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30 new luxury cars coming to India

December 30, 2005 16:47 IST
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The Indian auto industry is well on track to becoming the third largest car market and 2005 saw it move in this direction with a spree of overseas acquisitions and slew of new models to cash in on the growing affluence of the Indian consumer.

Despite the highs and lows of 2005, the New Year promises to be a rush hour for the industry with global hot wheels on a passage to India. With auto majors betting big on luxury vehicles, India is expected to see 30 new cars on its roads in 2006.

The biggest among them would be Bugatti's Rs 10-crore (Rs 100 million) two-seater sporty Veyron. Also on the anvil are Rs 500,000 Rhino-Rover SUV from International Cars & Motors followed by Audi's entry-level premium car A4 at Rs 20 lakh (Rs 2 million).

This apart, General Motors' is expected to come up with its hatchback Aveo at Rs 450,000, Hyundai's premium mid-size Verna and Skoda's entry-level Fabia at Rs 600,000 each. Japan-based Honda will also launch the new generation Civic in May with an expected price tag of about Rs 10 lakh (Rs 1 million).

Car market leader Maruti, which will introduce a diesel version of Swift by 2006, is set to enter the sedan segment with YY4 at about Rs 10 lakh.

All in all, 2006 promises to be an exciting year for the industry. So, all you auto enthusiasts tighten your seat belts as India drives on.

However, in an eventful 2005, the automobile sector galloped to new heights. Its manifold achievements included a renewed overseas thrust of ancillary companies, getting its first testing facility, and foreign players driving into the country -- changes which will deeply influence the future course of the auto sector.

This notwithstanding the labour unrest, which made headlines, and volumes in the auto industry moving into a slower lane during the year.

The hope of the industry is now pinned on Finance Minister P Chidambaram's hint in November at tax sops for small cars. This is music for the ears of ever growing and upwardly mobile middle class.

"We will revisit the question of taxation on small cars at the earliest. Small car manufacturers are looking at making India a base for the global market. We have to keep pace with plans aimed at having small-car plants,'' Chidambaram stated.

The government taxes automobiles at 24 per cent - the upper end of the excise duty structure. Added to this are other duties, including natural calamity cess, education cess and Value Added Tax.

These add up to a tidy sum.

There was much to prove that the car and 2-wheeler industry was zooming ahead towards its chequered flag. The liberalisation of the Indian economy coupled its sustained growth rate of 7 per cent sees its clearest manifestation in the car industry. For not to far back, the humdrums Indian roads saw only Fiats and Ambassadors. But now the roads are buzzing with sleek cars, most of which are foreign brands.

The year saw some of the world's top luxury brands queuing up for the market. The grandeur of Rolls Royce, a name synonymous with Indian 'Maharajas', made a comeback after a gap of half a century with the company bringing in the 'Phantom.'

The other high profile launches in the luxury segment included Bentley Motors' Continental Flying Spur, Audi's A6 version, and German car major Porsche AG's convertible sports car Carrera Cabriolet.

The blockbuster came from the very Indian Maruti stable - Swift.

Indian auto ancillary companies' hit top gear and moved to overseas markets on an acquisition spree, even as some of the world's largest auto component majors like the Delphi, Visteon and Collins & Aikman are neck deep into financial troubles.

India's auto component manufacturers view global markets as an "unprecedented opportunity'' for leaving their footprints globally. It is 'Brand India' all the way. They are also looking out for cashing in on the growing trend of outsourcing of manufacturing to low-cost countries. This is the familiar wild geese model, when a country shifts a lower value added product to a lesser-developed country.

There were a series of Mergers and Acquisitions of foreign companies by Indian auto players. Bharat Forge acquired Sweden's Imatra Forging Group and China-based FAW Corp, Sundaram fasteners bought a German company and Continental Engines acquired the European operations of the Netherland-based Vege Motors.

The domestic component industry increased its output from a level of $6.7 billion to $8.7 billion, a 30 per cent jump.

Exports shot up from $1 billion in 2003-04 to $1.4 billion in 2004-05, showing a 40 per cent growth.

This will not only give them access to new technologies and client base, but also put them on track to reach the targeted $20 billion worth of exports by 2015, from the $1.4 billion now.

This year, India also became the only country after Japan in Asia to have a testing and R&D development facility. The government gave its nod to the Rs 1,718 crore (Rs 17.18 billion) National Automotive Testing and Research and Development Infrastructure Project. The facility being set up in Rae Bareli, Uttar Pradesh will mainly benefit original equipment manufacturers, insurance companies and road-building agencies among others.

The facility would comprise a test track spread over 4,000 acre, a crash test laboratory, an environmental lab and an electro-magnetic compatibility lab -- all the jing bang that will put the industry's growth on a faster track. It will be comparable to the best in the world and will be invaluable in India's quest to be a small car hub.

The industry witnessed a lot of fresh foreign direct investment flowing into the country in the shape of BMW, DaimlerChrysler, Toyota, Honda, Hyundai and Ford during 2005.

BMW followed the footsteps of rival DaimlerChrysler to announce a manufacturing plant near Chennai with an initial investment totalling 20 million euros (approximately Rs 110 crore). The company's plant will be commissioned in 2007 and will roll out the BMW 3 Series and 5 Series saloons.

The fact that India is being increasingly recognised by auto companies as the fastest growing market was reflected as Ford Motors' chief executive William Clay Ford Jr, popularly known as Bill Ford, made his maiden trip to India for the launch of one of its latest models Fiesta.

This apart, Citroen, Renault and Nissan are also firming up plans to assemble cars in India.

However, no carmaker has been in the news like Volkswagen AG. After keeping everyone guessing on the location of its investment, it came to light that Andhra Pradesh had paid money to an oufit floated by a corrupt company executive, which Volkswagen was not aware of.

Even as the company managed to exercise damage control after promising to return the money allegedly squandered by its point man for India, everyone is still guessing whether it is coming to India or not.

Another major incident that is going to permanently alter the scene of the Indian automobile industry was the clash at the Manesar plant of Honda Motorcycles and Scooters India (HMSI) which even prompted the Japanese ambassador to say future investment in the country might be impacted.

HMSI went through possibly one of its worst times after a workers' strife at its factory in Haryana took a turn for the ugly and the incident snowballed into a big political controversy.

The matter was finally resolved, but not before nationwide protests and debates, and intervention by none other than Prime Minister Manmohan Singh. Other companies affected by labour unrest included Omax Auto, Apollo Tyres, Toyota Kirloskar and Mico Bosch.

Volumes of several players nosedived during this period. But this hasn't deterred others like Toyota, Suzuki or Honda from ramping up investments for capacity expansion. The motorisation of the emerging markets, with China and India leading the way, is about to give the global motor vehicle industry a second wind.

A newly released white paper by Keystone India, The World's Top Auto Markets by 2030, projects that over the next quarter century, emerging markets will replace the mature markets of America, Europe and Japan as the primary driver of sales growth and will account for a staggering 69 per cent of industry sales and 87 per cent of vehicle registrations within a quarter of a century.

China and India will dominate this transition, as their combined shares of motor vehicle registrations will rise seven-fold from 5.3 to 37 per cent by 2030. While China is likely to become the world's largest motor vehicle market by 2017, India, due to its late start, is projected to come on strong, surpassing Japan within a decade, placing it third in sales.

Fuelled by rapid growth in population and per capita income, by 2030, India's auto market will almost match the United States in size.

The year saw a number of new car models and versions of existing ones being launched in the country by the likes of Honda, Skoda, Ford, and Toyota. So much so that the demand for this premium hatchback even caught Maruti by surprise. The company had to increase production for the model that captured the imagination of aspiring Indians and saw as many as 18,000 bookings within two weeks of launch. The other notable launch of the year was Toyota's Innova.

In the less visible commercial vehicles segment, Tata Motors tapped into large sales numbers with its mini truck, Ace. It took four wheels into traditional 3-wheeler space and by year-end the company talked of doubling production capacity. While Volvo became a generic name on trunk bus routes, Tata Motors kept its ties with Hispano Carocera in reserve and brought out instead the Globus/Starbus range.

April-November fiscal 2006 sales would be remembered for the sharp uptrend in sales of passenger carrying commercial vehicles, which may be a sign of the things to come in the near future. In the M&HCV category, that was up 6.05 per cent (down 0.99 per cent) and in LCVs, up 14.42 per cent (5.46 per cent).

During the third quarter, Tata-Daewoo's Novus truck was introduced in the domestic market. Better they did so; the commercial vehicles business is heating up. Force Motors formalised its tie-up with MAN for making commercial vehicles; Scania came seeking components; DaimlerChrysler India got vocal with plans for the Actros and even a Chinese brand was cited as candidate for local assembling.

In November, Mahindra & Mahindra Ltd (M&M) transferred its commercial vehicles business into a joint venture with International Truck & Engine of US. M&M also figured in 2005 car industry plans, announcing in February a joint venture with Renault to produce the sedan 'Logan' in India.

Although 2005 got off to a positive start with strong sales expected in the final quarter of the financial year 2004-05, the new financial year got off to an erratic start, courtesy the confusion over the deadline for emission norms. The mandatory Euro III norms became effective in 11 cities from April, the immediate fallout of which was a hike in car prices.

Auto companies have forewarned that the New Year would usher in with a price hike. Maruti, Hyundai, Ford, Skoda, GM, have all announced an impending hike in prices due to increase in costs of inputs and freight.

Nevertheless, the industry has managed to stay almost on a par in growth with fiscal 2005, particularly given the larger base from which growth is now measured. By end November 2005, overall domestic automobile sales at 57,96,372 units represented a growth of 12.86 per cent, trifle below the 14.85 per cent, same time in 2004.

Sales growth rate in 2-wheelers at 14.19 per cent (13.49 per cent for April-November 2004), 3-wheelers at 14.46 per cent (11.15 per cent) and light commercial vehicles at 20.56 per cent (24.21 per cent) improved or matched the year-ago trend. But it slid to a standstill at 0.92 per cent (27.29 per cent) in medium & heavy commercial vehicles and a steep drop in passenger vehicles at 5.77 per cent (21.54 per cent).

Car manufacturers attribute the slower sales growth to higher base volume, competing investment needs with the consumer and a likely sucking of demand by incentives. The trend coincides with a 2005 market; steady despite high crude prices and fear of inflation.

Agriculture was good; second quarter GDP growth rate was 8 per cent; incomes are rising and there is youth to fuel consumption.

In the 2-wheeler segment, Hero Honda and Bajaj Auto continued to play the numbers game with sales up by 19 per cent to just over 5.1 million units. The slowdown in the demand for scooters, however, continued with a decline of 5 per cent in the period under review.

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