Increased adoption of diesel in the passenger car segment.

What is the most significant trend in the Indian passenger car segment? The increased adoption of diesel, says Mr Sanjay Sondhi, Managing Director, Honeywell Turbo Technologies.

“In Europe, more than 50 per cent of passenger cars are diesel, and all indications show that India is following this trend,” he adds, in a recent email interaction with Business Line. Mr Sondhi estimates the penetration of diesel vehicles in India to increase from 37 per cent today to 42-45 per cent over the next 5 years.

Two other major trends that he sees are:

The increasing popularity of small sized diesel engines, driving both Indian and global OEMs (original equipment manufacturers) to develop low-cost cars to bridge the price gap between the two-wheeler and the current range of small cars available in the market; and

A significant share of the three-wheeler passenger cars and commercial vehicles being upgraded to four wheelers such as the Tata ACE, driven by tightening emissions and safety regulations.

Excerpts from the interview.

How do these trends impact your company?

With the help of modern diesel common rail and turbocharging technologies, diesel cars now deliver better fuel economy and lower emissions while providing superior driveability. As India adopts more stringent emissions (the auto industry is gearing up to adopt Bharat Stage 4 norms by April 2010 in the major cities), the demand for advanced turbochargers for diesel car applications will only increase. Thus, we anticipate that the increased demand for small sized diesel engines which deliver more power with low fuel consumption will translate into wider adoption of turbochargers.

What are turbochargers? How do they help?

The basic concept of a turbocharger is to recycle wasted energy from exhaust gas, thus transforming more of the fuel energy consumed into power. While the principle of turbocharging is very simple, the application of the technology is increasingly challenging and complex from an engineering perspective.

Turbo diesels exhibit significant advantages over naturally aspirated gasoline engines, showing typical fuel efficiency gains of 30 per cent, with CO2 reductions of more than 20 per cent. On the gasoline front, double-digit improvement in fuel economy is predicted as a result of both direct injection and turbo technologies.

Honeywell Turbo Technologies is recognised around the world as one of the leading manufacturers of engine boosting systems for passenger cars and commercial vehicles. From providing its first turbo for Caterpillar tractors in 1950s to pioneering the groundbreaking VNT™ (Variable Nozzle Turbine) technology for passenger cars in the 1990s, and more recently, launching the first parallel sequential dual-stage turbo system, Honeywell has been leading the way.

Is there a slowdown, as being talked about? How ‘leading’ is auto sales as an economic indicator of growth?

The automobile industry in India has witnessed tremendous growth in recent years and is all set to carry on the momentum in the foreseeable future.

Though, recently India’s auto market, which is mainly financed by loans, has been hit by the central bank’s moves to curb liquidity and stem inflation, this could get offset by the car purchases which usually rise during the festival season from October to December.

As the industry being an indicator of economic growth, today, the automobile sector in India is one of the key sectors of the economy in terms of the employment providing directly and indirect employment to more than 10 million people. If we add the number of people employed in the auto-component and auto ancillary industry then the number goes even higher.

By 2016, the automotive industry should have created employment for 25 million people in India, according to government predictions, set out in its Automotive Mission Plan. Of this, 62 per cent will be skilled workers, and 10 per cent, unskilled; the balance 28 per cent would comprise management and general personnel.

For every job created directly by the automotive industry, a further seven are created indirectly in the economy at large. Taking these factors into consideration, it can be said that the automotive industry is set to have a major impact on India’s future economic growth.

Currently, the sector accounts for 5 per cent of India’s economic output, but it is set to grow much faster than the rest of the economy.

Is the Indian automobile industry seeing a shift from the replacement market to the original equipment market?

Traditionally, a significant part of India’s automotive component exports was for the automotive aftermarket. However, with increased capability of Indian suppliers, there is significant growth foreseen in auto-component exports to global OEs.

The Automotive Mission Plan very clearly states that India will become a design and manufacturing hub of small cars for the automotive industry with players like Suzuki, Toyota, Hyundai, Tata, Renault/ Nissan all exporting cars from India with Indian made components. This then is also providing additional opportunities to the auto component industry to export components from India. Currently the auto component industry is exporting $2 billion worth of components directly; and the Automotive Mission Plan predicts this export to increase to $15 billion by 2015.

Has the auto component industry been able to attractive FDI (foreign direct investment) to the optimal extent?

Recent years have witnessed more and more global players making their entry into the Indian market through joint ventures, collaborations and wholly owned subsidiaries. With the new found interest of leading global giants, the Indian auto market has turned fiercely competitive with India’s dual advantage of a ready market and low cost manufacturing base.

The government has also relaxed rules to promote expansion of the auto industry in view of the escalating demand from the newly affluent middle class. Foreign automakers can now set up fully owned subsidiaries giving India a potential edge over China with its local partner mandate.

There is also a boom in auto ancillary companies. India is an attractive outsourcing destination for global auto companies because of its strong engineering skills and low costs. Sourcing parts from India is 10-20 per cent cheaper for US automakers and about 50 per cent cheaper for their European counterparts.

Among the car companies that are investing in India are US automakers General Motors and Ford, Germany’s BMW and Daimler Chrysler AG, France’s Renault, Japan’s Suzuki, Toyota and Honda, and South Korea’s Hyundai.

Are there inefficiencies that need to be ironed out to attract more investment?

Though things have dramatically changed in the country’s operating environment and stumbling blocks like poor infrastructure and complex policy environment have considerably improved, we are not yet at par with global standards. Also factors like high cost of power and high interest rates make us less competitive than many other countries.

How does the Indian auto industry fare on quality and cost factors globally? Has the fallout been felt by Honeywell too?

The Indian automotive industry has taken big strides in improving the cost, quality and delivery of its supplies. However, the Indian auto component industry has a long way to go before it can deliver cost, quality and delivery on a consistent basis. Also, the most visible improvement is among the bigger suppliers, while the medium/small sized suppliers have much to do before they can call themselves world class.

There is a clear need for the Indian auto-component industry to make significant investments in its R&D capabilities to become full service supplier to Indian and global OEs.

What is the R&D happening in Honeywell?

Honeywell Technology Solutions Lab in Bangalore has more than 5,000 engineers involved in developing products and solutions for our global businesses. Behind Honeywell Turbo Technologies’ impressive track record of innovations lie its engineering services and manufacturing facilities that span the globe. Wherever customers are located, the aim is to provide a seamless pathway that begins with turbo concept and product development and leads to program application and launch.

Big auto majors (both the domestic and foreign) have an ambitious plan of bringing low-cost small cars to India from next year. How will the auto component makers benefit from this new segment? Do you think there is an undue focus on petrol vehicles?

Honeywell is very excited by the opportunity of small sized diesel cars for the Indian market, and is in the process of developing turbochargers for small sized diesel engines specifically for the Indian market. These turbochargers are being developed by a team composed of Honeywell engineers based in India and in our passenger vehicle worldwide engineering centre in France. We are well positioned to play a key role in this growing segment.

While the use of turbochargers in India is currently restricted to the diesel segment, we believe that India will follow the European trend of increased use of turbochargers for petrol engines, driven by concerns of CO2 emissions and global warming.

Rising fuel prices and strict emission norms across the world forcing auto majors into go for manufacturing hybrid vehicles. Will these hybrid rollouts test the turbocharger market?

Beyond 2012 towards 2020, the internal combustion engine will remain the powertrain of choice with significant contribution from turbocharging technology coupled with extended use of biofuels and light hybrid technology.

With more automakers making an inroad to emerging markets, what will be the Honeywell’s expansion plan to meet the burgeoning demand?

Honeywell set up a state-of-the-art manufacturing plant in Pune in 2005, and has since invested significantly in establishing a local supplier network and local engineering for Indian customers. Catering to the growing demand for turbochargers, the plant has been manufacturing turbochargers for local customers and export. Honeywell is also introducing its innovative VNT™ technology to India.

Honeywell intends making India a hub for global sourcing of auto components and is making a significant investment in upgrading the skills and competencies of Indian suppliers.

Do you have a service network here?

Honeywell Turbo Technologies has already established a service network in India for its products with service centres in 8 major cities and plans to double this number over the next 12 months.

Source:-The hindu.

The way ahead for the auto industry.

PUNE: Magna Steyr, an operating unit of Magna International Inc, is expanding its presence in India by moving to a new engineering and research & development office in Pune. The new office currently employs 70 engineers and support staff, and Magna Steyr plans to recruit approximately 200 additional automotive engineers during 2008-09 to enhance its global engineering and research & development functions.

"The new office in India is a testament to Magna Steyr's commitment to India and its importance in our global strategy," said Guenther Apfalter, president of Magna Steyr. "Additionally, it creates an important base for engineering and research for both our global and local activities."

Magna Steyr has strategically chosen to grow its presence in the Chakan/Pune region to target the fast-paced automotive growth in the western part of the country, where many local and foreign OEMs have established operations.

NEW DELHI: India's famed automotive growth story has found many admirers and believers across the world. But the fast growing Indian auto sector may fail to become the global provider of vehicles and auto services that official targets envision unless government endeavours to provide more support and Indian companies themselves raise the bar. These are the views of leading Indian auto companies, contained in a new report from KPMG International on the Indian auto-manufacturing sector.

KPMG's India Automotive Study 2007 acknowledges that the Indian economy overall is growing faster than even the most optimistic projections, and that manufacturing is making an outstanding contribution to that growth. But companies themselves question whether Indian firms are fully prepared to make the leap to global scale. The Indian automotive industry is worth around $ 34 billion a year and contributes about 5 per cent of India's GDP.

It produces about 1.5 million vehicles and employs - directly and indirectly - in excess of 13 million people. The government's Automotive Mission Plan calls for automotive sales to more than quadruple to US$145 billion by the year 2016, and for auto sector employment to grow from around 13 million today to 25 million. But companies interviewed by KPMG expressed the view that this rate of growth would be difficult to achieve while infrastructure investment remains relatively low, and while few companies have achieved anything like global scale.

But even as the sector grows some concerns are becoming more pressing. KPMG found that senior auto executives are also concerned about India's eroding cost advantage and the increasing challenges of rewarding and retaining talent, about the pace of consolidation in some parts of the industry, and about the challenge companies face in building Indian auto brands. There are also some concerns expressed about government commitment to building the sector. Labor costs are becoming a big concern in an economy that historically was reliant on low wage rates. Companies now report that a shortage of talent is driving up rates and increasing staff turnover. "The turnover rate is already almost 20 per cent a year in many management levels," says the CFO of a leading auto component maker. "Unless companies can learn to retain people for longer all the benefits of having talented people available will be lost," the company adds.

Many companies believe that Indian manufacturers will have to work hard to increase productivity as labour costs rise. Yet automating India's production lines would require more capital than small companies can raise, according to the CEO of Kalyani Lemmerz, another component company: "Indian auto companies can't just imitate the developed country model, with high productivity through massive automation," he says. "It is still too costly to attempt that."

Above all, companies are concerned about the ability of India's own carmakers to build their brands. "Establishing our brands as quality brands in key markets is going to be a huge challenge," says the head of manufacturing at one large Indian vehicle maker. "We have to sell against established players, and we are going to have to spend a huge amount of time and energy on demonstrating the qualities of the brand."

A number of companies raised doubts that the Indian government being able to recognise the size and scope of the challenge of building a manufacturing sector of global scale. Companies say that government needs to move faster in building domestic and export infrastructure, and in encouraging research and development investments. And one concern voiced by many companies was the fear that India may slip behind competitors in creating an alternative fuels sector.

"Fossil fuel is coming to an end and the whole of mankind needs something to replace it," says the CFO of General Motors in India; "I am not sure the government is really geared up to deal with this fact." Despite the reservations, Indian auto companies are confident - many say that they are more confident than at any time in the recent past.

But Yezdi Nagporewalla, national industry director, Industrial markets in KPMG's India practice, says that it is just when confidence is running high that questions need to be asked. "India may be full of potential, but it faces more than its fair share of challenges too," he says. "From the remotest road-building site to the highest levels of government where policy is hammered out, there is work to be done."

During 2007 KPMG professionals interviewed 40 CEOs and CFOs from different segments of the Indian automotive industry, asking them for their own forecasts of how their sector would perform over the next few years. Many executives were upbeat about India's potential as a high quality manufacturing nation, and some believed that India should be able to build a range of world-class auto businesses in the next decade.
Source:-ET

Tough time ahead for automakers.

The bumpy ride for the Indian automakers will continue. The number one demand from Motown to reduce interest rates has been disregarded by RBI Governor Y V Reddy. The sales have been on a steady decline the past three quarters and no relief seems to be in sight.

The two wheeler and medium & heavy commercial vehicle sales have slumped over the April-December period. The auto companies felt a 25 or a 50 basis points would have improved the lending norms and thereby customer sentiment.

But it was not to be and the consensus now seems to be that the slowdown will continue unless the RBI steps in.

"The industry would continue to slump," said VP-Sales & Marketing, Suzuki Motorcycle India Pvt Ltd.

The banks have reduced their exposure to the auto industry as default rates continue to pile up especially on the two wheeler front. Lending norms too have become tighter resulting in reduced availability of credit but bankers are optimistic and do foresee a cut soon.

"We expect a rate cut in the next two quarters and would improve exposure," said Harpreet Singh, Business Director, Wealth Management, Distribution, Centurion Bank of Punjab Ltd.

With the growing competition and highly volatile market scenario the Indian auto makers have been compelled to think out of box. Experts say with no favours from RBI's monetary policy on Tuesday, the Indian automakers would surely be working overtime to revive their falling fortune.

If and when RBI decides to chip in, automakers would accept it with open arms till then its tough drive ahead

Source:-NDTV.COM

Audi production successfully launched in India at Aurangabad.

Mumbai: Luxury car maker Audi AG has now successfully started production for the Indian market of the Audi A6 at its Aurangabad site in the state of Maharashtra. By 2015, when more than 2,000 units of the A6 should be rolling off the line, Audi will have invested more than 30 million euros in production alone in India. Starting in late 2008, the new Audi A4 will also be assembled locally.
With this step Audi is continuing the company’s worldwide success story and growth trend, and is making a long-term investment in one of the world’s most promising automotive markets.

“Starting our own production there is the best way to adequately serve such a promising growth market like India,” said Rupert Stadler, Chairman of the Board of Management of AUDI AG.

“India is one of the components of our Strategy 2015, which aims to achieve sales of 1.5 million Automobiles per year worldwide. We want to be the most successful premium brand in India as well.”

The carmaker has set up an exclusive assembly line on the premises of the group production facility in Aurangabad for production of the Audi A6. Here Audi consistently relies on the company’s high worldwide standards.

Cutting-edge technology and highly skilled employees are the key to efficient production: the Indian team has been intensively prepared for their jobs with extensive training at the Audi plant in Neckarsulm.

In selecting the location for Audi in India, the group plant for SAIPL (Skoda Auto India Private Limited) In Aurangabad provided several decisive advantages. “Audi benefits from an outstanding infrastructure, highly developed working processes, a large pool of skilled workers and favorable logistical conditions,” said Frank Dreves, Member of the Board of Management at AUDI AG for Production.

He clearly indicates the standards applied at Audi’s second automotive production plant in Asia (after Changchun in China). “Top quality is a worldwide standard for Audi,” Dreves said. “It’s ‘Made by Audi,’ to put it simply. A highly skilled and motivated team of employees there also helps ensure this quality.”

There are currently 35 employees working in Aurangabad on the Audi production line, in quality assurance and in logistics. In 2008, more than 300 A6 sedans will be assembled in single-shift operation. The Audi A6 is intended exclusively for the Indian market.

As well as exclusive Audi production, consistent development and expansion of the sales and dealership structure are also key factors in the company’s growing presence on the Indian market.

Audi has been successfully represented on this market for about three years now. In the spring of this year Audi established a sales subsidiary, headquartered in Mumbai. All market activities in India are managed from here.

Audi adjusted prices for the Audi A6 to coincide with the start of local assembly. There are savings for customers thanks to the more favorable customs conditions. Depending on engine, these range from 140,000 to 210,000 Indian rupees (INR) – EUR 2,500 to 3,800 per car. Aside from the production of the A6 for the Indian market, Audi also imports models such as the Audi A4, Audi A8, Audi Q7 and Audi TT.
Source:-Machinist.in

Ford to invest $500 Million to Expand India Operations.

Current manufacturing facility will be expanded to accommodate volume production of new small car

A fully integrated and flexible engine manufacturing facility will produce petrol and next generation diesel engines for domestic and export markets

Chennai: Ford Motor Company today announced plans to invest US$500 million to expand its India operations, reaffirming its commitment to developing and implementing an aggressive growth strategy in the country. The new investment will fund several new initiatives, including the expansion of Ford India's current manufacturing facility in Chennai to begin production of a new small car within the next two years, and construction of a fully integrated and flexible engine manufacturing plant that will go online by 2010.

The new investment increases Ford's total financial commitment in India to more than US$875 million, and underscores its plan to elevate India as one of the strategic production hubs for small cars in the Company's Asia Pacific and Africa region. In 2007, Ford announced a $500 million investment to build small cars in Thailand, just weeks after launching production of small cars at a new $510 million, state-of-the-art facility in Nanjing, China.

John Parker, executive vice president, Asia Pacific and Africa, said, "This new investment highlights the significance of India's role in our continued expansion and overall strategy for the Asia Pacific and Africa region. We've developed a long-term and strategic plan for India that's anchored on a substantial product program and new engine manufacturing facility.'

The overall investment plan for India has already commenced, and will be implemented in phases over the next three years. The first phase currently underway includes the addition of a diesel engine assembly plant at the Chennai site that will have an initial annual capacity of 50,000 units. The first engines are scheduled to roll off the line in April, and will be used in the local production of the Fiesta and Fusion to satisfy domestic demand.

A significant part of the investment will be utilized for the development of new product programs, primarily to expand the Chennai plant and accommodate volume production of the new small car. Production of the small car is scheduled to commence within the next two years, increasing our overall annual production at the expanded plant to 200,000 units by 2010.

"Ford India's small car will be a worthy addition to the already successful and robust product mix that we offer to Indian consumers, and will further strengthen our competitive position in this increasingly dynamic market," explained Arvind Mathew, president and managing director of Ford India.

The second major component of the investment plan is a new, state-of-the-art and fully-integrated engine manufacturing facility to be constructed adjacent to the current vehicle plant. This new flexible facility will be capable of manufacturing both petrol engines and Ford's next generation diesel engine. Initial annual production capacity is planned for 250,000 units, with the first engines coming off line by 2010. Production at the diesel assembly plant that's currently being set up will be integrated into the new facility.

“Our investment plan clearly signals Ford’s intent to implement an aggressive and comprehensive growth strategy for the India market. Reaching volume production of vehicles and engines will not only allow us to participate in the future growth of India's auto industry, but really to help drive it, both in terms of domestic sale and export potential,” asserted Mathew.

The new facilities and capacity expansion will create more than 9,000 jobs – including 1,500 direct and 7,500 indirect jobs – as Ford India considerably increases its supplier base to meet the expanded production volumes. This, in turn, will compound additional investment by its suppliers and vendors and contribute to the overall growth of India's auto industry.

"We'll be significantly increasing our local sourcing to meet the requirements of our expanded production. One of the factors in deciding this investment was Ford's confidence in the international standards and capabilities of India's supply base," said Mathew. "We're also committed to the ongoing development of our own human resources, and we'll be providing skills training for the additional work force."

Ford India added 20 new authorized dealers to its network in 2007, bringing the total to 130 locations throughout the country. The Company plans to further expand its dealership base to accommodate the planned rise in domestic sales.

Ford will continue to introduce world-class customer service programs in India, such as the introduction of a 24-hour Ford Roadside Assistance Program in 2007, as well as professional service programs that include Ford's Quality Care, Brand@Retail and Total Maintenance Plans.

Ford India Pvt. Ltd.
Established in 1995, Ford India is a wholly owned subsidiary of Ford Motor Company, a global automotive industry leader. Ford India manufactures and distributes automobiles made at its modern integrated manufacturing facility, at Maraimalai Nagar, near Chennai. With more than 2,000 employees, the Company's models include the Ikon, Fusion, Endeavour and Fiesta. Ford India is in its eleventh year of operations in the country.

Source:-Machinist.in