26 April 2011;business-standard.com:Mumbai: Honda Siel Cars India (HSCI) will halve production at its Greater Noida plant from May because of a shortage of parts in the wake of earthquake and tsunami in Japan. “We are experiencing gaps in our supply chain due to the situation in Japan, resulting in production cuts. We are moving to single shift operations from May, 2011,” said Jnaneswar Sen, senior vice-president, marketing & sales, HSCI. The production cut is likely to continue for at least three months. It is expected to cause a production loss of 7,500 units, as the plant operates at 60 per cent of its installed capacity of 100,000 units a year. Last week, Toyota Kirloskar Motor had announced a 70 per cent cut in production at its two plants in Bidadi, Karnataka, for 40 days from on Monday. Honda Motor, the parent company, has already announced a production cut at its plants in Japan following a shortage of components due to the impact of tsunami on its parts suppliers. “The situation with parts supply in Japan remains fluid, production of component parts and vehicles at Honda plants is at approximately 50 per cent of the original production plan. Honda will carefully monitor the situation and manage its operations accordingly,” the company said in a release. The waiting period for HSCI’s premium entry level sedan, City, is expected to go up to two months, from the current two weeks, in a few weeks. HSCI sells 3,500-4,000 units of the City a month. But it will not affect the company badly, as the model enjoys ‘strong loyalty’ locally without much competition in this segment, say analysts. Most of Japan-based Honda suppliers are making progress to restart production, and many either have or are ready to resume parts production. However, there are a few suppliers that have yet to resolve the challenge to resume their production, according to the company’s statement. Honda is trying to work with its suppliers to help re-establish their operations, while evaluating other possible sources for those parts in the supply chain. “Honda is making every effort to work towards a full recovery after July to reduce inconvenience to customers,” the statement said.
Tyre stocks rally since Modi deal, may not sustain
Monday, 25 April 2011
26 April 2011;business-standard.com:Mehul Shah:Mumbai: Shares of Indian tyre companies have gained by three to 13 per cent after German tyremaker Continental AG agreed to buy Modi Rubber’s unit last week. Since the Continental-Modi Tyres deal last Monday for an undisclosed amount, shares of Modi Rubber have rallied nearly 20 per cent. Other tyre stocks like MRF (up 12.1 per cent), Apollo Tyres (up 7.3 per cent), Balkrishna Industries (up 4.55 per cent), JK Tyre & Industries (up 3.1 per cent) and Ceat (up 3.3 per cent) have all gained since then. However, market experts are not impressed. “Whenever some deal happens, shares of other companies in the same sector are also going up. This has been the trend in the market in the recent past,” said S P Tulsian, an independent investment advisor. “The upmove in tyre stocks post the Continental-Modi Tyres deal is irrational and not sustainable,” he added. In the case of tyre companies, the outlook for the sector is not rosy. “There will be some pressure on margins of tyre companies in the next two-three quarters due to high natural rubber prices,” said Ashwin Patil, analyst at LKP Securities. “However, current rubber prices which are ruling at Rs 230-240 a kg are not sustainable and should come down to around Rs 180-200 a kg by that time.” Prices of natural rubber, which comprise a little over 40 per cent of raw material cost in tyre manufacturing, have increased 16 per cent in this year so far. Over the next 12-15 months, rating agency Icra expects the profitability of tyre manufacturers to be affected by the expected supply gap for rubber, despite robust demand for tyres. Domestic tyre manufactures are also facing the threat of increasing penetration of Chinese imports into the Indian truck and bus radial tyre segment.
25 April 2011;deccanherald.com:New Delhi: State-owned Indian Oil Corp, the nation's largest oil firm, today hinted at an imminent hike in petrol prices, whose rates have not been revised since January in view of elections in states like West Bengal. "We would do it (increase rate) at the earliest possible," IOC Chairman Ranbir Singh Butola told reporters here. In his first interaction with media after taking over as the Chairman of the nation's largest fuel marketing firm, Butola said IOC and other state firms had consciously decided not to revise rates of petrol to keep "the environment happy". The government had in June last year freed petrol pricing from its control and state-run firms had on as many as seven occasions changed rates in line with international prices before deciding in the second half of January to freeze rates. "We live in an environment (comprising of the people and the government). If we take certain action, the environment is going to turn against us," he said. IOC is losing a tad less than Rs 7 per litre on petrol currently. After including the local sales tax or VAT, the desired increase in price comes to about Rs 7.50 a litre in Delhi. "In our consideration, we decided to take these losses for sometime," Butola said. Asked if the petrol price will be revised soon after assembly elections are completed on May 10, he said a review "will take place soon." He, however, deflected questions on state firms acting at the behest of the government in not revising petrol prices. IOC was losing Rs 297 crore per day on selling diesel, domestic LPG and kerosene at government-controlled rates, he said. "We are losing Rs 18.11 per litre on diesel, Rs 28.33 a litre on kerosene and Rs 315.86 per 14.2-kg domestic LPG cylinder," he said. The company, whose debt is growing at Rs 5,000-6,000 crore every month on unchanged fuel prices, expects government to compensate it for the losses.
24 April 2011;business-standard.com:Sharmistha Mukherjee & Swaraj Baggonkar:New Delhi/Mumbai: As uncertainties persist over sourcing of automotive components from Japan in the wake of last month’s earthquake and tsunami, Japanese automaker Toyota has cut production in India while compatriots Honda and Nissan may have to follow suit. Nissan is still a minor player in the country but Honda, with 2.36 per cent share of the Indian market, is very strong in sedans with its City leading the mid-size segment. Toyota’s Corolla Altis is strong in a segment slightly bigger than City. Its new baby, Etios, which costs half as much as Corolla, is making waves with waiting periods of up to four months, which indicate incremental demand. With its bigger sedan Camry and utility vehicle Innova, the company has 3.34 per cent share of the market. Not surprisingly, rival Maruti Suzuki is talking about a rise in demand for its cars, especially SX4, the sedan. Although headquartered in Japan, Maruti is nearly independent in its India operations with high localisation. American Ford Motor, too, whose Fiesta is a force to reckon with among sedans, has similar sentiments. “There has been a sharp spurt in demand in the last few days (for SX4). We expect further increase in demand from here,” said Shashank Srivastava, chief general manager (marketing) with Maruti Suzuki. Another senior Maruti executive said the company was not facing any constraint in supplies but was closely monitoring the developments in Japan. It might look at sourcing parts from Germany and Thailand. Ford India executive director (marketing, sales and service) Nigel Wark, stating that it would take a few days to assess any shift in consumer behaviour, said: “We have received a very good response to our sedans over the past few days.” Toyota Kirloskar Motor on Friday announced a 70 per cent cut in production at its two facilities in Bidadi, Karnataka, till June. This may get prolonged as the message coming out of its Japan office on Friday was that the company will not return to pre-disaster production level until the end of the this year. The local content in Toyota Etios is 70 per cent and critical components like engine and transmission are imported. Honda Jazz, City and Civic have localisation levels ranging from 74 to 77 per cent while Accord’s is a mere 28 per cent. Nissan Micra has 85 per cent local content. Honda City, for which one has to wait a couple of weeks now, may take up to two months to get delivered. "That there is an impact on (auto component) supplies is a given, we will have to adjust our production accordingly," said Jnaneswar Sen, vice-president (marketing), Honda Siel Cars India. A spokesperson for Nissan's India venture insisted that operations at Chennai had not been affected, but a vendor who supplies parts to Nissan said the company was facing a crunch and the waiting period for the small car Micra had increased. The Micra diesel now has a waiting period of a month. "Japan is an integral part of the supply chain for the automobile industry globally," said Srivats Ram, president, Auto Components Manufacturers Association. According to data available with the industry body, components worth more than $10 billion were imported from Japan last financial year.
Maruti to shift 3 lakh units production to Manesar from Gurgaon
Sunday, 24 April 2011
24 April 2011;deccanherald.com:New Delhi: The country's largest car maker Maruti Suzuki India is planning to shift production of about three lakh vehicles from Gurgaon to decongest the old plant as soon as the two new units at its Manesar facility come up. The Gurgaon facility that has three units, currently produces nearly 9.5 lakh units per annum. Once the vehicle output is trimmed at the facility to 6-6.5 lakh units, the company aims to utilise the idle space and workforce to produce more engines and other parts there. "The Gurgaon facility is very congested and old. We need to reduce some production there. The plan is to reduce the output to 6-6.5 lakh units annually," Maruti Suzuki India (MSI) Chairman R C Bhargava told PTI. The company had rolled out nearly 9.5 lakh units from Gurgaon in 2010-11 out of a total installed capacity of 8.5 lakh units at three plants in the complex, spread over 300 acres of land. It produces models like Swift, M800, Omni, WagonR, Ritz, Alto, Eeco and Gypsy there. "We will shift the excess production to Manesar from Gurgaon... From the two new upcoming plants in Manesar that will have a total installed capacity of 5 lakh units, we should be able to do 7 lakh units," Bhargava said. At present MSI is setting up two new units inside its Manesar facility at a total investment of Rs 3,625 crore. The existing plant there produced about 3.5 lakh units in 2010-11. The two new plants in Manesar will have a capacity of 2.5 lakh units annually each. The company is aiming to open the second unit by September-October this year, while the third one is scheduled to be operational in 2012-13. On by when the company will start trimming its production in Gurgaon, Bhargava said: "We would like to do it as soon as we can do. It will depend on creation of new capacity and market demand." Besides vehicles, the Gurgaon facility also produces engines, manufacturing about 7 lakh units per year of the K-Series engines and about 4.5 lakh units per year of F, G and M-Series engines. Elaborating on how the company plans to utilise the idle space post-decongestioning Gurgaon, Bhargava said: "It will be mainly used for parts production. We will produce more engines and will ramp up the capacity." When asked by how much the engine capacity will be increased, he said: "We have not decided it yet, but it will obviously be matched with the level of car production." Besides Gurgaon, a separate entity -- Suzuki Powertrain India Ltd -- produces diesel engines at the Manesar facility. It has a capacity to roll out 3 lakh units per annum. MSI is also considering to set up its 7th plant, over and above the two upcoming units in Manesar, as it aims to sell up to 30 lakh units every year by 2015-16. The company's present overall vehicle capacity is 12 lakh units per year. Once the two new units at Manesar become operational by 2012-13, its total production capacity will go up to 17 lakh units annually. In 2010-11, the company's sales soared 24.81 per cent to 12,71,005 units from 10,18,365 units in the previous fiscal. Domestic sales increased by 30.08 per cent to 11,32,739 units from 8,70,790 units in the previous fiscal. MSI's passenger car sales during last fiscal jumped by 26.24 per cent at 9,66,447 units from 7,65,533 units in FY'10. However, its market share in this segment fell to 48.74 per cent from 50.09 per cent in 2009-10. Besides the fresh investments at Manesar, MSI is investing Rs 2,500 crore for its K-Series engine plant and setting up a dedicated R&D facility at Rohtak. Earlier, the company had announced to hire at least 2,300 people, mainly for its upcoming two new plants in Manesar, within next two years. At present, MSI, which is 54.2 per cent owned by Suzuki Motor Corp employs 8,617 people as on March 31, 2011.
23 April 2011;economictimes.indiatimes.com:NEW YORK: Those who think gasoline and food prices are high now should brace themselves for what is coming, a leading commodities strategist warns. "People may be surprised at how high prices can go," predicts Colin Fenton, the head of commodities research at JP Morgan in New York. Fenton, in Denver this week to talk to clients, said inflation is well under way in everyday items consumers buy, even if the consumer price index reports a modest 2.2% rate. As an example, he points to the little bag of chips that are a staple of sack lunches and sandwich shops. From November 2001 to August 2007, they were stable in price, rising only a penny to 34 cents. They now cost 45 cents, with a 6% jump the past 12 months. Gasoline prices are where consumers probably notice commodity volatility the most. But people need to fill their tanks to get to work, he said. Consumers may reduce their downloads from iTunes, the number of lattes they drink or cut their cable viewing, Fenton predicts, but they will keep buying gasoline. Last August, Fenton and his team turned bullish on commodities, and in January they issued a prescient warning that commodity markets had become too complacent about risk. While he couldn't have predicted the specific events that would push volatility higher -- uprisings in the Middle East and a massive earthquake in Japan -- Fenton's forecast soon panned out. Rising food prices contributed to revolts in the Middle East, which have contributed to higher oil prices, which in turn has pushed food prices even higher. Most revolts have occurred in countries where food purchases consume 35% or more of household budgets. Other countries most vulnerable to food inflation include Pakistan, India, Indonesia, Nigeria and the Philippines. But the real force of higher commodity demand comes from growth in emerging economies, especially China, which is hungry for fuel. Although US consumers may grumble, the Chinese government is in a much stronger position financially to absorb price hikes. Fenton predicts oil will hover around $180 a barrel by 2016. But not everyone is convinced that the strong demand out of China is sustainable. "The hard landing suggested by weakening Chinese stocks would no doubt burst the global commodity bubble, including agricultural product prices," predicts leading deflationist A. Gary Shilling. A reversal in China would hit other emerging markets dependent on commodity exports, dampening demand globally. But Fenton, who recently visited China, said that the country's economy looks solid and demand for transportation fuel remains high.
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