15 Nov 2008;business-standard.com:Danny Goodman:New Delhi: The special discount of Rs 8 lakh offered on the Honda Civic Hybrid is not sustainable by the car-maker and could be a strategy to clean up its inventory. On Wednesday, Honda had cut the price of the hybrid version of the Civic sedan from Rs 21.50 lakh to Rs 13.36 lakh and shocked the market with such an aggressive pricing.
However, while the company has sold 130 cars till today, it is offering only 190 cars under the scheme, which have been imported from Japan. "It seems we would be able to achieve this target in a few more days and the aim was to popularise the scope of the hybrid cars," says Jnaneswar Sen, senior general manager (marketing), Honda Siel Cars. Sen says the prices will revert to the original tag once the scheme ends. Sen adds that once the prices go up, he expects volumes to go down again, but asserts that the offer is not a inventory-cleaning method.
However, rivals say that Honda's strategy is meant to clean up inventory of hybrids which have been piling up in 2008. "This problem crops up in the case of cars that have the special edition tag whose inventory must be cleared within a given time span. In buying special cars like hybrids, year of manufacture matters especially during resale. Hence, the huge discount," says a senior executive of a leading Japanese auto-maker.
Other car majors in the country with hybrid models (existing or in planning stage) feel that they cannot follow such a strategy and the market is not big enough. The 4th largest manufacturer of cars – Toyota says it has no plans to speed up the launch of its best-selling hybrid car Prius in India. "We are studying the Indian market," says Sandeep Singh, deputy MD (marketing), Toyota Kirloskar. Industry CEOs say the Indian market is not ready for mass conversion to hybrid cars primarily due to its prohibitive cost arising from an import duty of about 104 per cent.
"The launch of the Scorpio hybrid is some time away," says Pawan Goenka, president (automotive sector), M&M.
Goenka says despite having to import key components of the hybrid vehicle into the country, it's cheaper to assemble a dual-fuel vehicle in the country than importing as a CBU.
Besides, the high price, industry sources say the infrastructure available for the largescale adoption of hybrid cars is not in place.
"Trained mechanics preferably by OEM or dealers are essential for the proper maintenance of the car. This is largely not in place, especially on highways and in the rural areas," says another source.
Honda Civic hybrid comes with a two-year preventive maintenance warranty or 80,000 km and standard warranty for two years or 40,000 km, besides roadside assistance for 4 years.
14 Nov 2008;business-standard.com:Nevin John & Swaraj Baggonkar:Mumbai: Tata Motors, which bought the marquee UK automobile brands earlier this year, has firmed up plans to develop a new platform for Land Rover to boost the prospects of the company.
Tata Motors, the world’s fifth-largest medium and heavy truck-maker and the second-largest heavy bus manufacturer, plans to develop a new platform for the Land Rover stable to win defence orders from Europe, China, Russia and India, sources familiar with the development said.
“We have plans for the defence sector and are looking for defence deals from overseas and also from India,” Ravi Kant, managing director, Tata Motors, told Business Standard recently. He declined to give further details.
Land Rover, with nearly 60 years’ experience, provides armed forces around the globe with light vehicles designed to meet a wide range of defence and peace-keeping roles.
The standard defence vehicle in the Land Rover stable is based on the Defender heavy-duty 4x4 platform. The military versions of Defender are based on the civilian version, having the same basic chassis, powertrain, axles and bodywork.
Tata Motors has also been providing defence solutions including armoured trucks for over five decades. The company has so far supplied over 10,000 vehicles to the Indian military and paramilitary forces. At the Defence Expo earlier this year, the company showcased the Tata Light Speciality Vehicle (TLSV), a reconnaissance vehicle, in an attempt to expand its offerings.
The company also makes light armoured troop carrier (LATC) with remote controlled weapon station (RCWS) designed for movement of troops and produces the armoured version of the Safari SUV for the army.
Tata Motors’ focus to help revive Land Rover’s fortunes may be governed by declining sales of the company. Land Rover sales dipped 11.22 per cent to 61,421 units in the July-September period as compared to 69,189 vehicles sold in the corresponding period last year. However, Jaguar sales have grown 17 per cent to 17,535 vehicles, thanks to its new brand Jaguar XF model.
Enam Securities in its recent report said that Jaguar and Land Rover (JLR) volumes are feeling the heat of a slowdown in the US and Europe.
Given their current situation, we expect that things could get bad on a fiscal basis, unless JLR operations revive in a hurry,” the report said.
14 Nov 2008;business-standard.com:Kalpana Pathak:Mumbai: State-run Indian Oil Corporation (IOC) has asked the Forward Markets Commission (FMC) to allow the company to hedge its refinery margins and end products such as petrol and diesel.
The country's largest refiner is also holding talks with the Multi-Commodity Exchange (MCX) to provide it with a platform to hedge refinery margins and end products.
At present, MCX provides a platform to oil exploration and marketing companies to hedge volumes for crude oil only.
"The purpose of hedging refinery margins is that you are assured of a particular level. As a refining company, we are more concerned about the refinery margins and our interest is to protect the same," said an IOC official. While exploration and production (E&P) companies are constantly exposed to the risk of fluctuations in oil prices, refiners and oil marketing companies (OMCs) are concerned about protecting their spread between crude oil and refined products (gasoline, diesel, naphtha, etc).
According to IOC, it has so far hedged anywhere between 5 and 10 million barrels of crude oil in 2007-08. It imports about 260 million barrels and it hedges less than 5 per cent of the same.
S V Narasimhan, director (finance), IOC, said, "The market has been very unstable in the past few months and thus we are not very aggressive on hedging. We are waiting for oil prices to stabilise and then we may take a position."
IOC earned $6.36 on refining every barrel of oil in the second quarter of this financial year as against $8.44 gross refinery margin in the same period last year.
In a trading activity, when an organisation hedges its portfolio, it is primarily taking positions in the future market and operating within a pre-defined band of possible loss or gain. On the one hand, this feature could help the player achieve certainty of future cash flows, while on the other it could also eliminate the possibility of gaining from any favourable market movements.
For instance, if an E&P company enters into a long-term supply contract with a buyer to sell crude at $80 a barrel, it would not be able to benefit if the crude prices increase beyond $80.
An E&P company is exposed to the price risk for the entire duration of its business cycle (usually a year), thus exposing it to higher oil price risk with potential to impact the bottom line as well the top line. On the other hand, the oil refining and marketing companies are exposed to these risks only for the length of the input purchase to the product sale period, which ranges from few days to a couple of months.
In view of the volatility in global oil prices, the RBI in November 2007 had allowed domestic oil refining and marketing companies to hedge their price risk to the extent of 50 per cent of their inventory using OTC/ exchange-traded derivatives overseas.
But the companies have been playing safe so far. BPCL, which hedges crude oil to bring stability to its refining margins, says it is a fairly new territory for the company and it is still on the learning curve. BPCL trades around 20-25 per cent of its hedgeable products on OTC exchange.
BPCL's Mumbai refinery reported a gross refinery margin at $1.82 a barrel in Q2 FY09 as against $9.29 a barrel in Q1. In the first year of its hedging, it earned Rs 50 crore and says it will increase the amount this year.
14 Nov 2008:economictimes.indiatimes.com:Chanchal Pal Chauhan:NEW DELHI: Honda Siel Cars India sold 98 Civic Hybrid cars on a single day on Thursday, much more than what it managed in the entire five months The Civic Hybrid's efficient engine is only the beginning of its beauty.
More Pictures since the premium hybrid’s launch in India, thanks to a whopping Rs 8 lakh, or 40%, price cut. Honda is aiming to sell another 100 cars in the next few days. Company officials maintained that the reduced price is a limited-period offer—a marketing tack frequently used in the Indian auto industry.
With Thursday’s orders, Honda has sold out the first batch of Civic Hybrids it had imported from Japan. The second batch is already on its way. “A big consignment of these cars will be reaching India in the next few days. We will also take more orders as per the demand from our dealers,” the HSCI spokesperson said.
Civic Hybrid, at its new price of Rs 13.36 lakh, is now almost cheek by jowl with the petrol-fired Civic, which costs Rs 12.86 lakh (ex-showroom Delhi) for the top variant. The price parity has led to increase in demand for the hugely fuel-efficient hybrid in metros like Mumbai and Delhi, and fuel-sensitive areas like Punjab and Hyderabad.
14 Nov 2008;timesofindia.indiatimes.com:Pankaj Doval:NEW DELHI: Maruti seems to have come off age after more than two decades it was formed as a joint venture between Japan's Suzuki Motor and the
Indian government. The company is set to develop an all-new model from scratch by 2011 using its Indian engineering strength. I V Rao, managing executive officer (engineering) of Maruti Suzuki, told TOI that the company has been strengthening its engineering and design competencies as it plans to nearly double its engineering workforce by 2010 from 560. "We would like to close March next year with 740 engineers and reach 1000 by 2010," Rao said.
And speaking about the future direction for the Indian R&D team, he said, "Going forward, we would be working on a model that is conceived, developed and designed at Maruti by its own engineering team." Rao's statement indicates the fast-growing stature of Maruti within Suzuki's overall global plans and clearly brings out the future strategy of the Japanese carmaker.
Maruti has been emerging as an important arm for Suzuki's global operations. Last fiscal marked a turning point when it overtook Suzuki in terms of sales in respective home markets when it sold 7.11 lakh units to Suzuki's 6.73 lakh units in Japan. Suzuki has said that of the three million cars that it wants to sell worldwide, almost 30% would come from Maruti.
Maruti Suzuki's R&D capabilities began with modifying Suzuki cars to Indian conditions and have been growing in line with the company's rising sales performance. It has evolved over the years, becoming big enough to play a part in some of Suzuki's key global design projects like the Swift and the A-Star. Nearly 75 engineers at Maruti have trained in long-term projects at Suzuki, Rao said.
13 Nov 2008;economictimes.indiatimes.com:WASHINGTON: The weak US economy will slash America's oil demand this year by 1.1 million barrels per day, or 5.4 per cent, the first time annual
oil consumption will fall by more than 1 million bpd since 1980, the federal Energy information Administration said on Wednesday. For 2009, total US oil demand was projected to drop by an additional 250,000 bpd, or 1.3 per cent, the Energy Department's analytical arm said in its new monthly forecast.
"The current US and global economic downturn has led to a decrease in global energy demand and a rapid and substantial reduction in crude oil and other energy prices," the agency said.
The EIA lowered its estimate for US real gross domestic product growth to 1.3 per cent this year and projected GDP will decline by 1.4 per cent in 2009.
The US average unemployment rate was expected to jump to 7.9 per cent next year, the EIA said.
World real GDP growth was projected to slow from about 4 per cent in 2006 and 2007 to about 2.5 per cent this year, and to 1.8 per cent in 2009, the agency said.
Global oil demand was expected to increase by only 100,000 bpd this year and remain virtually flat next year, the EIA said.
Between 2007 and 2009, oil consumption in non-industrialized countries, especially China, Latin America and the Middle East, was projected to rise by 2.3 million bpd, which will be offset by a 2.2 million bpd decline in demand in industrialized nations, including the United States and the European Union, the agency said.
As a result of the sputtering economy and lower petroleum demand, the price for the US benchmark West Texas Intermediate oil will average $63.50 a barrel next year, the EIA said.
The agency said OPEC's planned oil production cut of 1.5 million bpd "may limit, but not reverse" the recent sharp drop in oil prices.
EIA said it expects OPEC's crude oil production to drop from 32.3 million bpd in October to 31.3 million during the first quarter of 2009 and remain relatively stable through the end of next year. The 1 million bpd decline would represent about 70 percent of OPEC's announced production cut.
"We project oil prices to remain relatively flat, averaging $60 to $65 per barrel throughout 2009," the EIA said. Oil hit a record $147 a barrel in July.
"The condition of the global economy is expected to remain the most important factor driving world oil prices," the agency said.
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