Archive for March, 2010

2010 Volkswagen New Beetle

2010-VW-Final-Edition-New-Beetle-car-wallpapersVolkswagen has unveiled the Final Editions of the New Beetle and the New Beetle convertible at the Los Angeles Auto Show. The Final Editions will be limited to only 1,500 units each. The Final Editions come in special Aquarius Blue paint with a painted black roof on the coupe, and a two-tone Aquarius Blue and Campanella White paint scheme with a white top on the convertible.

Under the hood of both models is Volkswagen’s 2.5-liter inline five-cylinder gasoline engine, with its ready-to-go 150 horsepower, and 170 lbs.-ft. of torque. A six-speed automatic transmission with Tiptronic® puts the power to the pavement, and can change gears on its own, or let the driver select each gear by tapping the selector up or down. With the automatic transmission, the New Beetle can achieve an EPA-estimated 20 mpg in the city, and 29 mpg on the highway.

The 2010 New Beetle Coupe and New Beetle Convertible Final Editions will be available for $20,240 and $27,170 respectively

Auto parts makers losing out to cheap imports

Today, even as India stands on the cusp of another auto revolution as a global hub of small cars, there are signs that local manufacturing of car components will no longer enjoy a smooth ride

Auto parts makers losing out to cheap imports

Nearly three decades ago, MarutiSuzuki India Ltd ushered in an automobile revolution in the country that led to the domestic auto parts industry.

Today, even as India stands on the cusp of another auto revolution as a global hub of small cars, there are signs that local manufacturing of car components will no longer enjoy a smooth ride.

In December 1983, when the first Maruti 800 car rolled out of its factory in Gurgaon, then a sleepy suburb of New Delhi, its only made-in-India parts were the battery and tyres.

In those days, the government had strict curbs on foreign exchange spending. The company was forced to localize under a phased manufacturing programme, which granted an import licence as long as it made more parts in India every year.

Graphic: Paras Jain/Mint

In the next decade, a robust local components industry came up which, in turn, helped smoothen the entry of global car makers in the 1990s. Today, 95% of the parts of small cars such as the Maruti 800 are made in India.

“If we were not forced in those days, we would have gotten away with imports,” concedes R.C. Bhargava, chairman of Maruti. “But that would not have been beneficial to consumers.”

Maruti is now all set to roll out its millionth car this fiscal, on 23 March. It will become the first company to do so in a fiscal year. That’s just one illustration of how much the small-car market has grown in India to account for 75% of all car sales. Indeed, nowhere in the world is the auto market so heavily skewed, and that puts India on the verge of becoming the nucleus of the international small-car industry.

Yet, manufacturers and experts fear this second revolution won’t augur well for what is now a $19.8 billion (around Rs90,000 crore) auto parts industry.

The business environment, to begin with, is hardly as conducive to growth as it was in the 1980s. The car industry has been delicensed and the government can no longer ask manufacturers to source parts from India. Import duties on components have fallen from 60% in the 1980s to 10%. Foreign exchange controls for the industry have also been done away with.

Compounding the matter are the recent free trade agreements with South Korea and the Association of Southeast Asian Nations (Asean), a regional economic bloc, which makes it cheaper for car makers to buy components from these countries.

Import of components has grown faster than domestic production since the 2005-06 fiscal, according to a study released on Saturday by industry lobby group Federation of Indian Chambers of Commerce and Industry (Ficci).

India then imported components worth $2.77 billion, or 22% of the size of the industry. In 2008-09, this grew to $6.12 billion, or 30.8% of the industry size.

Imports from South Korea, Asean and the European Union, with which India is negotiating a free trade pact, have grown rapidly and now form 70% of total component imports, the Ficci report said.

If imports continue to grow at this rate, India will find it tough to meet its automotive mission plan, said Ficci’s additional director Chetan Bijesure. The plan aims to increase component exports from India to $20-25 billion by 2015 from $2.76 billion at present.

Component suppliers for large cars, which have a limited market in India, have faced the brunt of the fall. Motor Co. Ltd’s India subsidiary, for instance, makes only 28% of the Accord sedan locally—even a decade after launching the car.

A spokesperson claimed the company is committed to increasing localization levels for its cars, but industry watchers said, on condition of anonymity, Honda had gone slow on this as it prefers to import from Thailand.

“For them to think of aggressive localization, they would need at least penetration of 15 cars per thousand,” said Kumar Kandaswami, senior director at professional services firm Deloitte. Currently, the penetration in India is nine cars per 1,000.

“Global models are becoming more important, and at the time of deciding the model, companies also decide the source,” said Krishan Kumar, director of the Maruti Centre for Excellence and former head of engineering at Maruti.

This means large-car component makers could be reduced to manufacturing technically less advanced products for small cars, defined as cars shorter than 4m with an engine capacity below 1,200cc.

The cushion of high sales, along with the price sensitivity of buyers of small cars, means their makers generally opt for local components. For instance, Ford India Pvt. Ltd’s small car Figo, which the firm plans to export in large numbers, will have 85% local components from Day 1.

But even small-car companies are becoming more comfortable with importing engines. Toyota plans to import the engine and transmission for its new offering Etios from Thailand or Japan, as it expects its initial sales to be around 70,000 units a year.

Toyota—which set up a regional facility to manufacture gearboxes in India in 2002 with an investment of Rs500 crore—also imports 50% of the components of the Corolla sedan, which it has been producing in India for over a decade.

“We would be encouraged to localize more, particularly if the tax policies with relation to transfer pricing are more friendly,” said Shekar Viswanathan, deputy managing director of Toyota Kirloskar Motor Pvt. Ltd.

Component manufacturers also point to infrastructure bottlenecks, shortage of skilled labour and government restrictions as reasons for slowing growth. “The infrastructure deficit alone results in us losing 17% of our competitiveness,” said Surinder Kapur, chairman of auto component maker Sona Group.

As more car makers veer away from localization, component manufacturers could well decide to open operations in South-East Asia and export to India.

“There are indications of that,” said Vishnu Mathur, executive director of industry lobby Auto Component Manufacturers Association of India. “A number of investments that could have come to India have gone to Thailand.”