The goings-on in the Indian automotive scene have been pedestrian to say the least, compared to the hectic action in January. Which prompts us to go off the beaten path and look at some major issues that have affected the automotive industry.Perhaps the most interesting of which was the recent news reports about the so called agricultural boom going bust and as a consequence tractor demand. Now every one is aware that tractor demand has historically been linked to agrarian trends. Thus with CMIE's recent statistics predicting a mere 0.5 per cent growth in agricultural production in 1997-98, (after the heady days of a 5.8 per cent growth from 1995-97) naturally the panic set in. The obvious victim of this minuscule growth thus had to be the demand in the tractor segment and the tractor sales figures released for the third quarter from October to December did not disappoint.
Overall sales growth for the third quarter dipped from 15 per cent posted during the six months from April to September 1997 to 10.29per cent. Consequently all tractor companies were hit bad - with the market leader's Mahindra bearing the brunt of the fall. The only manufacturer that came out unscathed was Punjab Tractors with a 20.53 per cent growth (thanks largely to recent capacity expansions), compared to the mere 5.90 per cent growth in units sales achieved by M&M. Although shaken from their complacency, M&M was unfazed by the growth at Punjab Tractors stating that M&M's growth is based on a much larger base.
But despite this retort the market leader announced some concrete steps to cement it's 27 per cent market share in the tractor business. And going by the figures for the month of January 1998 the efforts appear to be paying some dividends for M&M which has posted a positive 3 per cent jump in January sales compared to the negative growth of the industry.
However given the harsh realities of the agricultural slowdown, tractor majors could well have to start looking elsewhere for support. Could `exports' be the medicine forthis malaise?
Another important occurence, which many consider a non-event was Denso India's premium priced rights issue at Rs 50 per share. This when the scrip was trading at Rs 32 in the markets, was probably a clear way of increasing the stake of its parent Denso Corporation of Japan and its associates in the Indian company. Interestingly enough the parent and its associate companies had already received the necessary Foreign Investment Promotion Board (FIPB) and other government clearances to pick-up the unsubscribed portion of the rights issue. But while this could be a simple ploy to increase stake in the Indian venture can anyone doubt the parent's commitment to the cause. Also none can deny the earnings potential in India for auto ancillaries -- both as a low cost global sourcing base and an OEM supplier to the likes of MUL, Hero Honda, Bajaj Auto - with the possibility of adding the Honda Siel, Mitsubishi and Toyota car ventures to the growing list of customers.
Then there was the announcement byTelco about the dilution of its stake in the Mercedes Benz joint venture. Which given the crunch on resources was not an option, but in all probability a forced decision on Telco. Besides the precarious financial position, Telco as the market leader has had little respite bearing the brunt of the slowdown in commercial vehicle offtakes. A fact which is clearly reflected by the drop in market shares from 50.96 per cent to 42 per cent for the nine months to end-December. An inventory pile up has further compounded the beleaguered truck manufacturers problems and more importantly the `Mint' which was unveiled recently at the Delhi Auto Expo, still continues to be the largest grey area affecting future profitabilities.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
