I N D I A ’ S N O . 1 M A G A Z I N E F O R A U T O M O T I V E N E W S , V I E W S & A N A LY S I S
Auto Monitor
Vol. 13 No. 28
www. a m o n l i n e.i n
5 August 2013
INTERVIEW Frugal India invades hi-tech Europe
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Prasan Firodia, MD, Force Motors, has big plans that are under execution.
Engine ingenuity VECV will export trucks to Malaysia, Russia, and Indonesia; makes India global hub for Euro VI engines.
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E Commercial Vehicles Limited (VECV) is planning to export trucks to new Asian markets such as Malaysia, Indonesia and Russia. The company is revamping its product portfolio with a new range of engines. The move is a step to take the JV to the next level after successfully completing five years. Going forward, Volvo Group is keen to take its Indian subsidiary among the top 10 for CVs. Currently India is ranked 13 or 14 for Volvo Group in terms of M&HCV sales, according to Bertil Thoren, President Volvo Group Alliance Office.
In terms of sales, VECV is looking at acquiring 15 percent market share in India by 2015 from the current five percent after upgrading its entire product portfolio with the new range of engines produced at its new plant at Pithampur in Indore. In another move, VECV will invest further Rs 1,200 crore over the next 2-3 years taking its total investment to Rs 2,500 crore. VECV’s recently inaugurated engine plant at Pithampur, Madhya Pradesh, has an initial capacity of 25,000 units per annum and has been set up at an investment of Rs 375 crore. This is expected to increase to 100,000 units as per market requirements and could involve an addition-
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Building momentum
Bertil Thoren, Board Member VECV, is gung-ho about making India as a global hub for engines.
Nabeel A Khan Indore
26 Pages
INTERVIEW
al investment of around Rs 125 crore. Supporting its frugal engineering, the company has an assembly section called smart cell that can assemble 166 components in two minutes without human intervention. VECV’s engine facility will act as a global hub for meeting the requirements of medium-duty trucks. The company will ship five- and eight-litre diesel Euro VI engines to Volvo Group plants in Venissieux, France. The engine is based on the Japanese platform of the Swedish vehicle manufacturer and would be further exported across Europe from France. Thoren, who represents Volvo Group on VECV Board of Directors, added, “The glob-
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al manufacturing hub at VECV is truly a win-win situation for both Volvo Group and VECV. On one hand it will help Volvo Group reduce costs by sourcing engines from this plant, while helping VECV source best-in-class Euro III and IV engines based on latest Euro VI Volvo Group technology. Talking about the advantage of producing the engines in India, a Volvo Group representative said the move will offer 25 percent cost benefit when compared to manufacturing in Europe. The same engine platform will be adapted to Euro III and IV engine technologies to meet VECV’s and other Volvo Group requirements for this type of engines in India and other markets of Asia. Currently, VECV exports to Bangladesh, Sri Lanka and going forward will take it South Africa also. In terms of market share, VECV has realized a growth of one percent every year since the JV was signed in 2008. Tata Motors and Ashok Leyland command a majority (over 80 percent) market share. Price plays a crucial role in truck buying in India and the two
players have been offering a better proposition. However, VECV claims that it has been working at increasing productivity, reducing costs and also lifecycle costs thus increasing fuel efficiency. “Our frugal engineering and automation at this plant will help us in being cost competitive,” said Rajesh Mittal, Sr. VP & Head –Operations, VECV. The company will continue to focus on offering lifecycle cost benefits in terms of better fuel efficiency and low maintenance cost. At the new plant, the company has automated about 30 percent of operations. VECV will also produce a 4-cylinder engine at this plant which will churn out 180 hp to 240 hp of power, which is probably be a first in India. “Over 15 years, we see 4-5 players capturing equal market share. Products will change and the mass segment CVs that have no cabin and only chassis may not exist. The market will move to better quality vehicles that are now segmented ‘premium mass segment’ vehicles,” said Siddhartha Lal, MD and CEO, Eicher Motors.
The segment was bound to grow and it did by 40 percent between 2011-12 and 2012-13. The Verna was particularly successful and the Sunny was doing well too. Everything seemed fine till Maruti Suzuki launched the Ertiga. Auto pundits predicted that the Innova would feel the heat from this potentially successful model from Maruti when it was launched in April 2012. But Toyota continued its run. Instead, it was the turn of the midsize sedans to feel the brunt. There was in-house competition at Maruti with the SX4 with the car clearly losing to the MPV. The same year Renault launched the Duster in July. The catapulting success of the Duster has turned the tide for this segment. The first three months of this year, the Duster is averaging 5,000 units per month. That’s better than
the Ertiga too. And who’s taking a hit? Again, midsize sedans. Vehicle sales went up 2.15 percent last year of which car sales slipped 6.7 percent and UVs grew 52 percent. In Q1 this year, sales of PVs have fallen over 7 percent and car sales have dropped over 10 percent. The UV segment has overtaken the midsize sedans. What most OEMs did was get the pricing right. The UVs were priced on par with midsize sedans. Although not as luxurious, they have won over customers with their practicality and space and (in case of the Duster and the newly launched EcoSport) rugged character. As a result, giving more bang for your buck. It’s the only factor recently successful cars have had in common, be it the Ertiga, the Duster, or the EcoSport. A simple answer to what a blockbuster vehicle needs to be in India.
Blurring the line The onslaught of MPVs and UVs in the market is playing havoc with passenger vehicles in other segments. Anand Mohan analyses the shadowy evolution.
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hen you adjust the shutter speed and exposure of a camera to its right values during night photography, a moving spot of light appears like a line. It’s a common trick in a photographer’s repertoire used to create compositions of light that don’t exist. Many such intersecting lines will blur it to an extent where each line can’t be traced back from its origin essentially blurring the picture. The car industry in India is
transitioning into such a phase. Till a few years ago, the auto market was a well defined one. The number of car models available on sale was a fraction of those available in Europe. The market was not spoilt for choice. But over the last few years, things have changed. When Maruti launched the Dzire, it threatened the hatchbacks. For about Rs 40,000 more, you could buy a compact threebox sedan instead of a hatchback. This success soon saw a volley of new cars coming onto the market; the Honda Amaze being the latest. In the first two months of its launch, Honda has rolled out about 11,000 units of the Amaze, without hurting sales of the Dzire. In fact, sales of Dzire grew from
46,958 units in Q12012 to 49,259 units in Q1 this fiscal. The success of these models creamed sales of the large hatchback that fell over 9 percent in Q1. India used to be an entry-hatchback market that quickly made way for the largehatchback and slowly but steadily, it’s the compact sedan that’s gaining importance. Let’s move a segment higher. The executive segment that includes cars like the Elantra, Corolla Altis, Laura, etc has seen an increase in the number of models. But sales are far from buoyant. Sales in this segment have submarined from 9,974 units in Q1 2011-12 to 6,432 units in Q1 2012-13 and now even further to 4,930 units this quarter. The loss felt by the executive segment coincided with growth in the midsize sedan segment. The last few years have seen a slew of launches. These include the Verna, Sunny, Vento and Rapid.