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Now, Honda and Mitsubishi follow Nano to Gujarat

AHMEDABAD: Nano is paving the way for global car-makers to drive into Gujarat. After Tata Motors decided to relocate its small car project here, Japanese auto giants Honda and Mitsubishi want to park themselves in the state. Officials from both Honda and Mitsubishi met representatives of Gujarat’s delegation that visited Japan last week. Teams from both the car companies met Maheshwar Sahu, managing director of Gujarat Industrial Development Corporation (GIDC) on November 11 and 12 in Japan. “Both Honda and Mitsubishi have shown interest in making investment in the state,” said a senior official in the chief minister’s office (CMO). A general manager from Honda and a senior executive from Mitsubishi met the 11-member Gujarat delegation comprising industrialists, representatives from Gujarat-based corporates as well as senior government officials. The delegation visited Tokyo and Seoul during their week-long visit and met representatives of Japan External Trade Organisation (JETRO) and Korea Trade-Investment Promotion Agency (KOTRA ) for the upcoming Vibrant Gujarat Global Investors’ Summit - besides holding 30 one-on-one meetings in five days. The state government has been hard selling the Delhi-Mumbai Industrial Corridor (DMIC) to the auto majors. Around 40 per cent of the corridor, which is being built in association with government of Japan, falls in Gujarat. “DMIC is one of the important factors behind Maruti’s decision to zero in on Mundra port to export 2.5 lakh cars. After Nano’s relocation, the state government plans to hard sell the corridor to Japan’s auto companies,” he said. Source: The Economic Times(18 Nov, 2008)

Car-makers are cutting output, say vendors

Mumbai: After commercial vehicle and two-wheeler makers, it could be the turn of car- makers to undertake production cuts on flagging demand as slowdown, high interest rates and shrinking availability of finance mar consumer sentiment. Some vendors say Maruti Suzuki may take a 5-8 per cent production cut this month as well as in December, though a company official ruled out such plans. In fact, vendors say that many auto manufacturers have already implemented a 20-40 per cent output cut in October on select models, which is likely to continue. “Barring Maruti and Hyundai (which has export support), several manufacturers undertook 20-50 per cent production cut in October on select models,’’ said a senior executive with a leading Delhi-based auto parts supplier. Most car manufacturers, however, denied undertaking production cuts. Vendors, who shared manufacturer-wise production cuts figures with this newspaper, feel the production cuts are aimed at keeping inventory levels under check. Car sales declined 6.59 per cent in October, dropping for three of the last four months even as overall automobile sales fell 14.42 per cent last month, led by truck and bus sales (down 50 per cent) and two-wheelers (down 18.17 per cent). “Maruti is moderating production in line with stockholding of its dealers,’’ said the CEO of a Delhi-based vendor. Though festivals in October and marriages in November helped boost sales, December promises to be a tough month for dealers. “Banks have become cautious (as they can’t send people to repossess vehicles) and are rejecting 20 per cent of the auto loan applications,” said Raj Chopra, CEO, Competent Automobiles, a large dealer for Maruti in Delhi and North India. This could, felt Chopra, bring down sales by 15-18 per cent as 90 per cent of the car purchases are financed. “December will be the real test. Sales are likely to drop 15 per cent in December because of rejections by banks,’’ said Chopra. “The feedback that we are getting from car-makers is that the slowdown has hurt sentiment and customers are opting not to buy new vehicles and save money,’’ said a senior executive with OEM supplier, who didn’t wish to be identified. Given the uncertainty, car makers are often revising their production plans twice a month while they never used to do so even once earlier. Maruti provides a tentative production plan for a month and a firm plan for 15 days, said vendors. “There’s nobody willing to commit for 2-3 moths. Almost every plan undergoes change in 15 days, depending on the stock-level of dealers. It’s difficult to look beyond one month,’’ said another CEO of an auto-parts manufacturer. Typically, December is the worst month for sales as customers defer purchases in the year-end, which has a bearing on the resale value. Some have deferred their purchases to buy new models, which will hit the market in the next two months. “If interest rates come down, it won’t take much time for a revival. It’s the reluctance of the banks and high interest rates that are holding back customers,’’ said Ashok Taneja, president, Shriram Pistons. Source: Business Standard(18 Nov,2008)

GM to sell stake in Suzuki to raise cash

TOKYO: General Motors Corp., a struggling U.S. automaker, will sell its entire stake in Suzuki Motor Corp. for 22.37 billion yen ($230 million) to raise cash, the Japanese company said on Monday. Suzuki said it would buy back a 3.02 per cent stake from the American auto giant, which is seeking a $25-billion government lifeline, together with Ford Motor and Chrysler. Source: The Hindu(18 Nov, 2008)

No price cut in two-wheeler industry: Bajaj

NEW DELHI: In response to a call by finance minister P Chidambaram to the auto industry for cutting rates, Bajaj Auto Chairman Rahul Bajaj today said there is no scope for price reduction in the two-wheeler industry in the near future. "The two-wheeler industry is not like other industries where the margins are 30-35 per cent. This industry has a margin of about 4-5 per cent only and in the near future we do not see any price cuts," Bajaj told reporters here on the sidelines of the India Economic Summit. Chidambaram earlier in the day had asked for a price reduction by car and two-wheeler makers to stimulate demand. Bajaj said price reduction was not the solution to the problem faced by the two-wheeler industry, adding that the main issue of credit availability to consumers still remains unaddressed. Expressing a contrasting view to that of Chidambaram, who stated price-cut would result in increasing market share, Bajaj said, "If everybody cuts price then how would the market share of one company increase." Banks need to cut interest rate for customers so that they can make new purchases, he said adding that excise duty reduction is not going to solve the problem. Asked specifically if Bajaj Auto would be willing to take the first step in cutting prices, he said, "Bajaj Auto, like every company in the industry, would respond to market- comparative situation as it believes that there is no reduction in interest rate as far as my customers are concerned." He also hit out at banks for not lending to customers. "Public sector and private sector banks are not lending to potential buyers of two-wheelers," he said. Source: The Times Of India(18 Nov,2008)