Stimulus effect: Auto makers slash prices

With government announcing a 4% cut in CENVAT across the board, the Auto industry today announced price cuts across various models and segments. The cut has been in the range of Rs.2000 to Rs.50,000. Rate cut comes as a blessing for the auto industry which has been hit hard by the global recession and a slowdown in the India economy.

Pune-based Bajaj Auto today announced cut in prices of its vehicles by up to Rs 4,400 on account of four per cent reduction in CENVAT.The prices of two-wheelers have been reduced by up to Rs 2,100, while that of three-wheelers have been cut by up to Rs 4,400, Bajaj Auto Ltd (BAL).

Maruti Suzuki said in a statement that the price of its top-end SX4 sedan will go down by Rs.23,000 to Rs.760,542, while the small car Maruti-800 will be cheaper by Rs.6,500 at Rs.193,561. Hyundai Motor, the second largest car maker in the country, has cut the prices of its flagship model Santro (GL) by Rs.8,834 (non AC), while the top-end luxury car Sonata will see a drop of Rs.44,792.The company's new sensation i10 will be cheaper by Rs.11,247 and Rs.18,381 depending on its models.

Toyota Kirloskar said the price of its popular multi-purpose vehicle would be reduced by up to Rs.32,780, while high-end models like Corolla would be cheaper by Rs.40,750.

Auto sales for November down

Economic slowdown seems to have taken a toll on the Auto sector as well. Auto companies today reported their monthly sales figure, with all the top auto makers reporting disappointing set of figures.

India's leading car maker Maruti Suzuki sales declined 24.3 per cent in November this year compared to sales in the same month last year.The company sold 52,711 vehicles in November this year as compared to 69,699 in the like period a year ago.

Company's volumes in the domestic sedan segment, called the A3 segment, which comprises SX4, Esteem and Swift D'zire models, grew by 40.3 per cent from 4,260 cars in November last year to 5,975 this year.

The sales in the high-end small car segment, called the A2 segment, comprising Alto, Wagon-R, Zen, Swift, and A-Star models declined 26.6 percent from 47,641 in 2007 to 34,976 this year.

Tractor major Mahindra and Mahindra too announced that it will it could cut down productions and temporarily shut plants due to slowdown in sales in domestic as well as overseas markets.

The economic turmoil has cast its spell on country's oldest automobile company Hindustan Motors too, with sales of Ambassador cars dipping by more than 33 per cent in the past few months.A company official told reporters that Amby sales which were in the region of 900 cars per month have come down to 600 units now.

Maruti gets board's nod for joint venture

Passenger car maker Maruti Udyog, which has been renamed Maruti Suzuki, has secured the nod from India's Foreign Investment Promotion Board to establish a joint venture with a Japanese firm for exhaust system components.

The 49:51 joint venture with Japan's Futaba Industrial Company will manufacture exhaust system components at a factory to be set up at Manesar in Haryana with an investment of close to Rs.2 billion ($50 million), official sources said.

Futaba is a leader in exhaust system components for automobiles, in areas such as tubular and fabricated exhaust manifolds, exhaust pipes, catalytic converters and mufflers.The proposal will be put up before Finance Minister P. Chidambaram for a formal nod.

Mahindra, Renault, Nissan to pay JV fee, share Chennai unit equally

The yet-unnamed joint venture of Mahindra and Mahindra Ltd, its subsidiary Mahindra-Renault Pvt. Ltd, and Nissan Motor Co. that will make four lakh vehicles a year from 2009, will be a contract manufacturer with the three companies equally sharing the capacity, said Pawan Goenka, president (automotive), Mahindra and Mahindra. He added the company was in talks with Nissan to market its cars in India similar to the venture it has with Renault for the Logan sedan.

The joint venture company would not develop or sell cars on its own, said Goenka. The three companies, which would market the products made by the venture, will pay a fee to it in proportion to the goods manufactured.

“Mahindra’s greatest advantage is to get access to the technology of Nissan and Renault through this plant in Chennai,” said Umesh Karne, senior research analyst with Emkay Share and Stock Brokers Ltd. “The joint venture company will be developing cost-advantageous products. So, royalty (fee for manufacturing) would not be an issue.”

Global players such as Fiat SpA and Nissan Motor Co. are entering into contract manufacturing alliances with Indian companies to gain from the low cost of manufacturing in the country and benefit from economies of scale.

Nissan Motor Co. has a tie-up with Maruti Udyog Ltd, which sells one of every two cars sold in the country, to make 50,000 units a year of a small car, which it will export to Europe. Fiat SpA and Tata Motors Ltd are spending Rs4,000 crore to build a factory in Pune which will roll out models designed by the two companies.

Mahindra and Mahindra will hold a 50% equity in the contract manufacturing unit; the chairman and CEO will also be its appointees. Nissan and Renault will work out how to split the other half between themselves.

Read more in The Livemint article

Sigma-Vibracoustic JV unveils Rs 75-crore unit

Vibracoustic of Germany, part of the 4.5 billion-euro Freudenberg Group, has stepped up its operations in India by setting up another manufacturing unit in Punjab in collaboration with Sigma India. The new unit has been set up at a cost of Rs 75 crore for manufacturing anti-vibration parts for automobiles. Vibracoustic India, a 50:50 JV between the German group and Sigma Corporation, already has two manufacturing units in Punjab.

The two partners have so far invested Rs 96 crore to set up manufacturing facilities for producing anti-vibration components such as engine mounts, bushings, tuned dampers and hydromounts for auto companies. The JV exports nearly 75% of production and customers include European auto majors.

Sigma Vibracoustic supplies components to global players like Daimler Chrysler, Volvo, Porsche, Ford and General Motors. In India, the Indo-German JV’s customers include the Maruti, the Tata Group and the Mahindras. Among the platforms that use the company’s components include Mercedes E, C & S class and Atego trucks.

Read more in The Economic Times article.

Govt exits Maruti, sells stake for Rs 2,360 cr

The government today exited the country's largest car maker Maruti Udyog by selling its residual stake for Rs 2,360 crore to a clutch of financial institutions led by Life Insurance Corporation (LIC).

The government has sold all the share held by itself for and average price of Rs 797 per share to raise Rs 2,360 crore.Maruti shares today closed at Rs 764.65 on the bourses. The government had fixed a floor price of Rs 760 for the sale.

The government had offered 2.96 crore shares in the company representing 10.27% stake. LIC got all the 1.3 crore shares it had bid for at a price of Rs 800 per share. The country's biggest insurer, which earlier held 8.1% now controls 12.5%, and has become the second-largest shareholder in the company.

In all, 32 financial institutions and mutual funds were alloted shares. State Bank of India was the second most successful bidder and got 83 lakh shares at Rs 775 per share.

Read more in the The Business Standard article.

Corporation Bank bids Rs 850/shr for Maruti stake

Enthused by the oversubscription to its offer to sell its remaining 10.27% equity in Maruti Udyog (MUL), the country’s largest car maker, the government hopes to raise around Rs 2,500 crore from the auction. The total number of bids received were for around 3,59,00,000 shares as against 2,96,79,709 shares on offer (1.21 times the subscription).

A Finance Ministry official said the auction process is likely to be completed tomorrow itself at a meeting of an empowered group of ministers (eGoM), which is overseeing the sale. The Maruti scrip was trading at Rs 802.85 towards close of trade on BSE, up from the previous close of Rs 800.

Financial bids for the shares, at a floor price of Rs 760, were deposited today by 36 of the 39 companies that expressed interest to participate in the auction. The highest bid of Rs 850 per share for a lot of 1,00,000 shares came in from public sector Corporation Bank. The lowest bid of Rs 765 came from the Union Bank of India.

As many 20 public sector banks, insurance firms and mutual funds put in bids, along with private sector entities like HDFC among others. State Bank of India and a couple of its associates, IDBI, GIC and Canara Bank also participated in the auction.

Read more in The Business Standard article.