MOTOR

Auto makers stumble in India’s policy fog

Global auto makers which have rushed to set up factories in India to feed local demand admit they have been tripped up in the last 12 months by the country’s unpredictable policy-making.

After a stellar 2010-2011, when car sales grew 31 percent year-on-year, the industry has faced a staggering slowdown and radically different buying patterns - bad news for giant complex companies that plan years in advance.

“To say we’ve been wrong-footed would be an understatement,” the head of General Motor’s India operations Karl Slym told AFP on the sidelines of the country’s Auto Expo car show last week.

Shinzo Nakanishi, chief executive of Maruti Suzuki, the Japanese-owned market leader in India, admitted that “many changes have surprised us during the last year”.

The first factor was the Indian central bank’s decision to persist doggedly with an aggressive cycle of interest rate hikes to tame inflation. It raised the cost of borrowing on seven occasions in 2011.

Many customers who rely on credit to buy vehicles have either decided to defer their purchases or simply put them off altogether, meaning the mood of the Auto Expo was more sober than during its last edition two years ago.

In October, new car sales fell 24 percent year-on-year, the biggest dive in more than a decade, while sales over the full financial year to March are forecast to be flat compared with 2010-2011.

The second major swing has been the switch in demand from petrol-engined cars to diesel, caused by an unexpected change in policy that emerged from India’s finance ministry.

In June 2010, Finance Minister Pranab Mukherjee announced suddenly that the government had deregulated gasoline prices, leaving state-run energy companies free to increase their prices.

Subsidies and regulation for diesel, used by the country’s hundreds of millions of farmers as well as the truckers who transport most of India’s freight, remained in place.

“Thirteen times prices were raised. Each time the gap between petrol and diesel got wider,” Nakanishi lamented to AFP.

Today, diesel costs around $0.40 per litre less than petrol - a huge gap in a low-income and highly price-sensitive country.

Not surprisingly, four out of five buyers now purchase diesel-powered cars, but the industry with its complex supply chains and manufacturing plants was not ready to cope with such an abrupt change in consumer preferences.

The head of Ford’s operations in India, Michael Boneham, said the US giant was unable to produce the number of diesel units requested by buyers from its factory in Chennai.

“I don’t know where government policy is going to go on this issue,” he admitted to reporters last week, adding that the company had been “constrained”.

“We could have been selling significantly more diesels,” he said.

Most modern engine manufacturing plants are designed to be able to produce both petrol and diesel engines, but switching from one to the other requires significant investment in new machinery and tooling.

The other difficulty is that the vast and vital supplier base producing components for each factory needs time to adapt and catch up with any sudden change in demand.

Slym from General Motors complained that the industry has only partial visibility on major policy decisions that affect it.

“The budget is around the corner (at the end of February) and you can be sure that something will change,” he said. “And you don’t know about it and you can’t plan for it.”

He said there had been a sudden change in duties for companies importing car kits and assembling them into vehicles in India. The new policy increased import taxes by 65 percent.

“There are plenty of forums where we try to work together with the government, but at the same time there are these crazy things that happen that catch us all out,” he said.

Predicting the direction of policy in India is particularly difficult at the moment, with the government buffeted by a series of corruption scandals and assailed by critics.

Business leaders complain that government departments are sitting on proposals for fear of taking decisions that could be seen as corrupt, while Prime Minister Manmohan Singh has failed to push through his reform agenda.

After a year of few major announcements, in December Singh’s administration rolled out a flagship reform of the retail market, allowing foreign supermarkets to open stores for the first time.

The delight of Wal-Mart, Tesco and Carrefour, the main companies set to benefit, was to be short-lived. Two weeks later, after an outcry from shopkeepers and the opposition, the proposal was mothballed.

AFP

Micro opens showroom at Aththugalpuraya

Taking a giant leap in the automobile industry, Dr. Lawrence Perera trod into an adventurous venture and the most prestigious industry by turning out the first local car in Sri Lanka in 1999. Now his company has not only limited their range of products to cars but also forayed into the sphere by manufacturing vans, jeeps buses and tractors.

In the process of an islandwide expansion they have opened branches in Kandy and Matara. Their third branch was ceremonially opened in Kurunegala recently. The occasion was graced by Dr. Lawrence Perera, chairman of the Micro car company as the distinguished guest.

The branch has enhanced the beauty and charm of Aththugalpura by installing the biggest and modern showroom with all products being exhibited under one roof, in response to a big demand.

The huge demand for vehicles in Kurunegala will guarantee satisfaction by creating a tranquil business environment to cater to the wishes of all customers. Since being a agricultural area there is a heavy demand for tractors.

The company is expected to open branches in Anuradhapura, Ratnapura and Jaffna in the near future. Steps have been taken already to distribute spare parts throughout the country through their agents.

Whatever the distance may be, it is a special feature that Micro has standardized the Microproducts in every nook and corner of the island.

Customers are able to buy Micro products without any hindrance with their continuous guidance, and cordial service Micro products which consolidated the national identity with pride has already made a revolutionary change in Sri Lankan automobile arena.

Fiat boss says no merger with Chrysler before 2015

Fiat and Chrysler Group head Sergio Marchionne said in an interview published that he would need at least until “after 2015” to fully merge the two automakers and leave his post.

When asked how long he would stay in his job, Marchionne told the Detroit Free Press, said: “Nothing is going to happen until after 2015 unless I get hit by a bus.”

The newspaper, which did not name its sources, said the merger of the Italian auto giant and the third-largest US carmaker could be complete as soon as 2013. Fiat took over operational command of the ailing US automaker in June 2009, when Chrysler emerged from a government-supported bankruptcy. In June 2011, it took a majority stake and now controls 58.5 percent of the company. The two groups still operate independently, even if Marchionne is the chief executive of both. The Agnelli family, which founded Fiat and is the main shareholder with a 30.4 percent stake, supports the merger.

Marchionne’s comments echoed those he made in August 2011, when he said he planned to retire in about five years, but cautioned: “I wouldn’t focus on the date, I’d focus on the process.” He also intends for Chrysler to launch an initial public offering before he leaves his post. The Detroit Free Press reported that Marchionne was facing a difficult year at Chrysler, with only one major new product, the Dodge Dart, to be launched in 2012.

The car is to be unveiled at the Detroit Auto Show on Monday. In 2013, Chrysler expects to launch eight new vehicles.

AFP

Protesters decry economic divisions in car business

Members of the Autoworkers Caravan said Sunday the inequality underlying life in the United States was now evident across the auto industry.

The demonstration on the eve of the North American International Auto Show had drawn a letter of support from workers in Italy battling Fiat/Chrysler chief executive Sergio Marchionne.

“In Turin Italy, Fiat has blackmailed workers threatening to close down the plant, if they don’t forfeit their right to a national accord on work time and overtime, a part of their health care benefits and their right to strike against management pretensions,” said the letter from Loiacono Pasquale and other former union representatives from Fiat Mirafiori in Turin.

Wendy Thompson, a retired United Auto Workers member and former elected UAW official, said the objective of this year’s demonstration was to call attention to the gap between auto workers and auto executives.

“Auto executives, part of the one percent, are crowing about their return to profitability at this year’s autoshow,” said Thompson. “The one percent - not workers-are profiting from the rise in worker productivity,” she said.

The crowd for this year’s demonstration outside the auto show was smaller than in the past, roughly three dozen. But last year’s contract negotiations had cut into the interest in public protest.

Last year, the Autoworkers Caravan, which describes itself as an advocate for rank-and-file workers inside the United Auto Workers, was instrumental in pushing the union into negotiating wage increases for second-tier workers, who are paid less than more senior UAW members.

“In the past, we have been very successful in drawing interest in the concerns of workers who build the vehicles seen at the North American International Auto Show,” Thompson said. “The claim of new jobs overlooks the 150,000-plus auto jobs cut since the Wall Street financial crisis.

And some ‘new’ jobs are paying poverty wages,” she said.

AFP

Increase in motor vehicle licensing

The Motor Traffic Department (MTD) stated that new vehicle registrations in 2011 reached 500,000 with a significant revenue amounting to Rs 500 million.

The growth has attributed to ongoing mega road development projects, increasing investor participation in the economy with high volumes of loans granted from bank and financial institutions to the general public.

According to MTD sources the biggest increase has been in motor vehicles segments with 230,000 new registrations.

The registration of three-wheelers has been the second largest with the number amounting to 126,000. New registrations for agricultural vehicles have also risen in 2011. There had been an increased demand for driving licences. It is reported that at present, 5000 driving licences are being printed per day .

(IH)

Japan auto sales down 15% in 2011

Japan’s domestic sales of new cars, trucks and buses slumped 15 percent in 2011 mainly due to the huge disruption sparked by March’s quake and tsunami, industry groups said Thursday.

Sales fell to 4.21 million vehicles last year, the Japan Automobile Dealers Association and the Japan Mini Vehicles Association said, after the March 11 natural disasters damaged factories and crippled supply chains, forcing the likes of Toyota to shutter plants and halt production.

The industry was already suffering sluggish demand after state subsidies for the purchase of environmentally friendly vehicles ended in September 2010.

But a breakdown of the figures revealed that things were starting to look up for the industry.

AFP

INDIA: Visitors look at a Mercedes-Benz S600 car during the 2012 India Auto Expo in New Delhi. The world’s leading car makers launched new models in India on Thursday at the start of the country’s Auto Expo, eyeing a market that has slowed sharply but remains a hotspot compared with depressed Western economies. AFP