Friday, March 13, 2009

After years of recording gravity-defying growth, auto majors in India are finally feeling the heat.

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For long now, India and Indians have debated over the repercussions of ever-increasing oil prices. There were two wheelers and four wheelers rolled out of the assembly lines all across the country and auto financers were running after prospective ‘drivers’ and ‘riders’, everywhere… Cheap funds, cheap bikes, cheaper cars (with that ‘interest’ string attached), but ‘expensive’ oil! That was the buzz around, and India was worried (and so were the Americans, of course!). It felt like wartime, with guns but no bullets, with automobile engines all around but perhaps no oil to vroom around! And the financials of the auto majors? Oh! They stood tall and pretty, prouder than bearing the ‘seal of the eagle’! Happy Capitalism was the dream word, but no more a reverie!

Then came the turmoil, and happy faces soon faded into the background; many of them belonging to the automaker community. And 4Ps B&M spoke, last issue (dated November 7 – November 20, 2008) through its cover feature titled, ‘Bechara Bajaj’ commenting on the deplorable 34% fall in sales figures (in units) reported for October 2008 as compared to the same month the previous year. We thought, it was just the ailing Bajaj (and hence ‘Bechara’) that was getting its pockets ripped apart by the recessionary jackals. But then came some more shockers – Hero Honda and TVS, the other two two-wheeler players also reported a fall in sales units over the previous year. And if that wasn’t enough to convince us all of the melancholic environment in their factories, the Society of Indian Automobile Manufacturers (SIAM) disclosed that sales figures for the entire auto industry (including the four wheeler giants) had plummeted by a 14.2% during the month of October 2008 (compared to the previous year). That meant a reduction in monthly sales by 145,817 units for the industry! And suddenly, it feels like the war times are back, with no guns available this time… Yes, oil prices have stabilized globally and there is good news everywhere when it comes to this ‘liquid gold’ at the moment. But there are cut downs reported all across the sector with players announcing reduction in production volumes… No engines, but oil… no guns, just bullets!!!

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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