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Mahindra and Mahindra Ltd (M&M), India’s largest maker of utility vehicles, plans to launch at least eight models in the next 12 months, including variants of existing models.

The company intends to unveil a new sports utility vehicle (SUV) as well as variants of the utility vehicle Xylo and the small truck Maxximo, president of automotive and farm equipment Pawan Goenka said in a conference call with analysts.

All the models will roll out from M&M’s factories at Nashik and Chakan in Maharashtra. “It’s going to be one of the busiest years for us in terms of new product launches,” said Goenka.

The announcement follows the utility vehicle maker reporting a 40% jump in quarterly profits on 28 July, beating analyst estimates.

Ajay Sethia, analyst at Centrum Broking Pvt. Ltd, said the launches may not boost sales significantly unless they include a compact SUV. M&has M been planning such a launch, but did not speak about it on Thursday.

“The SUV, expected to be priced at Rs5.5 lakh, can lead to incremental volumes,” said Sethia.

Goenka said the demand for its models was robust, but the company was facing production worries as three key inputs—tyres, casting components and fuel injection systems used in diesel vehicles—were in short supply.

As a result, M&M had suffered a production loss of 7-8% in the June quarter. This included tractors, utility vehicles and smaller vehicles, whose combined sales rose 12% to 101,864 units.

The firm is now considering importing some of these parts, said Goenka, but the impact will only be visible by the third quarter of the fiscal.

M&M is also considering setting up a tractor manufacturing unit in Tamil Nadu. This will help the company compete with India’s second largest tractor maker, Tractors and Farm Equipment Ltd, or Tafe, which has a strong presence in the southern states.

Another analyst with a foreign brokerage said his firm is positive about M&M’s performance in the coming quarters, but he is sceptical if it can sustain the margins. “The margins can play a spoilsport for any auto company,” he said, requesting anonymity.

Shally seth
mint (Web & Print Edition)

Pune: Nearly three years after Bajaj Auto Ltd (BAL) pulled the plug on scooters, and stopped producing them at the Pune plant, Mr Rajiv Bajaj, Managing Director, has given the assurance that the company will return to making scooters.

The promise, however, comes with the rider that this will happen only after BAL gains recognition as a player of importance in the global motorcycle market.

“We will make scooters at some point of time,” Mr Bajaj told shareholders at the company’s annual general meeting (AGM), adding “but we have to be a globally dominant maker of motorcycles before that.”

Outlining the strategy, he said BAL wanted to become a specialist in marketing. “I don’t think motorcycles that succeed are (necessarily) better products, they are perceived as better products,” he said, adding that he wanted to compete by creating a right perception.

“When markets evolve, businesses have to be specialised, and only branded businesses make money.”

The way to specialise is through sacrifice, Mr Bajaj said, maintaining that by sacrificing scooters, BAL came to be perceived as a motorcycle specialist. “Though we make 3.5 million bikes (a year), our global market share is only 10 per cent,” he pointed out. “There is no reason why we cannot push for 30-40 per cent and do one thing well,” he said, reiterating, “We never said we’ll not make scooters, not at this point.”

Speaking about the car project, Mr Bajaj said that a new platform of three and four-wheelers was being developed and would most probably be made at Waluj which will help keep costs down. “We are not trying to make cars, but money-making cars,” he emphasised, adding that BAL believed in operating with 20 per cent EBITDA margins.

“We will put out a four-wheeler by 2012 and the capex on the project will be less than Rs 500 crore,” he said.

Alka Kshirsagar
The Hindu Business Line

Mahindra & Mahindra is betting big on the used-car segment. Rajeev Dubey, president (HR-after-market & corporate services) and member of the group executive board at M&M spoke to FE’s Ronojoy Banerjee on how the company is looking at increasing the number of used-car outlets across the country. He also spoke about how M&M is going to use its used-car platform to increase its spare parts business.

Excerpts:

What is M&M’s line of thinking as far as the pre-owned car business, FirstChoice, is concerned?

Our basic idea is to give pre-owned car buyers the same experience as the ones who buy new vehicles. We have created a stable service, sales and spare-parts division similar to what is provided to the new car segment customers. This way our pre-owned car customers don’t have to run from pillar to post and all facilities are provided to them under one roof.

What potential do you see in the used car or pre-owned car market in India at present? And how do you see it evolving over the years?

Currently, the pre-owned car segment is about 1.1 times bigger than the new car segment. It is roughly around 1.9 million units in India. Generally, when an economy develops the pre-owned car business grows rapidly. For instance, in US the pre-owned car business is 2.5 times bigger than the new car segment. At present, the pre-owned car segment in India stands at Rs 1,200 crore. By FY15, it is estimated to become an Rs 6,500 crore market. For M&M, the pre-owned car business is around Rs 450 crore.

But why do customers choose used cars over a new one?

As the disposable household income goes up, aspiration level too surges. On one hand, people don’t want to keep cars for too long and tend to sell off after a few years, increasing the supply of pre-owned cars, on the other hand, another segment aspiring for bigger cars are unable to afford a new one and so choose a pre-owned one. Therefore, there is a healthy mix of demand and supply. Since the pre-owned car business is getting organised, the transparency levels is increasing.

What are your future plans with FirstChoice?

We are a multi-branded pre-owned car business, present in 80 cities across the country. We are bullish and confident of creating a synergy between our three divisions: sales, services and spare parts. When this happens, there will be a strong eco-system for pre-owned cars.

Currently you are supplying spare parts to M&M products. Are you looking at increasing your supply of parts to other players and OEM’s too?

Yes. We are looking at supplying to other players. Our focus is still on supplying to M&M products. Once we are able to do that consistently, we will be looking to increase our share of spare parts to other players. We are going to leverage our used car business to expand our spare parts segment. Currently, our supply to others is very low.

Mumbai: Japanese automobile major Toyota will launch its new small car ‘Etios’ in December this year and sales will begin in January next year, a top company official said.

“We are setting up a new facility for our new car, ‘Etios’, which will be completed soon and the production will start a little ahead of December. We will launch the car in December and the sales will start in January next year,” Toyota Kirloskar Motor Private Ltd Deputy Managing Director Sandeep Singh told reporters here on the sidelines of a boot camp conducted for owners of its Fortuner SUV on the outskirts of Mumbai.

The company has invested Rs 3,200 crore to set up a new facility for production of the small car, with an initial capacity of 70,000 cars per annum, he said, adding that the company has utilised internal accruals for the investment.

The capacity of the new facility can be extended up to 2,00,000 cars per annum in two years. The company will produce 65,000-70,000 cars in the first year, he said.

The price of the new car will be above Rs 5 lakh. The company is looking for local components suppliers for the new car, he said.

Toyota is looking at exporting the small car from India to various overseas markets, which is likely to start within the next two years, Singh said.

The company is, at present, using the full capacity of its existing plant, with an output of 73,000 vehicles per annum. Next year, it will go up to 80,000, he said.

Innova is Toyota’s best selling vehicle, with 48,000 units sold every annum, followed by Altis with 13,000 and Fortuner with 9,000, he said.

New Delhi: Maruti Suzuki will launch next month a refurbished version of Alto, the decade-old compact, entry-level car that has been the fulcrum of its sales, as the country’s biggest carmaker looks to preempt the introduction of a similar product by rivals.

The Alto K10 will be powered by a larger 1000-cc engine and sport different exteriors and interiors, said Maruti officials involved in the project. The new product will be 125 mm longer than the vintage version and more spacious than the company’s badges in the so-called ‘B’ segment, Estilo, the old WagonR and A-Star, they said.

Maruti officially declined to share details about the car, but a spokesman said, “It will be an affordable, but aspirational product.”

The K10 will be priced in the `2.8-3.4 lakh range, squeezing between the Alto Lxi and Estilo LX. Only top-end variants Lxi and Vxi will be available.

Maruti’s decision to unveil an inspired remake of a best-selling model after a decade comes in the wake of rivals Tata Motors and Hyundai Motor India readying a similar car for the premium entry-level segment. Hyundai plans to unveil a model priced below its top-selling Santro while Tata Motors is working on a vehicle to fit between Nano and Indica.

The two companies are taking aim at a product that sold 2.4 lakh units, nearly a quarter of Maruti’s more than 1 million sales last year, and operates in a niche segment. Neither Nano nor a handful of small cars launched this year such as Ford Figo, Nissan Micra and VW Polo address the Alto’s market.

Instead, the Alto, rather its top-end Lxi model that contributes to 70% of sales and is priced at `2.8 lakh, competes with the `2.7-lakh Hyundai Santro standard and the Chevy Spark that costs `3.23 lakh.

“It is no longer about spotting the opportunity, but getting there first,” said a senior Maruti executive.

Maruti’s game plan is clear: as rival launches are not due anytime soon, make the most of the opportunity. “Everyone has realised it is a large segment,” said the Maruti executive.

The company is aware that it has to be careful with the K10’s pricing so as not to disturb Alto sales. Rather, it wants the new model to complement Alto’s market share, given the scale of volumes in the segment.

Experts said Maruti does not have a choice. The premium entry-level segment, notably a single model, is the nucleus of the company’s annual sales.

“Given that both the Hyundai and Tata models will undoubtedly boast high mileage and target big volumes, Maruti needs some quick rearguard action…they need to get it right first,” said an auto analyst with a top Mumbai-based investment bank.

Analysts said Maruti is looking to sell nearly 2 lakh Altos and up to 1.5 lakh K10s a year, raising the combined tally by 40%.

With the K10, Maruti is giving buyers another alternative in a particular segment, a strategy introduced by former managing director Jagdish Khattar and honed over the years. The B-segment is crowded with Maruti models Alto, WagonR, A-Star, Ritz, Estilo and Swift, which together contribute to more than 70% of its total domestic sales and is growing at a 16% clip.

“The whole idea of straddling a segment with multiple models is a very good one because consumers are very fragmented and within segments there are psychographic fragments. This fragmentation is possible because of the large volumes in the segment,” said the Maruti spokesman.

“The Alto K10 will help us tackle that trend and add additional volumes in the premium entry-level segment,” he said.

The strategy is also a perfect foil for the company’s inherent strengths – a formidable national network for sales and service and great fuel efficiency. Indeed, only a quarter of Alto sales come from the top 10 cities where competition is the most cutthroat.

“If we don’t offer more choice in every segment,” said the Maruti official, “our competitors will.”

Since its launch, the Alto has always turned out to be the bright spot in Maruti’s sales. But it faces serious competition, perhaps for the first time. For Maruti, owned by Japan’s Suzuki Motor Corp, it is familiar territory.

The company’s aggressive plans for the K10 is reminiscent of the time when it faced a slew of rivals in the small car segment in the form of the Tata Indica, Hyundai Santro and Daewoo Matiz in 1998. Maruti reacted by first cutting price of the M800 by `20,000 in December 1998, and then quickly rolled out a flurry of models—the Baleno in 1999, the WagonR early 2000 and the Alto around six months later.

Since then, its multiple-model strategy has helped it hold on to its market leadership. Given the margin pressures, a price war is no longer attractive. The twin-model strategy is considered the next best alternative.

In marketing terms too, the new car will attract first-time buyers who may have been looking for something more aspirational in the entry mid-size range. At least 60% of Alto buyers are first-timers, so catering to this section could turn out to be rewarding.
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