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Thursday, December 24, 2009

Carmakers brace up to drive into new export territories

Indian auto majors are slowly changing tack as the economy marches on revival path. Bit-by-bit , domestic car biggies are now changing over to newer export target while going flat out to push domestic sales higher. The strategy had always been there in some form or other, but has now got an impetus with several countries in the EU and the US preparing to phase out the so called 'scrappage incentive' scheme for cars with the economy showing signs of revival.
Some frontline Indian carmakers had successfully pushed their products into these overseas markets even during recession, with users taking advantage of the (Sterling) 2,000-to-4 ,000 incentive that was available for scrappage of existing cars they were using. The scheme was actually an encouragement to go for new cars so that manufacturing didn’t slow down hugely. But now with the economy reviving in those countries, the discounts are slowly being withdrawn.
Accordingly, realising the potential threat, automobile makers here like Maruti Suzuki, Hyundai Motor India and Tata Motors are shifting priorities to newer destinations like Latin America, Australia, New Zealand, Africa and Saudi Arabia. They are also focusing more on the internal domestic market, which, over the past few months, has most definitely shown signs of revival.
Talking to Mr Arvind Saxena, senior VP (marketing & sales), Hyundai Motor India (HMIL) said: “The European countries had announced several stimulus packages under the scrappage incentive scheme. Some have been withdrawn and some are expected to be withdrawn in the near future. Exports have not improved much in Europe. And we are now looking at newer destinations like Australia, New Zealand to even Latin America.”

HMIL is also altering its business mix. The company usually relies on export markets for 50% of its sales and on the domestic market for the balance 50%. For instance, in calendar 2008, HMIL's total sales was 4.89 lakh units. Of this, 2.43 lakh units were exported. In 2009 calendar year, the company targeted a sale of 5.12 lakh vehicles, of which 2.75 lakh units are for export markets. Europe accounts for nearly 60-70 % of HMIL's total exports.
"We are in the process of changing this 50:50 business mix. In 2010, we plan to sell 55% of our total vehicles in the domestic market and export the balance 45%. Our emphasis will be on penetrating in tier-III and tier-IV cities. At present, nearly 27-28 % of our domestic sales come from these cities. Our aim is to take this figure to 35%," added Mr Saxena.
Maruti Suzuki too is looking at newer export markets. “Scrappage incentive is not a permanent thing, which is why, we have to find newer markets. We had initially started with exports to 18 countries. Today, we export vehicles to 60 countries. Australia, New Zealand, Africa and Saudi Arabia are some of the emerging markets. Our A-Star model has been a runaway success in western Europe. Along with this, we are scaling up penetration in rural markets to boost domestic sales," said Mr Mayank Pareek, executive officer, marketing and sales at Maruti Suzuki.

In 2009-10 , Maruti aims to sell 10 lakh cars. Of this, 1.30 lakh vehicles will be exported. According to Mr Pareek: "We've been able to export 1 lakh cars till December, which is the highest ever in the history of Maruti in any fiscal," added Mr Pareek. Of these 1 lakh cars, nearly 80,000 have been exported to Europe. Tata Motors, though not a very large player in the export market, is also exploring new territories for their cars. A Tata Motors spokesman said, “We have a business plan to expand our global footprint, which we cannot share right now. Generally, we export our cars to Italy, Spain, Poland and other countries. We are now looking at all potential countries. Tata Motors will launch a variant of Nano in Europe, which will help us to boost our exports in EU. For the domestic market, we are moving to tier-III and tier-IV cities."
General Motors, which now exports cars to Nepal and Bangladesh, aims to export 20% of its total production of 2.25 lakh vehicles by 2011. "Initially , we will start exporting to Asia Pacific and subsequently to Europe. We are also focusing more on the smaller cities and rural market. Earlier, 70% of our sales used to come from metros and the rest 30% from smaller cities. Now we have changed this mix. Our aim is that 60% of our sales come from smaller cities and the rest 40% from metros," said Mr P Balendran, VP, GM India.

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