Levy on diesel cars will not solve fuel pricing tangle

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Mumbai: With a diesel price hike out of the question, the Petroleum Ministry has now shifted its attention to the automobile segment. The idea is to discourage demand for diesel cars by imposing an additional levy on them. This is not the first time this has happened. In 2008-09, better remembered as the year when crude prices touched $147 per barrel, the Centre slapped an additional Rs 15,000- 20,000 on cars with engine capacities ranging from 1500cc to over 2000cc. Naturally, automakers protested but it was clear that the move was directed at large gas guzzlers, which were making the most of subsidised pricing in difficult times. Will the Government target the same segment this time around too? If it does, it is not going to help suppress demand for diesel. Diesel options galore Today, there are more small cars on the road and almost every manufacturer has a diesel option to offer. Over the last few months, with petrol prices galloping away to over Rs 70 per litre (diesel is Rs 46/l), customers are making a furious beeline for diesel compacts. The logical option is to extend the levy to small cars, too, which account for over 70 per cent of sales in the country. The downside is that it could severely affect demand at a time when steep interest rates are already dampening market sentiment. Skewed policy The auto sector, in its turn, believes that the Government would do well to hike diesel prices instead. “When carmakers have worked so hard to achieve cost-efficiencies, why should they bear the cross for a skewed pricing policy?” an industry veteran asked. Excise structure There are other issues to contend with from the viewpoint of the excise duty structure. Small cars are levied 10 per cent and these are categorised as vehicles up to four metres in length and with engine capacities capped at 1200cc for petrol and 1500cc for diesel. All other cars and SUVs pay a higher 22 per cent excise duty. Will the Government have different additional levies for (diesel-driven) small and large cars? Going by the 2008-09 experience, it would not be surprising if this ends up being Rs 10,000 for the compact range and twice as much for all other cars. Would this, in turn, be fair to the automobile industry? “Obviously not, but there is little we can do in the process,” an industry official said. Differential pricing Clearly, this is not a long-term solution for the fuel pricing dilemma that comes back to haunt the Government year after year. The best way forward is to have differential pricing for diesel supplied to cars and commercial vehicles except nobody has a clue on how to make this work. If past experience is anything to go by, this will only lead to mass-scale adulteration of fuels and corruption at the dealers’ end. There is really no way out for the automobile industry this time around either except that it will raise a lot of questions on consistency in policies. The other big risk will arise if demand for diesel cars continues unabated even after the levy. The Government will then have to get back to the drawing board all over again.

Hyundai Eon bookings open tomorrow

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Mumbai: The country’s second largest carmaker, Hyundai Motor India, has announced opening of bookings for the ‘Eon’ compact car from Saturday, October 1.

Around 13 years after launching its first model – Santro, the new small car is the company’s answer to the highest-selling car in the country, Maruti Suzuki’s Alto. On sales of around 34,000 units a month, the Alto had no competition in its segment till date.

Developed jointly by the company’s Korean and domestic R&D centres and manufactured at Hyundai’s plant near Chennai, the Eon follows the Korean carmakers ‘Fluidic Sculpture’ design philosophy. With a focus on space and fuel efficiency, it is targeted at first-time car buyers.

“Hyundai is committed to offer products with advanced technology to the Indian market. We are confident that the EON will set a new benchmark in the Indian market with regard to styling, performance, safety and convenience,” Mr H.W. Park, MD and CEO, HMIL, said.

Hyundai, which is also the largest car exporter form India, sells seven models in the country through its 330 dealers. These include the Santro, i10, i20, sedans such as the Accent, Verna, Sonata Transform and the Santa Fe SUV.

Cough up more for diesel cars now

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New Delhi: Delhi government has rasied the registration tax on diesel vehicles by 25 % on the existing registration rate from Thursday. The increase has caught many new owners unawares.

While the actual increase in the registration rate is not much – between 1 to 2.5 % – many owners feel the lack of formal notification by the transport department has created confusion at many transport offices.

While the regional offices had been informed of the hike, a copy of the notification was not available at many places. Those who had come to get their vehicles registered, complained that lack of clarity added to the confusion.

A public notification will be out on Friday while the transport department website has already been updated with the information, officials said.

The segment that will be hit the hardest due to the hike will be four-wheelers . Private cars, which pay one-time tax, will be paying fractionally more than before, depending on the cost slab of the vehicle. So, while a four-wheeled vehicle costing less than Rs 6 lakh will pay 5 % registration rate on the cost price; a car priced Rs 6-10 lakh will pay 8.75 % instead of the previous 7 %; cars costing more than Rs 10 lakh will pay a registration rate of 12.5 % now from the earlier rate of 10 %.

Commercial vehicles, which pay an annual fee, will be required to pay 25 % more on the existing annual rate as per the respective slabs.

The increase in tax rates is more of a disincentive than a revenue churner, said government sources. “The increase in revenue collection is around 10-12 %but it is not really the reason behind the move. The idea was to discourage consumers from buying diesel vehicles as they harm environment,” said a senior official.

Officials hope that the hike will discourage consumers from opting for diesel cars. Around 1,300 vehicles are registered in Delhi every day. Of these, approximately 30 % are diesel vehicles.

In the four-wheeled category , the ratio of diesel vehicles is even more- almost 40-50 %, said sources in the transport department.

Car sales growth seen slumping to slowest in decade: Crisil Reuters

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New Delhi: Car sales in India is crawling towards sub 5-percent growth, to their slowest in a decade, as rising fuel prices and higher cost of loans continue to bite, Crisil said, indicating further demand slump in one of the world’s fastest growing auto market.

The research firm said on Wednesday domestic car sales is now expected to eke out upto 3 percent growth for the fiscal year ending March 2012, sliding from an earlier forecast of 8-10 percent.

Crisil’s latest estimate is in stark contrast to 2010/11, when domestic car sales grew at a breakneck speed of 30 percent.

Industry body Society of Indian Automobile Manufacturers ( SIAM) expects sales to grow at 10-12 percent this year, but has indicated that estimate may be revised down.

“We have revised our forecasts downwards on account of a rise of 3 rupees in the petrol prices and a 25 basis points increase in interest rates. This would be only the second time in the decade when industry will grow at sub 5 per cent,” Crisil said in a note.

The Indian car market, which saw a 10 percent decline in sales in August, is driven by a burgeoning and aspirational middle class that relies on bank loans for such purchases.

But RBI has raised interest rates a dozen times in 18 months in an effort to battle near-double digit inflation, a move that has hurt credit-based purchases.

“While automobile financiers have not fully passed on the increased rates to end users, uncertainty regarding their decision to pass on the rate hikes, coupled with the burden of EMIs (equated monthly installments) of other loans would impact demand for cars,” Crisil said.

A timely resolution of an ongoing labour dispute and subsequent production loss at the country’s biggest car maker Maruti Suzuki is critical for the industry’s growth, Crisil noted.

If production remains constrained at Maruti, which accounts for roughly half the cars sold in India, industry growth will be “severely impacted,” Crisil added.

M&M, Honda gear up for key launches this week

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Mumbai: The next couple of days will see two vehicle launches. No big deal considering the spate of new models hitting the market. However, what makes the Brio and the XUV 500 special is the contrasting position of their individual manufacturers.

While a confident Mahindra & Mahindra wants to go a notch higher in the SUV space, Honda needs to price its car aggressively and get the momentum back in place.

For a little over a year, it looked as if it had lost its way but recent price cuts with the City and the Jazz have put things back in order. “The timing could not have been better with the Brio due to be launched on Tuesday,” sources said.
M&M’s new flagship

M&M’s XUV 500, which will debut a day later, will take over from the Scorpio as the flagship vehicle and priced upwards of Rs 12 lakh. The company believes that its brand is now robust enough to attract buyers to a higher priced SUV.

Nearly a decade ago, when it launched the Scorpio, things were quite different. M&M had broken away from Ford to focus on this Rs 600-crore project, which was meant to take it to another league from offerings like the Armada and the Commander.

It was a big chance but the company was absolutely clear that it had to graduate to the next level. The Scorpio caught the fancy of the market and M&M has not looked back since.

The (ex-showroom) price positioning of its products has also been carefully done. The Scorpio (and its different versions) is right on top priced at Rs 7.3-12.24 lakh, followed by the Xylo (Rs 7.09-9.35 lakh) and finally the top-selling Bolero at Rs 5.19-6.80 lakh. The XUV 500 will end up being the most expensive option but M&M is quite upbeat about its prospects especially when the Rs 12-20 lakh SUV space is still vacant.
Honda’s pricing-
As for Honda, it was categorical from the beginning about sticking to the premium space in cars. This strategy worked effectively with the City and the spin-offs were evident with the Accord and Civic too. There were no hiccups for some years till the script turned awry with the Jazz pricing at over Rs 7 lakh.

Though the City continued its good run, a big shock was imminent on the fuel pricing front. Last year, the Centre decided to deregulate petrol prices but continued with the subsidy on diesel.

This was when Honda realised it was in all sorts of trouble thanks to the large price differential between the two fuels. As petrol began getting progressively dearer, the demand for diesel cars shot through the roof and the City found itself under serious pressure.

Clearly, there was little Honda could do to remedy the fuel pricing situation. Its diesel engine was still over two years away and Honda R&D decided to work overtime and prune the costing structure of the City and Jazz.

With their prices now slashed by Rs 66,000 and Rs 1.5 lakh apiece, the results have been ‘electrifying’ with the crowds back in the showrooms.

Nissan drives into entry-level sedan segment

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New Delhi: Nissan drove into the entry sedan segment in India on Tuesday with Sunny, pricing the base variant at Rs 5.78 lakh (ex-showroom Delhi). The model will be manufactured at the company’s Chennai plant and will compete with cars like Maruti’s Dzire, Ford’s Fiesta Classic and Toyota’s Etios.

The Sunny is the second car to be manufactured at Chennai after the Micra hatchback and the Japanese automaker said it plans to sell more than 40,000 vehicles in the Indian market this financial year. The Sunny sports a 1.5-liter petrol engine and Gilles Normand, Nissan’s V-P for Africa, Middle East & India, said the model will focus on the Indian market. “While the Micra has been developed with a big eye on the export markets, the Sunny will have India as a key market.”

Nissan plans to sell nine models in India by 2012, four of which will be imported. The auto maker said it will source more than 85% of the parts for the Sunny from vendors in India, including 40% from suppliers based out of Chennai. Nissan currently imports and sells the X-Trail sport utility vehicle, the premium Teana sedan and the 370Z sports car in India.

New Hyundai Eon a modern day 21st century 800!

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First instance of action in the cut throat low end entry level car segment is almost a revolution with Hyundai throwing style, substance, space, performance and fuel efficiency to take on the Alto league. Adil Jal Darukhanawala gets behind the wheel of the stunning Eon which he reckons is the modern day 21st century 800!

It is close to 14 years to the day when Hyundai opened its innings in India with a tall boy smallie to present not just its first car in the India market but also to present the first major challenge to Maruti Suzuki’s domination of the peoples’ car segment. Both Hyundai and Santro were unknown names in the Indian market but with some nifty marketing backed by sound engineering and design, the quirkily styled Santro helped establish the product and the brand in the minds of the Indian motorist.

Fast forward to the present and Hyundai is now an established and genuine number two car maker in the country, having a varied portfolio which still features the Santro as its entry level offering. Though long in the tooth and having seen two to three upgrades over its existence to date, the Korean car maker realised that it needed to dip into the segment dominated by the Suzuki Alto with an all-new car and try and take a slice of this pie.

So far the Alto has been a runaway success for Maruti Suzuki, and deservedly so, given its make-up, reliability, performance and pricing. What is surprising is the fact that it took so long for other car makers to see the Alto carve out such a strong and wholesome niche and then try and address it with a rival of their own.

Now with development time for an all-new product taking three years at the very least from concept sketch to production, one must hand it to Hyundai for having seen this earlier than others and developed an all-new, India-specific automobile which is the best way to describe what is a unique price-specific product needed for the entry level segment in India.

Brings us straight to discussing the price point of the new vehicle which should be on or about the Rs 2.5-lakh ex-showroom sticker tag for the base Alto. Hyundai would have worked out what it had to do with a brand new modern design to try and engineer it not just to the pricing of the Alto but more importantly, allow it to deliver more in terms of style, occupant space, performance, fuel efficiency than the established segment leader.

Thus was born Project HA, which saw not just Hyundai’s design and development centre at Namyang in Korea do most of the work, but the fact that Hyundai’s Hyderabad-based R&D centre also pitched in massively to firm up a product which is fresh and appealing and also meets most requirements in this class of small car in India.
The pictures here are of the exact production version of the Hyundai Eon, as the Project HA offering it will be known as when it is unveiled in India in the coming month. The writing is clear: the new Hyundai is a stunner with substance to boot, as I discovered during the course of an exclusive half an hour session driving this small Hyundai at the firm’s Namyang test track.

In one fell swoop Hyundai seems to have re-written a new chapter for entry level small cars and it is here in the Rs 2.5 lakh to Rs 3.0 lakh space, where most entry level buyers are to be found searching for their first spanking new automobile. While the Tata Nano may be cheaper, the Indian consumer is looking at better value, more substance and style rather than just focus on pricing. And in this era where every detail counts, the Eon should be the one which could ignite an all-new and more meaningful race in this segment.

The Eon is built on a completely new platform which has no bearing on the ones used before, either for the Santro or the svelte i10. What clearly denotes the Eon is its stylish exterior with hints of Hyundai’s fluidic design language showing. It is no secret that trying to style a small package is much more difficult than a larger sized hatch or saloon.

But with the Eon, the Hyundai design team has really pulled out all the stops and emerged with a package that is fresh, contemporary and appealing. Casey Hyun, the Australian-born Korean who headed the design team, was clear in his mind that style was as important as the interior detailing needed to prepare a product which had to stand the test of time in a class which would see newer competition arrive sooner rather than later.

The overall stance of the car replete with its hexagonal-corporate face and those swept back headlights running almost all the way back, to the rakish A-pillar, is thoroughly modern and with the large air dam in front plus the slickly valanced bonnet character lines, the Eon stands out strongly.

Given the fact that its overall length is just 3495mm, the Eon in profile is easy on the eye as against the Santro which shocked to make its imprint on motorists’ minds. The easily flowing glazed surfaces plus the milled wheel arches along with curvy character lines (at the waist level and lower down on the door sills) impart a level of design flair which normally isn’t prevalent in this class of car.

Design and style haven’t compromised what remains one of the key attributes punters look forward to in this class of car: usable occupant space. The packaging engineers have come up with a winner in this area, with class leading head, elbow and leg room, front and rear. I managed to spend quite some time getting my colleagues to move and slide front seats back and forth as I switched from front to rear seats. And this perfunctory course did suggest that the Eon would be impressive in its space efficiency and comfort

A quick comparison with the Alto is in order here and the figures tell their own story. The Alto measures 3620mm front to rear, while the Eon’s overall length is slightly shorter at 3495mm. However, the real story emerges when you factor in the 2380mm wheelbase of the Eon, which is 20mm longer than that of the Alto and the cabin just starts building up from there on.

Clever design of the dashboard, optimising the H-points for the occupants plus also proper thought on entry and egress helped liberate more space in the interior. If that wasn’t all, the seats impressed as did the width and the height, both these being dimensionally larger than that of the Alto (1550mm width and 1500mm height for the Eon as against 1495mm and 1460mm for the Alto). So much for the occupants but the Eon also caught the eye in another department, a substantially larger boot space to gobble up 215 litres of luggage.

The interior of the Eon is funky and appealing and the dashboard with its swathe of curves and slashes highlights this to the hilt. The central stack with air con and audio system switches, the instrument binnacle (with the large diameter speedo dominating) right in view of the driver’s forward line of vision and the nicely configured ergonomics are other details which highlight what Hyundai has done to move the game along in this class of car.

The level of fine tuning the interior can be gauged by the fact that Casey Hyun’s team ordered no less than 31 different makes of branded mineral water from India in various sized bottles to determine the positioning of no less than seven to eight bottle holders dotted all around the cabin.

On to the drivetrain which is now so very critical in this day and age of high fuel prices. Many would have forgiven Hyundai were it to have adapted the 1.0-litre mill from the Santro and tweaked it for the times but Hyundai opted to do things differently and created a whole new engine and transmission pack for the Eon. The engine is an all-new 814cc sohc three-cylinder one (actually based on the i10′s IRDE four-cylinder mill with one cylinder deleted), which is compact and takes up minimum space under the hood, also a design cue to the ample cabin space!

Being on a straight stretch of runway with a billiards-table smooth surface would make any car feel good. But what I felt when I did my couple of runs in the Eon at the Namyang R&D test track was the fact that the car’s wide footprint (wide track 1386mm front and 1368mm rear plus 2380mm wheelbase) made for a very stable and planted ride.

The torquey delivery, relative to its engine size of course, did say much for the lugging power of the small motor but what was impressive was the firm yet pliant ride. Hyundai hasn’t skimped much on the underpinnings with MacPherson struts up front and a torsion beam rear axle working with gas-charged shock absorbers.

Throw in electrically assisted rack and pinion steering gear, a front discs/rear drums brake set-up and 13-inch wheels shod with 155/70-R13 rubber, and the Eon makes for a compelling package in the smallest as well as the most important category of car in this country. Factor in its kerb weight in the region of 725 to 772kg depending on the variant (there will be three at launch) and the Eon is set to be the new standard bearer in the small car segment in the country.

Hyundai will have an early mover advantage in this class because market leader Maruti Suzuki isn’t exactly lagging behind with development for its own new offering in the Alto league. And the signs are that there should be some more new entrants joining the fray from other OEMs.

Just like the premium hatchback category has hogged much of the automotive limelight in recent years, and with justifiable reason, expect action to be heightened in the entry level category once Hyundai unveils the Eon some time in mid-October. A new dawn beckons for the 800s but this time it is Hyundai and not Maruti Suzuki which is setting the pace.

Himalayan car rally to be flagged off on October 11

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The 13th Raid-De-Himalaya car rally of Himachal Youth Services and Sports Department and Motor Sports Association will be flagged off on October 11 by Chief Minister Prem Kumar Dhumal, said an official spokesman here on Saturday. The Raid will be covering approximately 2,500 km through the most rugged terrain of Himalayas and will have both X-treme and Adventure categories. The teams from Tata Motors, Mahindra and Maruti Suzuki are set to battle it out in the most predominant Adventure category. In the X-treme category, Team Army, Team Thunderbolt, Team Eagle Motorsport and Team Air Force would participate. Keeping in view the mandatory ecological parameters, Raid-De-Himalaya has introduced necessary sound regulations, claimed the spokesman. In the X-treme category, the pre-event scrutiny would be on October 9 and 10 in Shimla. In the first leg, the rally will traverse through the districts of Shimla, Mandi and Kullu and will halt at Manali. The second leg would pass through the mighty Rohtang to halt at Leh on October 12. Next day, it will cover several routes in Leh including the 18,300-foot Khardung-La, the highest Motorable road in the world and cover Kargil, Rangdum and Penzi-La to conclude in Srinagar on October 16. In Adventure Trial category, the pre-event scrutiny would also be held on October 9 and 10. It will pass through the districts of Shimla, Mandi, Kullu, Kangra, Chamba, and would enter Jammu and Kashmir, through Bhaderwah, Kishtwar, Kokernag and Ananatnag. From here it would go to Kargil, Rangdum, Dras, Kargil, Zozi-La and culminate in Srinagar on October 16.

Volkswagen evaluating more models for India

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Frankfurt: The German automotive major Volkswagen AG has said that the company is evaluating more models for introduction into India plugging in segment gaps, including the possibility of considering its new small car UP!

“While the immediate focus of launch of UP! is on Europe, we will consider this in other markets including India subject to feasibility studies. However, increase in localisation of content is vital for bringing in new models into India,” according to Dr. Ulrich Hackenberg, Member of the Board of Management, Volkswagen Brand and Executive Vice President, Volkswagen Group. The company may also have to localise the cars to suit Indian requirements, he explained.

The India market is strategic for the Volkswagen Group and the immediate focus is on developing the local market rather than addressing exports business potential in the markets around it. The accent is to increase the localisation of content from 70 per cent and take it up to 75 or 80 per cent in the near future and even more, he said speaking to media at the Volkswagen Group stall in the Frankfurt Motor Show.

“The development of suppliers and vendors to meet our expectations is vital for the launch of more cars including small car UP! in India. Unless we have this we would not be able to be competitive. In fact, we are looking a development of the vendor network not only for India but for supply of parts for other manufacturing bases of the company located across the world,” he said.

Mr Neeraj Garg, Member of The Board and Director Passenger Cars in India, told Business Line that the company business is looking up in spite of tough business environment for the automotive sector in India now. “Sales of Vento and Polo have boosted our position in India. The company has invested more than Rs.3,800 crore for the plant near Pune and we have the capability to produce up to 1,30,000 cars per annnum,” he said.

The launch of more vehicles in India hinges on the feasibility studies we have in place for certain segments of cars. The idea is to fill these gaps, which could possibly be a small car, a seven seater, another sedan and possibly a sports utility vehicle.

“We are also developing the dealer network up from 77 now to 100 by year end, which will provide a wider reach,” he said.

Costlier petrol will fuel demand for diesel cars

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Mumbai: The Rs 3/litre petrol price hike is going to fuel diesel demand even further and put huge pressure on carmakers and the public sector oil refiners.

On an average, petrol will be dearer than diesel by at least Rs 25/litre (Rs 71 to Rs 46) effective Friday. “The craze for diesel cars will only increase and it will be tough for companies to cope with this lopsided demand,” an auto sector executive told Business Line.

It remains to be seen what impact the hike will have on petrol-driven compact cars. For instance, when prices were hiked by Rs 5/litre in May this year, it hit sales of some top-selling Maruti models like the Alto and Wagon R by nearly three per cent in the short-term.
Big setback.

 

Carmakers like Honda have constantly maintained that this fuel price differential has been a big setback since it does not have a diesel engine in its portfolio. Over the last few months, the company has attempted to offset this disadvantage by reducing prices of the City and Jazz models but the recent price hike could only make things more difficult.

Honda is now getting ready to launch the Brio at a competitive price and it is a moot point if the absence of a diesel option will make a difference to its fortunes. Almost every other carmaker, right from Maruti and Ford to Toyota and General Motors, has a diesel option in its compact car kitty. Despite this, they could still find the going tough in terms of meeting the surging demand.

“It’s not as if all of us are gloating about getting more orders for diesel cars. We are still very uncomfortable about the subsidy and are not sure when the Government will decide to withdraw it,” a car company official said.
Inflation fear

The truth is that this may not happen in a hurry because any move to deregulate diesel prices will stoke inflation which is already inching towards the 10 per cent mark. For the moment, nobody has a clue on working out a differential pricing model for diesel in cars and trucks. “As a result, expensive cars and sport-utility vehicles will continue to make the most of subsidised diesel even though it is an obnoxious practice,” the official added.

From the oil companies’ point of view, leaving diesel prices untouched will hardly help their cause. The losses at Rs 6/litre should be seen in the context that diesel accounts for nearly 60 per cent of the total fuel losses with kerosene and cooking gas taking up the balance 40 per cent. With states like Tamil Nadu reeling under a severe power shortage, use of diesel will only increase in generator sets and deflate the profits of the refiners.