Mahindra Navistar to see cash break-even in a year

Mumbai: A year after launching heavy-duty trucks to compete with Tata Motors Ltd and Ashok Leyland Ltd, India’s top truck makers, Mahindra Navistar Automotives Ltd expects sales to pay for expenses shortly.

Mahindra Navistar, a 51:49 venture between auto maker Mahindra and Mahindra Ltd (M&M) and truck and engine manufacturer Navistar Inc., sells tractor trailers and tippers ranging between 16 tonnes and 31 tonnes to the construction sector, and heavy-duty lorries to ferry automobiles and consumer goods.

“We shall be able to (see) cash break-even in the next 12 months,” Pawan Goenka, president, automotive and farm equipment sector, Mahindra and Mahindra, told reporters at a press meet.

Pawan Goenka

The joint venture has sold 2,500 trucks, according to Nalin Mehta, managing director, Mahindra Navistar. The firm’s factory at Chakan near Pune in Maharashtra has a capacity to produce 50,000 trucks a year. It currently sells about 300 trucks a month.


India’s medium- and heavy-duty goods commercial vehicles segment grew 8.19% to 187,559 units in the April-October period compared with a year ago, according to the Society of Indian Automobile Manufacturers.

With Daimler India Commercial Vehicles’ Bharat Benz trucks set to enter the market in six months and Beiqi Foton Motor Co. Ltd’s vehicles to be launched in the next couple of years, competition in heavy trucks is expected to intensify.

Mahindra Navistar plans to launch at least two new models—a 49-tonne tractor trailer and a 25-tonne tipper for the mining sector in the second half of the 2012 fiscal year.

Along with a few more variants, these will help the company ramp up volumes and use its factory capacity fully in the next three years, Mehta said.
To be sure, transporters, particularly small operators, are sceptical of new brands in the country.
Deepak Sachdeva, proprietor of New Delhi-based Sachdeva Roadlines Pvt. Ltd that has a fleet of 80 Tata and Ashok Leyland trucks, is wary of the maintenance costs of new brands.

“Even Ashok Leyland and Eicher Motors Ltd, which have been in the market for several years, have very few mechanics in the north,” said Sachdeva.
“There’s no doubt that it’s (Mahindra) a strong brand,” said Ajay Shethiya, an analyst at Centrum Broking Pvt. Ltd. “But it’s a long haul for them before they can dent the market shares of the entrenched firms.”

Mahindra executives are aware of the challenge. Goenka conceded that Mahindra Navistar has taken longer than was expected to increase sales. “They (transporters) trust the brand, but building confidence takes time,” he said.

This, to some extent, delayed the company’s plans to introduce heavy-duty buses and trucks in export markets, Goenka said. Since the firm has established a national reach now, it will focus on the bus, currently under development, and on exporting trucks to South Africa using Navistar’s network.

Mahindra Navistar, which launched its products in October 2010, has set up 50 dealerships and 950 service stations. It plans to double the number of dealerships and increase service stations to 1,200 in 12 months.

“We aspire to do to the commercial vehicles market what Maruti Udyog Ltd did to the passenger car market in the 1980s by ending the monopoly of Hindustan Motors Ltd’s Ambassador,” Mehta said

BharatBenz trucks from Daimler by mid-2012

Plans to manufacture buses in India as there is a ‘huge potential' in the Indian market

Eager to cash in on the fast growing commercial vehicle segment, Daimler India Commercial Vehicles (DICV) on Wednesday said it would introduce its new range of trucks under the BharatBenz brand by mid-2012.

The wholly-owned subsidiary of Germany's Daimler AG also plans to export trucks from India besides manufacturing buses from its Chennai plant.

“The full range showcase of the new BharatBenz trucks will happen in March …the production starts in April. The market launch will happen in the third quarter of the current year,” DICV Managing Director and CEO Marc Llistosella told journalists here.

In February last, DICV had introduced the new BharatBenz brand for the Indian market.

The company has set up a 400-acre production plant at Oragadam near Chennai with an investment of Rs.4,400 crore in setting up manufacturing and marketing and sales paraphernalia.

The plant will initially produce 36,000 units a year and later expanded to produce 72,000 units by starting 2013 on which the company will spend an additional Rs.350 crore.

Exclusive showrooms

DICV also has aggressive sales plans and is setting up exclusive showrooms in about 100 locations by this year-end. “The total truck market in India (in the 6-49 tonnes range) is estimated to be around 3.4-lakh units and is expected to grow annually at 5 per cent till 2020,” Mr. Llistosella added.

Export plans

On export plans, Mr. Llistosella said the BharatBenz trucks could be exported to markets such as Africa, the Middle-East and Southeast Asia. The company also plans to manufacture buses in India as there is a ‘huge potential' in the Indian market.

Commercial vehicles defy slowdown

Paradoxically, commercial vehicle (CV) sales have belied expectations of a slowdown in spite of weak Index of Industrial Production (IIP) numbers, month after month. Typically, CV sales display a strong correlation to IIP, which mirrors the state of economic activity in the country. But it’s different this time around.

Growth in industrial activity has slowed to 5% during the first six months of fiscal 2012 as against 8.2% during the year-ago period. But the Indian Foundation of Transport Research and Training (IFTRT), in its monthly analysis, said sales growth was 23% in November for light commercial vehicles (LCVs), intermediate commercial vehicles (ICVs) and multi-axle vehicles.

Although there are jitters about a slowdown in the sector, so far LCVs have been leading the run-up in sales. Market leader Tata Motors​ Ltd clocked a 25% year-on-year (y-o-y) rise in CV sales in November, mainly driven by a 38% increase in LCV sales. The company has a 58% share of the LCV market, even as other companies such as Force Motors Ltd​ and Eicher Motors Ltd are registering strong growth and late entrants such as Mahindra and Mahindra Ltd and Ashok Leyland​ Ltd are also faring well.

According to Umesh Karne, analyst, Brics Securities Ltd, “Buoyancy in the sector is due to demand from the organized retail sector, higher demand in consumer durables, construction in urban areas and replacement demand.” Higher replacement is due to insistence from large customers to provide a younger fleet. Meanwhile, better lifestyle in rural and semi-urban areas, along with a higher movement of agri-commodities, has also led to fleet expansion.
Of course, moderation in truck sales is visible. For November, Tata Motors’ truck sales rose a mere 7% from a year ago, compared with double-digit growth registered during October. Ashok Leyland, which has a strong southern presence in trucks, also posted 53% sales growth for November, albeit on a low base. A report by Edelweiss Securities Ltd hints at a lower single-digit increase in trucks from December.
The IFTRT note on monthly sales says that part of the sustained sales momentum is due to high discounts offered by manufacturers, who had raised prices steeply over the last eight quarters. Analysts estimate growth of about 9% in trucks and a robust 16-17% in LCVs for fiscal 2012. Still, market leader Tata Motors’ stock has underperformed the benchmark indices since the June quarter, perhaps due to its exposure to the passenger vehicles segment, which has been hit by a slowdown.
The outlook for CVs as a whole seems to be clearing up, with the interest rate cycle peaking and raw material costs expected to recede. The only grey area is profit margins, which would adversely affect earnings growth and in turn valuations.

Force Motors sells stake in JV to MAN for 150 mn euros

Mumbai: Commercial vehicles maker Force Motors Ltd has decided to sell its 50% stake in MAN Force Trucks Pvt. Ltd to its German joint venture (JV) partner and quit the heavy duty trucks segment.

Force Motors will sell nearly 56 million equity shares in MAN Force Trucks to MAN Truck and Bus AG for €150 million (Rs. 1,050.54 crore), subject to necessary approvals, it said in a statement to BSE Ltd.

The Pune-based company had initially held a 70% stake in the joint venture, formed in 2003, but later became an equal partner of MAN Trucks.
“We concluded that they should be allowed to take the full lead,” Force Motors chairman Abhay Firodia said.
Force Motors will continue to supply parts and some critical aggregates to MAN Trucks, he said.
“It’s another step in enhancing our presence in the growing Indian market. We now have a good standing here,” a MAN Truck and Bus spokesperson said on the phone from Munich, Germany.
The joint venture has not been performing optimally, Mint had reported on 15 September.
MAN Force’s plant in Pithampur, Madhya Pradesh, which makes heavy duty trucks, has been operating at half its capacity. The factory can produce 12,000 units a year but sells just 6,000 on average.
Nearly 200,000 heavy duty trucks are sold in the country annually, according to the Society of Indian Automobile Manufacturers, an industry lobby.
In April-October this year, 162,026 such trucks were sold in the domestic market, an expansion of 12% over the same period last year.
Firodia had earlier said Force Motors had converted its commercial vehicles business into the joint venture with MAN Trucks expecting large export orders, but that never happened.
The heavy duty commercial vehicles segment in India is dominated by Tata Motors Ltd and Ashok Leyland Ltd.
Companies such as Mahindra Navistar Automotive Pvt. Ltd, Volvo Eicher Commercial Vehicles Ltd and Daimler Commercial Vehicles Pvt. Ltd have also entered the market lately. The latest to join this space is the commercial vehicle maker from China, Beiqi Foton Motor Co. Ltd, which is setting up a manufacturing unit in Chakan, near Pune.
As competition intensifies, it would have been difficult for the joint venture to survive in its current form, said V.G. Ramakrishan, senior director, automotive and transportation at Frost and Sullivan.
“They (Force Motors and MAN Trucks) realized the JV was going nowhere and neither of them was able to add any value. They had to take a decision on how they want to take things forward,” he said.
Shares of Force Motors closed at Rs. 501 apiece, up 0.2% on the Bombay Stock Exchange, while the benchmark Sensex index closed at 15,946.10 points, down 2.6%.
The valuations “seem to be more rational given the company was valued at around Rs. 2,000 crore in 2008, when the JV was realigned,” said the head of mergers and acquisitions at a domestic investment bank, asking not to be identified. “Indian promoters are beginning to be more realistic with valuations and you will see many transactions going through at lower valuations in near future.”

Tata Motors​ can’t meet heavy-duty truck demand

Tata Motors Ltd, the country’s largest auto maker by sales, is finding it difficult to cope with demand for heavy-duty trucks, with buyers having to wait four-six weeks for deliveries.

Such a situation hasn’t arisen in the past few years, said vendors, dealers and fleet operators in Mumbai and Delhi. The company, however, said that the waiting period was typical for this time of year.
Fleet operators and logistics companies may start buying heavy-duty trucks from rival makers such as Ashok Leyland Ltd if the delivery period doesn’t come down.

Uncertainty looms: A file photo of Tata Motors’ Jamshedpur plant.

“We have been facing delays in delivery of trucks with large wheelbase and (are) considering buying them from other manufacturers,” said a senior official at a Delhi-based logistics firm, who declined to be identified.
Some of the heavy-duty models for which there is a waiting period are the 2515, 3118, 4118.
Trucks with a payload capacity upwards of seven tonnes are classified as medium and heavy duty.
In the nine months to December, sales of medium and heavy-duty trucks expanded 47.38% to 188,000 as the country’s economy expanded 8.9% in the first half of the year, fuelling capital goods and consumer durables demand, according to the Society of Indian Automobile Manufacturers, an industry lobby.
Transporters said the delay in delivery that they have been experiencing since December hasn’t impacted business, but the uncertainty is affecting fleet renewal and expansion plans.
“There is a continuous requirement of at least five to 10 new vehicles in the fleet per month. But we haven’t been getting them,” said Guru Pratap Singh, vice-president of the Bombay Goods Transport Association.
Singh’s firm, Calcutta Express Roadlines Pvt. Ltd, runs a fleet of 200 trucks.
Some transporters indicated that the delay may herald a price increase.
“There are no straight answers for these delays,” said a Delhi-based transporter, who declined to be named. “It’s an artificial shortage created by the company to go for another round of price hike.”
Tata Motors last raised prices of commercial vehicles by Rs. 1,500-30,000 on 1 January.
The head of a Tata truck dealership, one of the biggest in Maharashtra, said the delays began a month-and-a-half ago. He declined to be identified.
In an email response, a Tata Motors spokesperson said: “The months of February and March usually witness more demand every year. There is a marginal waiting period during these months, but that is again generic in nature.”
Tata Motors also attributed the waiting period to strong demand for new models introduced recently.
“Over the last 10 months, the company has introduced many new models with additional features and customer benefits,” he said. “Since October 2010, we have introduced the Bharat Stage III range (trucks compliant with new emission norms), wherein we have upgraded the power trains to provide higher torque and power along with better fuel efficiency. The market response has been very favourable and we are witnessing strong demand for our products.”
In response to whether the firm plans to undertake further price hikes, the spokesperson said Tata Motors doesn’t give a guidance on price hikes.
According to S.P. Singh, senior fellow and coordinator at Indian Foundation of Transport Research and Training, robust freight rates in recent months have left fleet operators with lots of cash that most of them want to use to purchase new vehicles.
Truck rentals have shot up from 26% to 39% over the last 13-14 months, he said.
Fleet expansion and upgrade plans may have been advanced by factors such as an impending rise in interest rates by non-banking financial companies and banks, Singh pointed out.
The fleet owners, he added, are also anticipating another round of price increases by the manufacturers as the government is likely to roll back the 4% reduction in excise duty, which had been cut as part of fiscal stimulus efforts in December 2008 and February 2009. The sale of such vehicles had dropped from the peak to almost one-third in the second half of 2008.
Earlier this week, at a vendor conference in Chennai, Tata Motors said it plans to produce at least 30% more trucks in February and March, and asked suppliers to ramp up accordingly, said an official from an auto parts firm who attended the meet.
The Tata Motors spokesperson did not elaborate on the plan for raising production, but said: “Higher number of units are planned during these months. So, production is as per plan.”
Ashok Leyland, the second largest truck maker by sales, is bullish about demand in the months ahead.
In a conference call with analysts on 24 January after announcing December quarter earnings, K. Sridharan, chief financial officer, said the company plans to close the year ending March with a total sale of 95,000 vehicles, up 48% from last year.
He expected overall truck and bus sales for the industry to expand more than 35%.
Manoj Mohta, head of research at rating agency Crisil Ltd, said commercial vehicle growth may get muted from April onwards as the segment is more susceptible to macroeconomic factors such as industrial production and interest rates on vehicle financing.
He, however, maintained that growth in high-tonnage trucks will continue to outpace the rest of the medium and heavy commercial vehicles even after the current quarter and is likely to expand 13-15% in fiscal 2012.

LOOSING 20% HEAVY VEHICLE SPARE PARTS SALE DROP IN ANDHRA PRADESH

Granite export slowdown from Andhra Pradesh to China .After processing the Granite in China; Chinese are export to Brazil, America, Taiwan and Myanmar. Due to international market crisis AP state Granite Industry in sleeping condition. Last 2 months, all transactions have been stopped.  This Industry is having nearly 1000 quarries in Andhra Pradesh.

The following reasons are 1) AP State Granite Industry was depending on Granite export to China. In China all leading and Important Projects works was stopped as well as House Constructions.

 Granite Sources in AP:

Chimakurthy, Ongole District: Black Galaxy

Khammam, Khammam District: Black Granite

Karimanagar, Karminagar District: Chili Red, Tan Brown, Mifil Red, Coffee Red,

Chittor, Ananathapuram District: White Granite

Srikakulam, Srikakulam District: Blue Granite

PROBLEMS FOR GARAGES AND DEALERS IN TAMILNADU

Chennai: Automobile vehicles and spare parts distribution company, TVS and Sons, part of the TVS Group, on Wednesday, inaugurated its 18th facility at Karur in Tamil Nadu.

Ashok Leyland​ executive director Rajive Saharia inaugurated the 3-S (Sales, Service and Spares) facility in the presence of TVS and Sons president N. Krishnamoorthy at Karur, on Wednesday, a company statement here said.

The opening of new dealerships was in line with the firm’s plans to establish facilities for every 50 km to 100 km depending on requirement of the location. This would also prove a boon to customers in not sending their vehicles for servicing to far-off locations.
More 3-S facilities would be set up in tier II and III locations, Krishnamoorthy said.
Some advantages of Karur facility include two bay servicing for vehicles, a computerized wheel alignment system, the statement added.