruvananthapuram into a major port but with private operatorship. Thirty-one shipping companies, including domestic majors like Shipping Corporation of India and Essar, have shown interest in the project. The port lies to the south of Vallarpadam terminal, which has been developed as the country’s first transshipment port, but is yet to get enough traffic. If Vizhinjam is given the status of a major port, the shipping ministry would be empowered to decide on whether to develop it as a transshipment hub, given its proximity to the International Container Transshipment Terminal (ICTT) in

Vallarpadam, said an official.

Vizhinjam is over 200 kms south of the Kochi port, while the Vallarpadam ICTT is on an island near the Kochi port. Based on estimates from Drewry Shipping Consultants (UK), container volumes at Vizhinjam Port are expected to reach 822,000 twenty-foot equivalent units (TEUs) by the end of Phase 1, 2020; 1.76 million TEUs by the end of Phase 2, 2030; and 2.82 million TEUs by the end of Phase 3, 2044.

E-retailers hire more, tie-up with logistics companiesOct 2, 2011, Business Standard

Online retailers are geared up to handle the festive season rush spanning Dussehra, Diwali, Christmas and New Year. Many of them have stepped up their workforce, while others have tied up with logistics companies to speed things up. Plus, plenty of offers and discounts have been lined up to make the most of the festive time.

Expecting an upsurge of 250% in traffic, ‘Ferns n Petals’, is planning to hire manpower for a week to handle the additional orders. It is also making its present workforce multi-task to keep up with the flood of queries and orders. Naaptol.com has tied up with the logistics firms to ramp up the workforce in the logistics department as the orders go up during October,

November and December. “We ensure with each of our logistics partners that their resources are in line, as the orders go up so that there is no delay in deliveries to our customers”, said Sandeep Komaravelley, marketing head, Snapdeal.com. Snapdeal.com is expecting the sales to almost double this season.

'India's steel production to touch 200 mt by 2020'Oct 5, 2011, Business Standard

India, the world’s fourth largest steel producing country, will witness its steel production capacity rise to almost 200 million tonnes by 2020. At present, China is the global leader in steel production, followed by USA, Russia and India. “By 2020, India would overtake USA and Russia in steel production. However, China would still remain the largest steel producer,” union steel minister Beni Prasad Verma said at a conference call here.

“Since, India is targeting 180-200 million tonnes capacity by 2020, the government wants a foresight into the quantum of input required, where to source it and the massive logistics requirement to move it to the plants,” he added.

Meanwhile, SAIL is reviving Malavika Steels at Jagdishpur in Uttar Pradesh. The TMT bar mill is expected to start production by January 2012 with 150,000-tonne capacity. Corrugation lines are already installed to produce 13,000 tonnes of corrugated sheets. Crash barrier line to produce 10,000 tonnes per year is expected to be installed by January 2012.

Agra footwear industry mulling consortium concept to take on ChinaSep 14, 2011, Business Standard

Agra footwear industry, which is the largest footwear manufacturing hub in India with estimated annual manufacturing value of almost Rs 10,000 crore, is mulling forming consortiums of individual units to cater to large export orders. The idea is to combine manufacturing capacity of big units operating in the organised sector and stand in competition to Chinese firms, which are known to absorb large

export orders and strictly meet delivery schedules. At present, Agra accounts for almost 35 per cent of the total footwear exports from India, while it also caters to 65 per cent of the

domestic footwear market.

Footwear segment plays a significant role in India’s leather industry. India is world’s second largest footwear producer after China, accounting for 13 per cent of global footwear production of about 15 billion pairs. There are around 10,000 footwear manufacturing units in Agra operating both in the organised and unorganised segments, of which 150 are sizeable with focus on the export market. Top players cater exclusively to exports with negligible contribution to the domestic market.

Some global brands that source footwear from India, include Zara, Esprit, Lumber-jack, Deichmann, Carrefour, Metro, Hugo Boss, Pierre Cardin, Acme, Clarks, Deichmann, Ecco, Elefanten, Florsheim, Hush Puppies, Marks & Spencer, Nautica, Nike and Reebok.

Tyre industry to invest up to Rs 10,000-cr by 2013Sep 8, 2011, Business Standard

The domestic tyre industry has lined up investments worth over Rs 10,000 crore between now August 2013. The additional investment is in 19 tyre projects targeted for completion this year. A major chunk of the projects are coming up in Gujarat, Tamil Nadu and Maharastra.

Industry experts say that post-2013, with the stabilisation of these projects and the availability of incremental domestic radial capacities, the dependence on Chinese imports would reduce. “Despite the worrying macroeconomic indicators and a general slowdown in domestic automotive sales, the Indian tyre industry continued to post a healthy 25-30% revenue growth during the first quarter of 2011-12 supported by strong replacement and export demand," said a report prepared by ICRA. The industry has already witnessed an addition of 17.7 lakh tyres from JK tyre, Metro Tyres Limited (Metro tyres) and Bridgestone India Private Limited during the first quarter of

fiscal 2011-12.

Other major projects scheduled for completion during the current year include JK Tyres, MRF Limited, Falcon Tyre Limited, and Metro tyres, with most of the capacity additions being towards radial capacities. The table below details the investment schedule plans in the Indian tyre industry. Apollo Tyres investing Rs 2,300 crore in Tamil Nadu and Gujarat, Balakrishna Industries investing Rs 1,400 crore in Gujarat and Maharastra, Bridgestone is investing Rs 3,210 crore in Pune and Pithampur, Ceat is investing Rs 340 crore in Maharastra, Dunlop is investing Rs 450 crore in Assam, Falcon Tyres Rs 570 crore in Uttharkhad and JK Tyres investing Rs 1,815 crore in Tamil Nadu and Karnataka. Michelin group investing Rs 4,000 crore investments at Chennai, which is spread over a period of seven years.

High inventory cost hits bottomline of textile cosAug 17, 2011, Business Standard

A fluctuating cotton and other raw material costs seem to have taken a toll on bottomline of textile companies for the first quarter. Companies like Aarvee Denim and Century Textiles have posted a dip in net profits for quarter ended June 30,

2011. "Raw materials have risen in the recent past, especially in terms of cotton. We have been running on high cost inventory since sometime. This has led to pressure on our bottomline. What's more, even the second quarter looks difficult because we still have a high cost inventory," says Utsav Pandva, chief financial officer of Aarvee Denim and Exports Ltd.

Talking about high cost inventory, Dilip Jiwrajka, managing director of Alok Industries Ltd. said, "We have made a conscious decision to keep our cotton inventory low because of high prices. We now have a less than 30 days inventory and run 'hand-to-mouth' as far as cotton is concerned. This has insulated us from constant fluctuations in cotton prices." On its part, Aarvee Denim still has an inventory of nine million kg of cotton meant for 4-5 months.

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Source of Information: I have picked articles from major business dailies like:

The Financial Express Business Standard The Economic Times DNA Reuters Hindustan Times, etc.

Selection criteria: Automotive news, other sectors like Energy, Power and any policy decisions related to Shipping/Transport/ Logistics industry.