http://www.theautodiary.com/TheAutoDiary is Deepesh Rathore's take on the happenings in the global automotive industry and a first hand account of daily experiences.Copyright 2006-2007 theautodiaryRSSviaXmlTextWriter v1.0http://www.theautodiary.com/rpg.aspx?var=171The Indian component industry has been going through some anxious moments recently with the strengthening of the rupee (a bit) and the weakening of the dollar (a lot). The Rupee is currently hovering around INR41/US$1, down by around 10% from a year back. This is bad new for the auto component industry, particularly companies like Rico Auto who have a high exposure with the US based carmakers.While a 10% strengthening of the rupee is something that companies can live with by tightening their belts and removing the inefficiencies in their systems, a recent forecast that landed on my desk spells even tougher times for the component industry. Leading financial institutions forecast that the Rupee will strengthen even more from the existing levels. Most FIs forecast that the Rupee will strengthen to INR38/ US$1 - INR39 / US$1 levels by the first quarter of FY 2009, The optimistic of the lot forecast the Rupee to be at INR 42/ US$1 levels – definitely levels that the Indian supplier base can live with but it is the pessimists that they have to worry about. BNP Paribas forecasts the Rupee to hit INR32/US$1 in the first quarter of FY 2009. The only solace is that there is a big gap between BNP Paribas' forecast and other's so we can expect (hope?) some flaws in BNP's forecast. The next most pessimistic (or should we say optimistic since the Rupee is strengthening) is Morgan Stanley which forecasts the Rupee to be at INR 37.5/US$1. Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=170I am a great believer of conspiracy theories. That's why I continue to believe that the automotive sections in the last central government budget were penned under heavy Maruti influence (also under heavy alcohol influence, I presume) in the way they significantly benefitted the Numero Uno carmaker in India. Looking at how many Maruti models benefitted (and how many competitor models were shafted) overnight due to excise duty exemptions, the budget sure was good news for the company. Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=169Unlike other Bloggers who will blame everything from a blown Hernia to an air crash over the Amazon jungle (and a trek back home) for not posting for nearly two months, I will just blame the higher powers, i.e. God and my boss who kept me snowed under work.Needless to say, I am back.Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=168A recent comment on SupplierBusiness caught my attention. The comment is about the payment terms of French carmakers – it seems they are bringing the payment gap down from an astronomical 105 days to a more respectable 90 days. That left me wondering about the payment terms in India.While all OEMs have their payment terms with suppliers, the general time lapse between delivery and payment in India seems to be at around 30-60 days. That's quite good for an emerging market like India.However, there is quite some variation in this time lag between different OEMs.Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=167The year 2008 may be the final year for the ubiquitous Maruti 800. The government's safety norms are coming up in 2008 and the 800 cannot meet the crash test norms. Bidding adieu in 2008 - for similar reasons - will also be the Maruti Omni van and the Esteem sedan. Amongst other cars on Indian roads, the Ambassador cannot meet the crash test norms and will finally say its last hooray in 2008. Coming back to the M800, the car still sells about 5,000 units a month. That's a significant number, more than the total sales of a number of companies and is significant also because Maruti probably has 50-60% profit on every unit sold, having amortized every machinery, tools and dies, jigs and fixtures for the car.Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=166Warning: These are just my musings. The resemblance to any person, company or situation is completely unintentional.I have always wondered how typical Indian OEM-supplier relationships work. On a micro-level that is.I wonder how the Managing Director of a multi-million dollar supplier group greets the General Manager – Sourcing of a leading OEM. The MD of the supplier probably smokes Havana cigars, goes around in a chauffeur driven S-Class and has the Ritz-Carlton as a second home. On the other hand, the GM – Sourcing earns a modest salary like any senior executive in an Indian automaker does.And yet it is the OEM executive whose stamp of authority ensures 85% of the turnover of the supplier group. Yes, the Havana cigars are dependent on someone's signatures.Does the high flying Managing Director (HFMD) greet the modest earnings OEM purchasing executive (MEPE) with reverence?Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=165Bellsonica Auto Component Pvt Ltd., the Maruti-Suzuki joint-venture with Bellsonica Corp., is expected to reduce the contribution per vehicle of Maruti's existing sheet metal suppliers. The joint-venture was set up in July last year and is setting up a plant in Manesar, near Maruti's new production plant. Maruti-Suzuki holds 30% in the joint-venture with the rest held by Bellsonica – one of Suzuki's traditional suppliers in Japan.The biggest loser is expected to be Jay Bharat Maruti, Maruti's traditional medium-sized sheet metal components supplier. Along with Caparo Maruti, Mark Auto (now SKH Metals) and Rasandik Industries, JBML accounts for most of Maruti's sheet metal requirements. JBML is one of Maruti's top five suppliers in terms of valueThu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=164Maruti's SX4 has received a good reaction from the market and first month sales have actually surpassed the Honda City's. But then, this blog is not about celebrating the sales of the SX4. It is about what lies in Maruti's future.In the hysteria of the SX4 we have forgotten about the new three-box car under development on the Swift platform. Sources indicate that the car would be up for launch by March 2008. I assume that the same petrol and diesel powertrains that power the Swift hatchback will power the three-box version as well. Though the diesel may come with a variable-geometry turbo.Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=163If what the Financial Express reported today is true, then we are witnessing the second phase of the Tata-Fiat relationship. According to a news story today – Tata will focus on the lower end of the market and Fiat at the upper end. So the Tata One (small budget car) and the Indica range will be Tata's focal areas while Fiat will look at the Palio, Grande Punto and the Linea.Everything sewn up there till the C Segment but neither Tata nor Fiat has anything more upmarket than the Linea. One may argue that there is little to worry about beyond the Linea in the Indian market as the numbers are still quite disappointing, but hey a flagship never hurts and the Fiat brand especially can do with some dose of good repute. Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=162The other day, Ratindra Puri of Lear India made me sit up and take notice. The event was a conference organised by Worldwide Business Research (WBR) and Mr. Puri was giving a presentation on Lear's success in India. Lear has been here now for almost a decade and is the market leader in seats with significant presence in interiors (though that business has been sold off globally to IAC). The company is a major supplier on three new vehicle programs in 2006 and to four new ones in 2007. Significantly, Lear India is supplying to seven OEMs in India and is the only Indian supplier – apart from Tata Johnson Controls – to supply to BMW in Chennai.Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=161While discussing the potential of the Indian supplier industry in the global context with one of my European colleagues, I pointed out to him that most Indian suppliers are home-bred entrepreneurs, who have realized the opportunity window and mostly used the technical collaboration / minority equity stake method to bring in technical know-how, unlike China where most supplier ventures are joint-ventures with global suppliers, formed out of compulsion.Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=160Some of the most outrageous exchanges between automotive hacks and company execs during press launches of cars and bikes:Don Juan: “How much stake do you (Ford) own in Suzuki?”Jac Nasser: “Left Detroit three days back. None at that time. Lemme check the latest situation for you now.”Don Juan (red faced, sweating and explaining his complicated question to fellow journos): “I was asking about the indirect holding in Suzuki through Mazda.”Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=159A week full of deadlines kept me away from posting. I am back….again!Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=158Talking of BMW in the earlier post, I remembered the puzzle that still keeps my brain busy. BMW will invest Euro 300 million in India and they have a huge plot of land in Chennai. Yet their current plant is very small – you don't need much space to assemble, on average, 6-7 cars a day – and the investments in the current operations would not be greater than Euro 20 million. Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=157I recently bumped into a Project Manager of Strategic sourcing at BMW. The person was responsible for sourcing from India. While the sourcing from India is in the nascent stages only, BMW is gung-ho (isn't everyone?) about India. And to think of it, they have already taken the first few steps towards their ultimate goal.BMW currently assembles the 3-Series and the 5-Series at their Chennai plant in India. Here assembling is more of an illusion as the process involves tightening the last few nuts and bolts on the cars and doing a final inspection.Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=156The buzzword in the automotive supplier industry is “bundling.” That is the clubbing of requirements of a platform over many production plants to create greater volumes for a supplier and drive down costs. That along with global sourcing means that you get the best in the world that there is and at the most competitive prices there are.While things may not be as easy as they appear, global sourcing and bundling does present a number of new choices.Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=155Forewarning: These are just my Sunday morning musings on the upcoming Tata small car and not entirely supported by facts.The prototypes are undergoing testing and the small budget car is reported to be only 20% off its price target. This is a commendable job if the customers get a competent product.So, how is Tata planning to keep the cost of the INR 100,000 within the target price? Part I: Buy land cheap. Best, convince the state government to capture it for you and then sell it to you for throwaway prices.Part II: Design from scratch Part III: Early vendor involvement Part IV: Keep things in your family Part V: Keep the bakery close to the people who will eat the bread Part VI: Keep vendors close to you Part VII: Innovate in everything Part VIII: Keep fingers crossedThu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=154The earlier post on product placements in movies made me dig this out. This is an earlier column penned by me and published in a now defunct magazineThu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=153The upcoming movie ”Tara Rum Pum” has some in-movie-advertising of GM in the form of brand Chevrolet. The movie's star, Saif Ali Khan, is a stock car racing champion for the Chevrolet team. Sure enough, one can make out Aveo stickers on the racing machine.Not good direction – the movie is based on stock car racing, an American sport, and the Aveo is not a model, Chevrolet will be stickering on to their racehorse in the US of A.Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=152As a marketing weapon, that is.The TVS Star returns 102kpl, the Hero Honda Splendor – last I checked – returns 85 kilometers to a liter of fuel; the Bajaj CT 100 is a 101kpl bike.Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=151The Maruti-Suzuki SX4 is just around the corner. I have been invited to a test drive on the 25th-26th of April with our auto journalists but will have to decline due to prior commitments. So I will only get my hands on the SX4 after the official launch in May.Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=150Automotive reporting done by daily newspapers seems to be getting absurder by the day. Most of our reporting relies on ‘getting a byte from some senior executive' and then ‘weaving a tall tale around it'. There is very little research, no understanding about the functioning of the industry and simply no respect for facts. One of the leading business dailies today reports on Maruti-Suzuki bringing in the SX4 sedan. Nothing wrong in that and the piece seems to be well written till I reach the following paragraph:Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=149I was at the launch of the Chevrolet Spark yesterday. It's a good car, perhaps the most credible and promising product to have come out of GM India ever. The looks are smart and cute and the specs are promising. GM guys seemed to be gung-ho about the product.So how important is the Spark for GM India? The importance can be gauged from the fact that GM flew in a plane-load of top guys from Detroit for the launch, including the likes of Rick Wagoner and Nick Reilly. The usage of words like “critical” and “first priority” to describe the Spark's importance to GM India should be enough indicators that the Spark is the last weapon, for a while, in GM's Indian arsenal.And for the first time GM is not afraid to fight it out on pricing. The Spark starts at INR 309,000, though the air conditioning starts only at INR 332,000 and the top-of-the-line variant comes in at INR 424,000.Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=147Recently, there has been a buzz that Hyundai India may be looking at Union finance secretary Ashok Jha for the post of the President. Before you throw up your hands in despair and exclaim, “What the heck?”, have a look at the reasons.Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=84As a small kid, in the early 1980s, I grew up in the suburban town of Gurgaon - then more known for growing wheat and vegetables than rampaging Toyota Qualises ferrying sleepy teenagers.Things changed in 1983 when the government set up Maruti, in collaboration with Suzuki, and its car manufacturing plant came up on the outskirts of the town in a huge tract of land - approximately five square kilometres, or more than a 1,000 acres. Those were dull times - land was cheap. The government probably paid not more than INR 20,000 per acre for the tract, if at all.Cue 2007. Times have changed. Blame it to rapid industrialisation, the scorching growth pace of the service industry and the speculative behaviour of the realty business, land in the vicinity is floating at around INR 60,000 per square yard. Even if one was to look at a bulk deal, Maruti's 1,000 acres will fetch a cool INR 150 billion!That is USD 3.3 billion!!Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=83I was reading with interest today's news story on Hindustan Motors shutting down operations at its Uttarpara, West Bengal plant. That another plant in the Communists ruled state of West Bengal is facing labour unrest is nothing to be surprised of, but, what really bewildered me were the statistics at the HM Plant. Have a look - 4,500 workers belonging to five labour unions turn out a little more than a 1,000 Ambassador cars every month. That should send all management and productivity gurus running to consult HM on lean manufacturing.In all fairness, the same lot of workers also make a handful of RTVs, Trekker and Pushpaks (rural utility vehicles) and maybe a few hundred engines and some other components as well but hey, look at it any way, 4500 is a huge lot.Thu, 28 Aug 2008 00:56:51 GMThttp://www.theautodiary.com/rpg.aspx?var=80Not mine but something I remember since long. And these lines summarise the Logan quite well. The Logan is an exciting car for the Indian market. However, Mahindra and Renault do not believe in starting things with a bang. While there is nothing wrong with the specs, everything seems to be walking the safe (?) edge of mediocrity. The engines look competent, but nothing to get enthusiastic about, the price is very competitive but then the Logan is blessed with a styling that is as hot as Reema Lagoo. Those straight lines and triangular tail-lamps are not going to win a beauty contest anytime soon. Not even in the colour black.Thu, 28 Aug 2008 00:56:51 GMT