Mercedes-Benz India to domestically produce AMG vehicles in India

Source: Business Standard, Oct 20, 2020

New Delhi: Luxury car maker Mercedes-Benz India has decided to produce its high-end performance AMG vehicles sub-brand in India.

The company will soon roll-out the made-in-India ‘AMG GLC 43 4MATIC Coupe’.

Mercedes-Benz’s sub-brand having a wide portfolio of performance limousines, performance SUVs, SUV Coupes, and sports car in its wide portfolio in India, AMG has a dedicated retail presence through the ‘AMG Performance Centres’ located across Indian metros.

The AMG performance vehicles were introduced in 2010 in India, are currently imported as CBU (Completely Built Units).

At present, the AMG portfolio in India comprises the 43, 53, 63, and GT series of high performance vehicles across different body shapes.

“The decision to locally produce AMG in India underlines Mercedes-Benz’s clear roadmap for the Indian market and our long-term commitment to our Indian customers,” said Martin Schwenk, Managing Director & CEO, Mercedes-Benz India.

“We want AMG to be more accessible to the potential customers and play a bigger role in our overall portfolio we offer in India. This decision is an important milestone towards strengthening our AMG ambitions in India further.”

According to Schwenk, the AMG GLC 43 4MATIC Coupe is one of the highest-selling AMG models in India. “We are confident, the launch of the locally produced AMG GLC 43 4MATIC Coupe will drive in value and aspiration for our customers and help the dynamic SUV Coupe retain its top preference among the discerning AMG customers,” Schwenk said.

Auto retail sales grow 11.45% month-on-month in Sept

Source: The Hindu Business Line, Oct 08, 2020

New Delhi: Our Bureau Vehicle registrations in September grew 11.45 per cent on a month-on-month (MoM) basis, but fell 10.24 per cent on a year-on-year (YoY) basis, the Federation of Automobile Dealers Associations (FADA) said on Thursday.

Two-wheeler retail sales fell 12.62 per cent YoY, while three-wheelers declined 59 per cent and commercial vehicles (CV), around 34 per cent, said FADA.

Passenger vehicle (PV) sales showed growth for the first time since the easing of lockdown rules, rising around 10 per cent MoM in September.

“With the government’s persistent effort to unlock India, September continued to witness a rise in automobile registrations compared to the previous months. Product launches and vehicle availability played their part as catalysts. A lower base during the previous financial year also helped the cause,” said FADA President Vinkesh Gulati.

Growth drivers

The need for social distancing, governmental efforts to normalise business conditions and banks’ increasing willingness to finance vehicle purchases helped boost demand for entry-level PVs, Gulati added.

Tractor registrations also continued to go up, with 80.39 per cent YoY growth, FADA said. In the near term, it added, the government’s move to waive interest-on-interest on the moratorium of loans up to ₹2 crore will improve sentiment and encourage vehicle purchases during the festival season.

As banks and NBFCs roll out festival offers to woo retail customers, auto sales are expected to witness more growth and close at last year’s levels. PVs and two-wheelers are expected to lead the way.

FADA cautioned that with the festival season and Bihar elections round the corner, the risk of a Covid resurgence may play spoilsport in specific regions.

The inventory for two-wheelers stands at 45-50 days and for PVs at 35-40 days. Any dampening of sales going ahead will affect the financial health of dealers, it added. “FADA advises manufacturers and dealers to avoid building any further inventory as this may lead to a disastrous situation similar to the last two festival seasons, when sales were below the mark,” it said.

Auto companies show signs of recovery, increase dispatches by 13%

Source: Business Standard, Oct 01, 2020

Automobile manufacturers showed significant signs of recovery as they dispatched 13 per cent more vehicles to dealers in September as compared to the same period last year.

Tractor sales also increased, with largest tractor player Mahindra & Mahindra (M&M) selling 18 per cent more farm equipment — indicating that a good monsoon is driving the rural economy.

“Retail demand continued to be buoyant backed by a very good monsoon, higher kharif acreage, and continued government support, including higher minimum support prices for key crops. We are looking forward to a robust demand for the festive season ahead,” said Hemant Sikka, president, farm equipment sector, M&M.

However, dealers and analysts said the numbers could be buoyed by the companies’ effort to boost inventory ahead of the festive season and a real picture of recovery will emerge only after the festive period is over.

The country’s largest carmaker Maruti Suzuki India (MSI) reported a 30.8 per cent increase in total sales at 1,60,442 units in September. The company had sold 1,22,640 units in September last year, MSI said in a statement.

Sales of entry-level cars boosted the numbers for Maruti. Sales of mini cars comprising Alto and S-Presso stood at 27,246 units as compared to 20,085 units in the same month last year, up 35.7 per cent.

Two-wheeler sales showed the steepest increase, with largest two-wheeler maker Hero MotoCorp deciding that it can afford to hike the price of its products by 2 per cent. The company recorded its highest sales in a single month in the calendar year of 2020. “With the peak festival season coming up in the months of October and November, Hero MotoCorp remains cautiously confident of achieving yet another benchmark in post-Covid retail sales with the help of positive consumer sentiments and continued government policy support,” Hero said.

Commercial vehicles, however, remained under pressure compared to last year but improved sequentially, primarily led by sales of light and intermediate vehicles.

Analysts said the higher-than-average rainfall and increased kharif sowing drove demand for tractors and entry-level motorcycles. Yet, easing restrictions in urban areas, besides favourable base and inventory filling, led to higher passenger vehicle sales than two-wheelers during the month, they said.

“We expect festive season sales to be similar to last year for passenger vehicles and two-wheelers. We expect strong wholesales in September and October, followed by normalised level of volumes from November onwards,” said Kapil Singh, research analyst at Nomura.

September sales numbers also put Kia Motors India firmly in the Indian auto market, with the company recording its highest monthly sales in the month on the back of bumper demand for its latest offering — the Kia Sonet Compact SUV. Total sales of the South Korean carmaker’s Indian arm rose 147 per cent year-on-year to 18,676 units, making it the fourth largest four-wheeler seller surpassing M&M.

BMW also said on Thursday it would increase prices of its model range in India by up to 3 per cent from next month.

Harley Davidson to quit India, take $75 million in restructuring cost

Source: Business Standard, Sept 25, 2020

New Delhi: Iconic US motorcycle manufacturer Harley-Davidson, Inc. (Harley) will discontinue its sales and manufacturing operations in India. The move is seen as part of its global restructuring initiative, under which it plans to exit international markets, where volumes and profitability have been elusive.

Industry sources said that Harley is also exploring a strategic tie-up with India’s largest two-wheeler maker Hero MotoCorp. UK-based Triumph Motorcycles, Harley’s rival in the 500-cc and above segment, has a non-equity partnership with Bajaj Auto, under which it produces its products at Bajaj’s Chakan factory. Bajaj also handles the distribution for Triumph.

“We are open to all kinds of partnerships. Whenever there is a good match available, we will certainly evaluate,” Pawan Munjal, chairman at Hero MotoCorp, had earlier told Business Standard.

Harley is the third US automaker to shut operations in India during US President Donald Trump’s tenure.

In 2017, General Motors — an American multinational corporation headquartered in Detroit — wound up its operations in the country and sold its plant in Gujarat.

Last year, another US automaker Ford Motor Company pared back its interests and ceased independent operations in India. It transferred most of its India assets to a joint venture with Mahindra & Mahindra, after failing to gain a foothold for more than two decades in the world’s fourth-largest automobile market.

The departure is seen as the latest setback for Prime Minister Narendra Modi’s strategy to encourage domestic manufacturing that would keep more of the fruits of a gigantic home consumer market in India.

The move by Harley will result in termination of 70 employees involved in its India operations. It will retain only a scaled-down sales office in Gurugram.

Sanjeev Rajasekharan, managing director of India, has been transferred to Singapore, where he will be head of Asia and emerging markets of the company.

Harley entered the Indian market a decade ago, but has so far managed to sell only 27,000 bikes, barely half of what the country’s segment leader Royal Enfield sells in a month. In the first quarter of this financial year, it sold only 100 motorcycles and for the whole of last financial year, it was 2,470 units — dropping from 4,708 units in 2015-16.

The Milwaukee-based motorcycle manufacturer has been scrambling for years to grow sales beyond baby boomers in the US and has not posted retail sales growth there in the past 14 quarters.

Chief Executive Officer Jochen Zeitz, who took the reins at the company in February, unveiled a major ‘Rewire’ in July to boost profits by reducing Harley’s product portfolio by 30 per cent and investing in 50 markets with growth potential in North America, Europe, and parts of Asia Pacific.

India was one of the markets the company at that point committed to investing in more heavily. Thursday’s statement said the move to leave had been pushed through since August 6.

Harley said it now expects total restructuring costs of about $169 million in 2020, but warned that the restructuring programme — referred to internally as ‘The Rewire’ — was likely to incur more charges.

“The company had previously disclosed restructuring actions associated with The Rewire that were approved through August 5. Between August 6 and September 23, the company approved commitments to additional restructuring actions under The Rewire related to optimising its global dealer network, exiting certain international markets, and discontinuing its sales and manufacturing operations in India,” Harley said in its regulatory filing with the US Securities and Exchange Commission.

The company will incur a restructuring cost of $75 million, including one-time termination benefits of $3 million, non-current asset adjustments of $5 million, and contract termination and other costs of $67 million.

Harley has an assembly plant at Bawal in Haryana, where it assembles completely knocked-down (CKD) motorcycles for local sales. While this unit accounts for a bulk of its sales in India, the company also imports completely built-up (CBU) motorcycles, where the import duty is as high as 50 per cent.

In the past year, Harley has become a rallying point for the US government to push for reduction of import duty on American motorcycles. Trump has on several occasions pointed to what he has described as high import tariff on Harley bikes.

In July, Trump once again expressed his displeasure, saying that even after India’s February 2018 tariff cut from 75 per cent to 50 per cent on CBU units, the rate was still too high and not acceptable.

“He (Narendra Modi) gets 50 (per cent), and they (India) think they’re doing us a favour. That’s not a favour,” said Trump, referring to India’s decision of lowering duty to 50 per cent from 75 per cent in February this year.

A CKD unit attracts 15 per cent duty. Harley builds two models in India, imports 11 as CKDs, and four as CBUs. Growth in domestic sales has slowed of late — with sales of cars and motorbikes falling 18 per cent in the last financial year to March 31 from a year ago.

Auto sales recovery continued in August driven by festive push

Source: The Economic Times, Sept 09, 2020

The retail of automobiles continued to recover in August and the deficit with last year’s sales levels came down significantly as demand improved during festivals like Ganesh Chaturthi and Onam, showed vehicle registration data.

Vehicle registrations in the country increased by 4% in August over July. While the registrations were 27% less when compared to August 2019, it was an improvement over July, when sales were down 36%.

“With the start of the festival season and the government’s continued effort to open up India, the month of August saw good numbers when compared to previous months,” said Vinkesh Gulati, president of the Federation of Automobile Dealers’ Associations (FADA), a lobby of vehicle retailers.

“Apart from the rural market which was showing revival signs until now, urban centres for the first time showed initial signs of demand pullback,” he said.

The sharpest recovery was for the passenger vehicles segment with sales of about 178,500 units – just 7% fewer than August 2019. Two-wheeler sales were down 29% compared to the previous year, while three-wheeler and commercial vehicle sales declined 70% and 58%, respectively.

Tractors sales continued to be higher than the previous year for the third straight month due to good monsoon rains and better rural sentiment. The data were compiled by FADA from road transport and highways ministry’s VAHAN platform. The website captures vehicle registrations from 1,242 out of 1,450 regional transport offices in the country as some states are yet to migrate on to the platform.

The recovery may break momentum in September, cautioned Gulati, due to the Shraadh period this month which is considered inauspicious by some communities. During this period retailers would be focussing on following up on customer leads and generating an order book for October and November in anticipation of festivals like Navratri and Diwali.

Automobile manufacturers are planning record production for the months of September-November as they anticipate substantial demand recovery during these months, ET reported earlier this month.

Govt asks auto industry to cut imports, raise exports

Source: LiveMint.com, Sept 06, 2020

MUMBAI/NEW DELHI: Senior ministers of the Union government took Prime Minister Narendra Modi’s clarion call of Atmanirbhar Bharat forward and urged automakers to reduce their dependence on imports, increase exports, and make India a global manufacturing hub for automobiles and auto components.

“I request the auto industry to not depend on imports, develop import substitutes, and expand its export business. The government will support you in increasing production and boosting employment potential,” said Nitin Gadkari, the Union minister for road transport and highways, and micro, small and medium enterprises.

Minister of railways, and commerce and industry Piyush Goyal and minister of environment, forest and climate change Prakash Javadekar also urged the auto sector to boost local manufacturing at the annual conventions organized by the Society of Indian Automobile Manufacturers (Siam) and the Automotive Component Manufacturers Association of India (ACMA), held on 4-5 September.

This is also likely to boost the economy by creating enormous job opportunities at a time that the country is struggling to shake off the adverse effect of the lockdown imposed to check the spread of coronavirus.

Gadkari urged the industry to develop import substitutes and increase investment in research and development (R&D) and export volumes and said that the government will set up industrial clusters along the 12-lane, 1,400km Mumbai-Delhi expressway. “The expressway passes through the backward tribal areas of Haryana, Rajasthan, Gujarat, Madhya Pradesh, and Maharashtra. Land acquisition cost in these areas is low. The land rate in Gurugram or any big city is ₹2-2.5 crore per acre. I am willing to give you land in these areas for ₹10-15 lakh per acre. I request the auto industry to develop industrial clusters on the land parcels,” the road transport and highways minister said. Gadkari said his ministry will take the responsibility for connectivity to ports, railway stations and airports.

Citing examples of existing auto hubs, such as Sanand, Manesar, and Hosur, Goyal said India must look at boosting its domestic capabilities and expand its global economic engagement.

“The auto industry should reduce dependence on imports, specifically in areas such as steel, tyres, and electronic parts,” Goyal said.

Goyal said he has requested the industry to come up with a viable model for setting up semiconductor fabrication units, which will help increase production of electronic components.

“India needs to focus immediately on setting up fabrication facilities because that is the root of the entire electronics chain. The government is willing to extend support to set these up,” Goyal said. One or more large automakers may look at setting up such units, and even consider moving existing fabrication units from other countries to India, he said. “I think it should be driven by the private sector and the government setting up a fabrication unit is not a good idea.” Goyal said. The industry must aim to become a global manufacturing hub for sunrise sectors, including electric and autonomous vehicles.

The government is working with other countries to sort out tariff and non-tariff barriers, including a free trade agreement with the European Union for India to become a preferred supplier. “We are also considering a credit guarantee model to help exporters. Under the model they may get insurance of up to 90% of their export value. The scheme should be finalized soon,” Goyal said. Gadkari and Goyal also hinted that the government is considering an increase in duties on import of auto components. Javadekar said that the government was evaluating the possibility of reducing goods and services tax for two- and three-wheelers to revive local demand, while Gadkari said that the much awaited vehicle scrappage policy is in its final stages of approval and will be rolled out within a month.

Auto sales bounce back in August on low base effect, pent-up demand

Source:  business-standard.com, Sept 3, 2020

Signalling sharp recovery, automobile sales for most companies in India rose at a brisk pace in August over the same month last year, shows the data released by a clutch of companies on Tuesday.  

Despatches at India’s top two carmakers — Maruti Suzuki India (MSIL) and Hyundai Motor India (HMIL) — zipped past not only the pre-Covid phase, but also the months preceding the pandemic, indicating long-built pent-up demand. The inventory restocking ahead of the festive season also drove despatches. Car companies in India count despatches to dealers as sales.

MSIL’s domestic sales saw year-on-year (YoY) jump of 20 per cent in August, the car market leader said on Tuesday. During the month, the local arm of the Japanese carmaker despatched 116,704 units over 97,061 units a year ago.

HMIL, the second-largest in the pecking order, too, saw despatches go up significantly.  The maker of Creta and i20 models sold 45,809 units, up 20 per cent YoY, the company said. This is the highest volume reported by the Korean carmaker since January 2019, when it sold 45,803 units in the domestic market.

Even as sales are showing an uptick, carmakers are not celebrating yet.  “We would like to carry on with cautious optimism since uncertainty still surrounds the pandemic,” said Tarun Garg, director–sales, marketing and service at HMIL.

He attributed the good show in August to a relatively low base of last year, when the company sold only 38,205 units. He also credited it to the newly launched models, including the Aura, Tucson, Grand i10 Nios — all of which have been received well.

Subrata Ray, senior group vice-president at ICRA, said the sales are being driven by rural demand as well as inventory restocking at dealerships ahead of the festive season.

“The discount levels have reduced substantially, especially in the sub-Rs 10 lakh price bracket, indicating healthy demand momentum and improved demand/enquiries from first-time buyers. The low-base effect of August 2019 — when volume declined 32 per cent YoY — also optically supports overall YoY growth rate. We expect sequential improvement in volume to continue in September as well,” said Ray.

For MSIL, the increase — the sharpest in almost a year — came on the back of last year’s low base and brisk demand for models in its mini and compact segment. Albeit on a low base, sales in these segments advanced at a fast clip of 94.7 per cent and 13.4 per cent, respectively.  The company has been a beneficiary of the growing preference for personal transportation amid the pandemic.  

Mahindra & Mahindra’s (M&M) passenger vehicle (PV) segment — that includes UVs and passenger cars — was a saving grace and helped offset some decline in the overall auto sales.  It saw despatches grow 1 per cent YoY to 13,651 units.

UV major M&M, too, benefited from the month-on-month recovery in demand and improvement in supply chain-related glitches. Snapping a declining streak, the company saw moderate increase in its PV sales.  It grew by a per cent to 13,651 units over 13,507 units a year ago.   “We have been able to meet the uplift in demand by managing supply-chain challenges and going forward,” said Veejay Nakra, chief executive officer, automotive division, M&M.

Indian automakers’ demand outlook cloudy despite some respite in July: Fitch

Source: LiveMint.com, Aug 22, 2020

MUMBAI: Demand for automobiles in India continues to be uncertain even though the sharp slide in sales during April to June slowed in July which could reflect the release of pent-up demand following gradual easing of restrictions to contain coronavirus pandemic, Fitch Ratings has said.

“The auto demand continues to face several challenges and Fitch forecasts overall industry volume to decline by more than 20 per cent in the financial year to June 2021. This forecast could be revised down if the extent and magnitude of the pandemic are worse than we expect.”

The economic fallout from pandemic exacerbated the weak consumer sentiment that was dampened by the higher cost of ownership under BS6 — a more stringent emission framework adopted from April. This is likely to constrain demand from first-time car buyers as well as upgraders despite their preference for private transportation due to hygiene reasons.

Likely curtailment in private and public investments will weigh on demand for commercial vehicles (CVs), particularly medium and heavy commercial vehicles (MHCV), which are used in more cyclical end-markets.

The pandemic has also reduced the availability of financing as lenders exercise caution, particularly to weaker borrowers that form a significant customer base for CVs.

Monthly sales volume particularly in passenger vehicles (PV) improved markedly in July, benefitting from gradual easing in the government’s stringent lockdown measures that were imposed in last week of March. Nonetheless, PV volume remained lower on a year-on-year basis.

Domestic sales volume of PVs increased by 73 per cent in July from June and that of two wheeled vehicles rose by 26 per cent. However, the volume of PVs was 4 per cent lower and that of two wheeled vehicles was 15 per cent lower, although the declines were much smaller than the 50 per cent and 39 per cent respectively in June.

Within PV, sales of utility vehicles increased by 14 per cent in July following a 31 per cent decline in June, underscoring the shift in consumer preference towards compact utility vehicles, said Fitch.

CV volume continued to fall more sharply in July compared with PVs, with continued weakness in MHCVs. Ashok Leyland, a leading manufacturer of MHCVs in India, reported a 75 per cent decline in domestic MHCV volumes in July following a decline of more than 90 per cent in Q1 FY21 for both Ashok Leyland and the broader industry.

Sales volumes of light commercial vehicles (LCV) fared better with Mahindra & Mahindra reporting sales fell by 16 per cent in July compared with decline of 69 per cent for M&M and 80 per cent for the broader LCV industry in Q1 FY21.

The sharp volume declines reduced revenue and resulted in operating losses for most Indian automakers in Q1 FY21. Nonetheless, cost-saving efforts by companies, including Maruti Suzuki, M&M and Ashok Leyland, helped to reduce operating losses.

Hero Motocorp, one of the leading manufacturers of two wheeled vehicles, reported marginally positive operating profit on back of cost savings and lower operating leverage in its two-wheeler business.

M&M’s domestic auto volumes dropped by 78 per cent in Q1 FY21 but a smaller 22 per cent fall in tractor sales and higher margins helped to limit the deterioration in overall operating margins.

Tata Motors’s PV and CV volumes in India fell by 61 per cent and 90 per cent respectively in Q1 FY21, leading to an operating loss at the standalone level despite cost-cutting initiatives. The loss and working-capital mismatch due to production and sales disruptions caused cash burn in excess of ₹4,000 crore during Q1 FY21 but the company’s efforts to conserve cash by reducing investments and securing ₹4,000 crore of debt helped to marginally improve its liquidity buffer at standalone level compared with March.

Auto component sector contracts 12% to ₹3.49 lakh crore in 2019-20

Source: The Hindu Business Line, Aug 19, 2020

New Delhi: The turnover of the automotive component industry stood at ₹3.49 lakh-crore for the period April 2019 to March 2020, registering a contraction of around 12 per cent over the previous year.

However, the after-market in fiscal year 2019-20 remained stable, despite a downturn in the vehicle industry, at ₹69,381 crore, growing marginally by around three per cent over the previous year, the Automotive Component Manufacturers Association of India (ACMA), said on Wednesday.

The apex body representing India’s auto component manufacturing industry in its findings for the fiscal year 2019-20 also said that the slowdown in the domestic market reflected on imports of components. Component imports contracted by 11 per cent to ₹1.09 lakh-crore in 2019-20 from ₹1.23 lakh-crore in 2018-19.

Asia accounted for 65 per cent of imports followed by Europe and North America at 26 per cent and 8 per cent respectively. Imports from Asia declined by 7 per cent, while those from Europe by 22 per cent and from the US by 17 per cent, it said.

Exports contract

Exports of auto components also witnessed degrowth of three per cent to ₹1.02 lakh crore in 2019-20 from ₹1.06 lakh crore in 2018-19, ACMA said.

“The automotive industry faced a prolonged slowdown in FY 2019-20 with vehicle sales in all segments plummeting significantly. Subdued vehicle demand, investments made for transition from BSIV to BSVI, liquidity crunch, lack of a clarity on policy for electrification of vehicles and slow down in key export markets, among others, had an adverse impact on the performance of the components sector in India as also on its expansion plans,” said Deepak Jain, President, ACMA.

Speaking about the current situation, Jain said the auto component industry has displayed remarkable resilience in wake of the lockdown; the industry faced acute challenges on the working capital, production and dysfunctional logistics fronts.

‘Growth returning’

“However, with the unlocking of the economy, growth seems to be returning to the industry with uptick in vehicle consumption especially in two-wheelers, passenger vehicles and the tractor segments, although sales of commercial vehicles continue to be challenged,” he said. The long-term prospects of the component industry continue to be bright, especially with focus of the government on ‘Atma-nirbharta’ and global competitiveness of the industry, Jain added.

Govt urges auto firms to cut royalties to foreign parents: Report

Source: Business Standard, Aug 18, 2020

New Delhi: Commerce minister Piyush Goyal has asked automakers to find ways to reduce royalty payments to foreign parent companies for use of technology or brand names, two sources told Reuters, in an effort to boost local investment and reduce outflows.

In India’s competitive auto market, top-selling carmakers Maruti Suzuki and Hyundai Motor’s local unit pay millions of dollars in royalties to parent companies in Japan and South Korea for using their technology and brand to build and sell cars. Read the rest of this entry »