1st June 2020 Auto News

1. Maruti sells 13,865 units in the local market in May

2. Auto industry capex falls by a staggering Rs 26,000 crore in FY20

3. Auto majors struggle to convert online bookings to sales

4. Coronavirus impact: Toyota Kirloskar sales dip 86 pc in May

5. Closure of economic activities should have been reviewed carefully: Yamaha

6. Maruti extends warranty, service timelines till June end

7. ETAuto Opinion: Will 'Anti-China' sentiment spoil Sino automakers' fortunes?

1.

Maruti Suzuki sells 13,865 units in the local market in May

By Sharmistha Mukherjee, ET Bureau, Last Updated: Jun 01, 2020, 10.28 AM IST (Source: The Economic Times)

NEW DELHI: The country’s largest car maker sold 13,865 units in the domestic market in May after resuming operations at its manufacturing facilities in Gurugram and Manesar (Haryana) in a graded manner due to the COVID-19 induced lockdown.

“Likewise, the company’s showrooms opened in accordance with Centre and State guidelines in a graded manner across different cities. The remaining showrooms would open in due course if they are not in containment zone or if not specifically restricted by any local guidelines”, the company said in a statement.

Maruti Suzuki sold 125,552 units in the local market in the corresponding period of the last financial year.

The company exported 4,651 units following resumption of port operations at Mundra and Mumbai port, ensuring that all guidelines for safety were followed. The company also sold 23 units to alliance partner Toyota in this period.

The company resumed its manufacturing operations post lock down strictly in accordance with the government regulations and guidelines, from May 12th at its Manesar facility and from May 18th at its Gurugram facility.

Production also resumed at Suzuki Motor Gujarat Pvt Limited (SMG) from May 25th 2020. SMG manufactures cars on a contract basis for Maruti Suzuki.

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2. Auto industry capex falls by a staggering Rs 26,000 crore in FY20

By Nandini Sen Gupta,

TNN, Last Updated: Jun 01, 2020, 10.07 AM IST (Source: The Economic Times)

(This story originally appeared in

on Jun 01, 2020)

CHENNAI: An 18-month slowdown and the pandemic-triggered lockdown has resulted in a sharp decline in planned investment by the automobile industry. The auto and component industry combined will see its overall capex shrink from Rs 31,750 crore in FY19 to an estimated Rs 26,000 crore in FY20 - a drop of 18%, according to a report by Crisil.

Individual segments will however see a much sharper drop as the BS6 transition investment is already in place and the overall auto industry is working with 50% capacity utilisation. "Between this year and next year, auto OEMs (vehicle manufacturers) will see a capex contraction of 30- 35%, whereas component companies may see a contraction of 40-45% depending on their exposure to commercial vehicle market and export," said Anuj Sethi, senior director, Crisil Ratings. The reason is because there are "no major regulation requirements in the next couple of years and even after recovery next year the capacity utilisation will be less than 70% with companies investing only in new model, R&D and electric mobility".

Auto makers including TVS and Ceat have announced capex cuts. Ceat has announced a 33% or Rs 250-crore cut in capex to Rs 500 crore, while TVS Motor has announced a capex of Rs 300 crore down 58% from the Rs 719 crore spent last year. Others like Hero MotoCorp have announced they will defer capacity expansion and other investment plans.

Bosch has announced that it has cut its capex by half due to slowdown in the auto market amid the pandemic. Auto parts makers' trade body ACMA has announced that parts makers will defer planned capex of around $4 billion till 2022 to preserve cash and tide over demand and supply disruptions due to Covid-19.

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3.

Auto majors struggle to convert online bookings to sales

By Lijee Philip, ET Bureau, Last Updated: Jun 01, 2020, 09.01 AM IST (Source: The Economic Times)

Mumbai: With the Covid-19 lockdown having brought automobile sales to nil in April automakers pulled out all stops to woo customers.

Hyundai, Maruti Suzuki, BMW, Mahindra & Mahindra, Mercedes-Benz and Toyota all recently announced digital car-buying initiatives. However, companies are yet to see online enquiries translate into major sales of vehicles.

Dealers are far from convinced about the digital strategy. While online enquiries have gone up in the past few weeks for most manufacturers, they’re not getting converted into sales, dealers said.

“Automobiles continue to be an engaging purchase and take a longer time to buy. Web enquiries have overtaken walk-ins and are likely to continue post-Covid days,” said Shashank Srivastava, ED, marketing & sales, at Maruti Suzuki. “Conversion to sales continue to be the highest for referrals on the back of existing consumer loyalty.”

Manufacturers said the prevailing conditions are preventing consumers from purchasing cars. The lockdown had stalled economic activity across the country.

“There is income uncertainty that is pushing consumers to postpone discretionary purchases,” said Vinay Raghunath, head of auto practice at EY. EY’s recent study mentions that Indian customers prefer online and contactless modes of purchasing, especially while researching vehicles. However, online sales are rare due to limited awareness, options and flexibility. An integrated ‘phygital’ platform with a digitally enabled agile salesforce will become a critical success criterion to tap into select consumer segments.

Tarun Garg, director of sales & marketing at Hyundai, which launched its ‘Click to Buy’ online sales platform last January, said that online enquiries are happening, but it's taking longer for consumers to decide and buy. A typical conversion to sales takes more than a month nowadays compared with 15 days earlier.

Dealers are hopeful that as the lockdown is lifted, customers will become more confident and start visiting dealerships. Manufacturers have mapped 28 touch points in the car-buying process, from start to final purchase, said Nikunj Sanghi, an automotive dealer.

“While we have digitalised almost 25 points, financing, test drives/registration and delivery need a physical interface. Consumers want to physically see and inspect the vehicle before taking delivery,” Sanghi said, adding the business module of physical dealerships won’t be eliminated, especially because registration and final deliveries will happen at the dealerships.

Vinkesh Gulati, VP of the Federation of Automobile Dealers Associations, said online sales in the auto industry won’t be easy. Given the Indian auto product line-up, customers will buy vehicles after test drives for quality and performance, unlike their European counterparts.

Luxury car maker BMW, which introduced four products during the lockdown, said that while web enquiries have been good, conversion to sales has yet to take place because vehicles could not be despatched or delivered.

Mercedes-Benz, on the other hand, got bookings for 100 cars, a mix of new and pre-owned cars, through its online initiative launched last month, but walk-ins at showrooms were lower.

Lack of unanimity between car companies and dealers over the online sales approach needs a speedy solution, which would only augur well for the struggling auto industry, experts said.

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4.

Coronavirus impact: Toyota Kirloskar sales dip 86 pc in May PTI, Last Updated: May 31, 2020, 05.07 PM IST (Source: The Economic Times)

NEW DELHI: (TKM) on Sunday reported a 86.49 per cent decline in domestic vehicle sales to 1,639 units in May. The company had posted sales of 12,138 units in May 2019, TKM said in a statement.

"We are conscious of the dealer business conditions in various parts of the country and we have been prioritising production at our end as per dealer requirements, both in terms of quantity as well as the grades that they require," TKM Senior Vice President Sales & Service, Naveen Soni said in a statement.

The market has been slow and with demand being less, the company has been able to wholesale only 20 per cent of what it would have clocked under a normal situation, he added. "However, retail sales have been much higher when compared to wholesales, thereby helping us reduce the month closing inventory levels at dealerships," Soni said.

There has also been a significant surge in customer orders and enquiries online, through digital platforms, he added.

Soni said operations have resumed in more than 300 company sales outlets across the country.

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5. Closure of economic activities should have been reviewed carefully: Yamaha

PTI, Last Updated: May 31, 2020, 12.33 PM IST (Source: The Economic Times)

New Delhi: Japanese two-wheeler major Yamaha has said that complete closure of economic activities should have been reviewed carefully in a large country like India and a proper road map should have been planned to handle the coronavirus pandemic in the country. The company, which has three plants in the country, said saving human lives is the top priority for any nation but economic activities should not be shut completely.

"We must remember that India is one of the world's largest economy and is also the world's largest two-wheeler market. Complete closure of economic activities in this market as well as other markets in the world has led to a massive depression, the worst since Great Depression in 1920s. The recovery period from such depression will take a long time," Yamaha Motor India Chairman Motofumi Shitara told in an interview.

A nationwide lockdown was imposed in the country on March 25 in order to prevent the spread of coronavirus. The lockdown is still in force but with many relaxations, helping industries to resume operations partially.

He further said, "I would say the decision to shut down the economic activity completely should have been reviewed carefully and a proper road map should have been planned to handle the crisis which is not only affecting the businesses but the lives of each and every individual involved with it."

Shitara said that with chances of coronavirus never going away, people should be encouraged to work with effective safety precautions in place.

"As per the WHO, COVID-19 may never go away. Concerns are growing about a second wave of infections. And perhaps a third. In such a situation, we may have to learn to live with coronavirus and everyone should start thinking in this direction," he added.

Shitara said that while lockdown has certainly helped contain the pandemic but it would be difficult to assess the complete picture whether it has been a complete success.

"We are observing that despite the continued lockdown, the states have witnessed a surge in coronavirus cases in the past few weeks," he noted.

Last week, Chairman Anand Mahindra had mooted moving away from the term "lockdown", saying it needs to have a defined tenure.

He had stated that lockdown extensions are not just economically disastrous but also create another medical crisis due to its psychological effects.

When asked to comment on the sales outlook for the two-wheeler industry, Shitara said the current financial year will continue with stifled sales volume owing to low demand due to the prolonged lockdown, disruption in manufacturing operations and supply chain as well as stigma attached to social distancing.

"However, the demand is expected to gradually grow from the next fiscal although the total sales volume for the year 2020 will remain the lowest in a decade," he noted.

Shitara said that initiatives like reduction in GST rates on two wheelers would help in triggering demand to some extent.

He, however, added that there is some ray of hope for the two wheeler industry with various surveys predicting a shift towards personal mobility in the post lockdown period.

"Due to aversion from shared or public mobility, it is predicted that demand for personal mobility can be higher," Shitara said.

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6.

Maruti extends warranty, service timelines till June end

PTI , Last Updated: May 30, 2020, 04.09 PM IST (Source: The Economic Times)

New Delhi: The country's largest carmaker Maruti Suzuki India (MSI) on Saturday said it has decided to extend warranty and service timelines for customers by a month owing to the current situation. The company has decided to offer the free service, warranty and extended warranty to the customers till June end, whose validity is expiring in May, MSI said in a statement.

This initiative will give an opportunity to the customers who could not avail the previous service and warranty benefits due to lockdown, it added.

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7. ETAuto Opinion: Will 'Anti-China' sentiment spoil Sino automakers' fortunes?

Chanchal Pal Chauhan ETAuto, June 01, 2020, 07:32 IST (Source: Etauto.com)

New Delhi: The Chinese are the latest to join the Indian automobile bandwagon and though their delayed entry has made it tough to gain a strong foothold, the changing times with a growing anti-China sentiment snowbowling into a major issue now might change the scenario for these moneyed enterprises.

Chinese companies have been shopping around the world, and India’s large market size, infact the fifth largest passenger vehicle volume has caught their eye with a growth potential similar to their home market, now the largest in the world. There aren’t many Chinese automakers in India, but off late some have made an ambitious entry with massive investments lined-up. The car market dominated by Japanese and then led by the Korean show that Asian companies have a clear edge on the value-conscious Indian consumers.

The MG Motor India owned by the SAIC, China’s largest PV maker and the second one in the league is Great Wall Motors or GWM, that is yet to start operations after announcing billion dollar investments in India.

Besides, others too are lining up plans either as a solo journey or via joint-ventures with some Indian players. Brands like Changan Auto, Geely Auto Group or Chery Automobile Company are also vying the Indian market with great aggression. Reason; High value preposition at affordable price something Indian customers love comes handy for the Chinese who already have taken over the Indian smartphone market with the same quotient.

All seemed well till the 2020 in February, where the Chinese had the single largest foreign country participation. Infact these players GWM and MG Motors turned out to be the showstoppers of ‘Indian Motoring Show’ and ducked all other participants with their smart futuristic vehicles and next generations fuel technology like electric, fuel cell and hydrogen.

The smooth ride has gone awry by the fast spreading pandemic Covid-19 that forced two months long complete lockdown on the country and started a slew of economic woes that seems to have altered all equations. While many including the US President Donald Trump is blaming China for the global pandemic and the economic crisis, the chorus is only growing stronger in India too. In these times when the government is taking a policy shift that could only aggravate the problems for Chinese automakers in the Indian market.

Government Affairs and Approvals

India follows an automatic route for foreign originating investments into the automobile sector subject to conditions and approvals from the government at various levels. In the light of the post-Covid-19 changes, the government has put restrictions on investments from China after strategic investment into HDFC from one of the largest Chinese Bank had only prompted the Indian central government to put Chinese investments through government approval route instead of the original automatic.

Automobile sector has been a rather free area for most of the existing players. In the past most of the OEM originating from the US, Japan or Europe had smooth and seamless entry. The Chinese players entering the Indian market are on a different trip as most of them are acquiring brownfield plants and not going for organic greenfield plants that would require an array of permissions and approvals from various state and central governments. In the given scenario many Chinese entrants would face hurdles as they are low on compliance unlike the European and American players that would only delay their entry and projects.

The existing players; MG India has acquired the older plant of (GMI) at Halol in Gujarat and a fairly new entrant Great Wall Motors has taken the same route and acquired the newer GMI plant at Talegaon in Maharashtra. The latter would need several permissions from the state of Maharashtra and local bodies, besides the central government to acquire the plant and make it operational to roll out cars scheduled in early 2021.

Technology and Supply Chain

Each car is a successful composition of over 30,000 unique components and spares that needs a host of suppliers from various diverse fields with technical expertise. Same for every OEM. Whether Japanese, Korean or Indian and the Chinese.

The Indian supply chain is highly dominated by the Japanese and European component makers and almost negligent Chinese have any base so far

The Indian supply chain is highly dominated by the Japanese and European component makers and almost negligent Chinese have any base so far. It’s a big challenge for newcomer Chinese to convince these traditional suppliers to invest in their products and develop components for their needs. The Chinese vendors' base development would take years and decades and probably by that time the market and demand would eventually change making difficult for many to sustain and compete against global players in the Indian market.

Currently, we have two main Chinese players in the passenger car segments that are trying to find their feet into the market. While another one in the commercial vehicle segment Beiqi Foton that has established operations, but is yet to start rolling out vehicles even after 12-years of its existence in the Indian landscape. It has been a rough road for most of them till now, and the struggle could only intensify as we move ahead.

Also, Chinese native products are not known for superb quality and don't carry great brand value. It is difficult if many of the current suppliers associated with brands like Suzuki, Hyundai or Volkswagen, Renault or Ford would like to be associated with new Chinese companies in these uncertain times.

Retail Operations and Dealer Channel Partners

India thrives on retail operations. More for the . The diverse retail network with motivated dealer partners ensures super success to most of the OEM’s especially in tougher times. Maruti Suzuki carries the best of dealer partners as of now, having diverse businesses and accumulated wealth to bear the regular shocks of the economy and withstand market fluctuations with more vigor.

The Chinese come with a lot of money and ample resources. For instance, the first to enter the fray, MG Motor India came with a bouquet of incentives for its dealers and channel partners. It offers huge rental incentives and takes care of other incremental overhead costs along with higher profit margins compared to traditional dealers business in the range of 7-8 percent, giving their partners a decisive edge. This helped them to get many influential entrepreneurs into their fold and streamline the business even in tougher times.

MG Motors has set the benchmark for the retail operations in terms of higher dividends and returns to dealers that would obviously strain the resources of other fellow newcomers. The entry barriers for new players have been raised, who would find it utterly difficult to sustain business in the times of novel coronavirus pandemic where demand for new vehicles has come down merely to a trickle.

Customers Perception

India always has had a tightrope with its mighty neighbour. China has always been a suspected peer and also a global rival as its moves have been ingrained in the Indian psyche since the 1962 aggression that changed India forever with all its neighbours.

The average Indian customers always suspected the Chinese acts even as they have made massive inroads into the Indian market whether its telecom, apples, white goods, automotive components or leatherite. Chinese doesn’t come as a natural ally though it’s the largest sourcing market for auto components and critical technology parts for mobiles and other technology products too.

The latest episode of Covid-19 and its Chinese origin has totally changed the perception against China as a country, and as the economic powerhouse with sly intentions. Notwithstanding the border issue, the global pandemic has raised the question on the role of China in plunging the world in the worst health crisis ever experienced. The overall sentiment has been extremely sensitive to the Chinese design and their role shadowing the world order.

Indians are also wary of the incessant Chinese hunger for acquisition that has caused a huge dent in the perception of mighty and moneyed Chinese companies acquiring stakes into Indian operations. After cornering many startups and other new enterprises, they are already eyeing partnership with India’s largest automaker ’ passenger car business and their strategy to acquire American plants of GMI has not gone well with the Indian diaspora.

Resourceful Chinese companies looking to launch new products may face several strong headwinds in these rough weather of economic uncertainty and political thundering. If the situation deteriorates further, the situation could be much worse for the new players planning to enter the market.

The Indian automotive market is hugely dominated by the Japanese and then by Korean European and American as they thrive in a market that doesn’t allow import of older or used cars. Chinese are less than even one percent in terms of market share in the passenger vehicle market.

For Chinese telecom has been a success story, thereby dominating the lower strata of the smartphone market and the solitary auto player MG Motor India have had initial success with their tech savvy-internet cars Hector SUV and electrified propelled mobility the ZS EV. However, the going is assumed to be tough as Chinese carmakers may face severe challenges in acquiring talent from Indian market into their fold as they expand their automobile operations like their telecom and white goods counterparts.

This absence of corporate confidence is also leading to severe challenges from the dealer community, which reportedly is not coming ahead to participate with the Chinese players planned retail operations. Many of the entrepreneurs and dealers are in a cautious mode just like the entire country is for the time being as to what happens after the coronavirus pandemic allegations and the rising tension in the Ladakh region of the Himalayas that might only escalate into a major nagging issue for long and create a bed of troubles.

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