Motoring to perdition?

 

 

Globally, the entire sequencing of recent events has been somewhat vague. From the oil price super-spike to the sub prime crisis, it seems that the entire vicious cycle has been in line with the thinking of a casualist: “Everything is a matter of chance”. Almost like a house of cards, things have been falling apart, with no primary cause in sight. In the heat of the argument, while determining the real cause and affect may pretty much lead to nowhere, many believe that the automotive industry is actually the doomed progenitor everyone was looking to blame. Though the industry itself blames the housing bubble that burst in the US as the main cause of concern, the world’s insatiable demand for wheels and propellants has never been so lofty and expensive. And now that the correlation in the global economy is at an all time high, the effects are widespread.

If more than $10 billion bailout package for the US auto industry is anything to go by, the jeopardy the automotive industry faces was never so grave. Now, even the relatively ensconced markets like India are not safe, as the façade of robust consumer confidence is completely shattered. The later part of 2008 has been the messenger of worst things to come. In the last two months of the year, sales declines have ridiculed the pompous praises which almost elevated the Indian automotive industry to a divine status, apotheosis you might add, but wait till you hear this: India’s largest car maker Maruti Suzuki lost 9.95 per cent in December, selling 56,293 units, almost 6,000 units less as compared to last year. GM India, riding on the sales success of its small car Spark, could not keep up the momentum and lost nine per cent, selling just 4,041 units. Even though the manufacturer has almost doubled its capacity, given the fact that its Talegaon facility (near Pune), is operational; there is immense competition at hand, and newer models are anticipated to fill gaps in the portfolio. However, GM improved its yearly sales, completing the year with 65,700 units (+10 per cent) in its kitty. On the other hand, Skoda Auto was perhaps the only car manufacturer which recorded a substantial increase in sales, selling 16,188 units, up 28 per cent.The Fabia compact has added the much anticipated volumes for the player, despite the fact that the present trends have subdued the otherwise positive year (for Skoda). However, others were not as lucky, and the overall negativity in the market took its toll on most. “After registering overall positive growth of 12.1 per cent YoY in the first half of FY09, Auto Sector volumes fell 9.3 per cent YoY (including exports) in October 2008 and further 10.4 per cent in November 2008, dragging overall industry sales growth YTD FY09 to 5.8 per cent YoY to 7.7 million units,” says Angel Broking analysis. The two-wheeler industry on its part demonstrated some difficult sustainability issues as well. Market leader Hero Honda, like its four wheeler maker counterpart (Maruti), lost close to 10 per cent. Selling 215,931 units, Hero Honda faced two tricky situations; one, there was a general lack of interest in the market; and two, the uncertainty in the market had busted all myths of early recovery, which has to be on a global scale. Hero Honda’s primary market strategy revolves around the entry level segment, a sector which comprises of lower middle-income consumers. The present downturn has had the most profound effect on such consumer groups, which are most susceptible to dilapidating market conditions; with many losing their jobs and finding it difficult to plan purchases. Even the uncertainties in the international markets are causing many people to consciously postpone their purchase decisions, in light to future percolations into India and its ‘seemingly volatile’ consumer market. Closing on Hero Honda’s heals was arch rival Bajaj Auto, which perhaps lost the most in the two-wheeler market. The Pune-based major sold 119,251 units in the year ending month, down almost 32 per cent. Even though factors such as those affecting Hero Honda were responsible for the anomaly, there was another major factor doing the rounds. The resurgence of Yamaha India, once left for dead after the expiry of its legendry RX100 days, has brought much discomfort in the premium segment-driven Bajaj camp. The recently launched FZ16 and YZF R15 bikes have become runaway success stories, bringing a lot of sales gains for Yamaha India. The Japanese major sold about 16,000 units in December 2008, recording a whopping 190 per cent growth. Industry pandits are of the view that Yamaha India’s slew of next generation models have successfully eaten into Bajaj Auto’s premium segment sales, dominated by the company’s Pulsar range (150, 180, 200, 220 DTS-Fi). Clearly, the company’s (Bajaj) faulty one segment (premium) strategy was the reason behind the massive sales fall.

Additionally, just as a multiplier effect, the downturn in the consumer market has had a toll on the component manufacturers as well. As per Angel Broking data, the credit period given to OEMs (original equipment manufacturers) has been extended from 34-45 days to 90-95 days owing to the difficult times the industry is going through at the moment. This phenomenon is universal for both the two and four wheeler component suppliers and their production might be effected. In a bid to fight back, the automotive industry is firing all cylinders to get back the sales numbers. Even though historically, yearend sales are generally low, on the grounds of ‘model year ending’, manufacturers were not sitting idle and praying. Apart from the huge discounts and enticing schemes doing the rounds, the year 2008 saw various launches in anticipation of better times. New entrants included the Honda Civic Hybrid, Bolero Hybrid, Maruti Suzuki A-Star and Mitsubishi Outlander. Even the turmoil hit tenure saw the launch of the much awaited Hyundai i20, supposedly a Hyundai Getz replacement. It seems that there will be no looking back for the auto manufacturers, as they will continue to launch newer models to supplement the old, almost undeterred by the present scenario. Hyundai on its part is ready to roll out the next generation Sonata Embera, with a brand new V6 engine along with the existing 2.4l petrol and 2.0l VGT diesel. Maruti Suzuki will start the year 2009 with the launch of the Splash compact along with a diesel variant of the SX4. Fiat India, which is already planning big for India, has planned to launch the latest Linea sedan and the Bravo (a niche offering). Fiat is counting on its resuscitation exercise in the year 2009 and is trying to use high growth markets like India to supplement its sales, lost at some other slow-growing and highly volatile markets. Also, GM is all set to unveil its Cruz sedan this year; the car will compete with the Toyota Corolla and Honda Civic in the A4 segment. Even niche players like Audi, Lamborghini, BMW, Mercedes and Porsche are not far behind, showing no signs of retreat. The year could well start with the launch of the new BMW 7 series and Audi’s soon to be unveiled Q5 and A5 ranges. As per market reports Porsche, the German sports car maker is ready to unveil the Panamera sports sedan in India, almost matching its international debut.

Supplementing the auto sales in the year 2009, the two wheeler manufacturers demonstrated their strength as well. Bajaj Auto is all set to get out of its troubles by its planned introduction of a brand new 125 cc bike as well as an updated version of the Pulsar 220 and 200 DTS-Fi. Hero Honda, TVS and Honda are also testing the waters to launch a slew of models in various segments, netting customers at different price points. Judging by these claims to fame, it is clear that even though the Indian auto industry is under scrutiny because of the ‘claimed’ impending doom of the global auto industry, there is an evident urge to rise from mediocrity.

It seems that even though the road to resurrection may not offer the ‘anticipated’ smooth drive; the suspensions have already been well oiled. No matter what the outcome, this will be a battle of grit and glory…