News 050201

AUTO NEWS BULLETIN

Weekly News reports from January 27 to February 3 2005
MURAD BAIG ASSOCIATES
R-8 Hauz Khas New Delhi – 110016.

ESTIMATED CAR SALES April 2000 to January 2005

Seg Model Apr 02 - % Apr-03 % Jan 05 Apr04- %
Ment Mar04 MS Jan 05 MS
Mar, 03 MS
`A1’ M800 145,223 26.1 167,564 23.7 9,625 97,974 14.6
-3.49m
Lower A2 Zen 62,573 11.2 64,646 9.2 5,746 54,494 8.1
3.49–3.65m Alto 25,713 4.6 60,634 8.6 13,117 99,469 14.8
Wagon R 31,918 5.7 50,865 7.2 7,153 63,803 9.5
Uno 800 0.1 902 0.1 - 45 0.0
Santro 85,834 15.4 101,854 14.5 10,167 85,581 12.8
ST 206,838 37.1 21,697 39.6 36183 401366 59.9

Upper A2 Indica 72,978 13.1 81,668 11.6 10,663 85,386 12.7

3.65 –4m Palio 23,041 4.1 8,804 1.2 204 3,716 0.5
Corsa Sail - - 3,212 0.5 87 1,976 0.3
Getz 1,603 7,086 1.0
ST 96,019 17.2 93,684 13.3 12557 98,164 14.6

Lower A3 Esteem 10,442 1.8 11,629 1.7 2,482 17,714 2.6

4.0-4.2m Accent** 20,343 3.6 26,318 3.7 2,280 18,353 2.7
Siena/Petra 2,764 0.5 120 145 1,288 0.2
Ikon 14,962 2.7 21,828 3.1 1682 17491 2.6
Cors/Swng 6,687 1.2 6,646 0.9 343 4,308 0.6
Indigo/Marina 6,418 1.1 28,075 4.0 3,344 31,213 4.6
ST 61,616 10.1 95,105 13.5 10276 90367 13.5

Upper-A3 City 12,006 2.1 18,416 2.6 3,206 26,713 4.0

4.2-4.5m Lancer 4,867 0.8 2,788 0.4 171 1,718 0.2
Balno/Altu 603 0.1 2,558 0.4 740 6,238 1.0
ST 18,786 3.3 24,045 3.4 4117 34,669 5.2

Miscel Ambass 13,776 2.5 12,034 1.7 1,290 10,206 1.5

Versa 1,947 0.3 4,000 0.6 328 4,044 0.6
Fusion - - 448 448 0.1

A4 Octavia 6,029 1.1 5,960 0.8 582 5,619 0.8

4.5–4.75m Corolla 1289 0.2 9,732 1.4 830 8,274 1.2
Optra 7,094 1.0 762 7,177 1.1
Elantra 397 3,852 0.6

A5-A6 Mercedes 1,099 0.2 1,621 0.2 160 1,730 0.2

Over4.71 m Accord 1,300 0.2 2,101 0.3 339 2,539 0.4
Sonata 1,493 0.2 1,237 0.2 93 731 0.1
Mondeo 452 0.1 155 0.0 - 28 0.0
Camry 464 0.1 1,065 0.1 80 693 0.1
Vectra 241 -- 235 0.0 6 38 0.0
Superb 21 186 0.0

ST (A4,A5&A6) 12,367 2.2 29,204 4.1 3270 30,867 4.6

Dom sales 556,972 100. 704,570 100.0 68,469 670,131 100.0
Exports 69,997 129,316 135,000*
GRAND TOTAL 626,969 824,537 805,131
*estimates
January wholesales remain on course for record domestic and international sales.

Utility Vehicle sales

January Apr 04- Jan 05

Omni : 5,666 49,530

Gypsy : 437 2,699
Qualis : 284 28,209
Tavera 1,824 9,291

Scorpio 3,142 23,193

Bolero 3,161 20,361*
Other M&M 5,870* 60,770*
Sumo : 3,706 24,134
Safari : 364 2,716

Forester : 7 70
CRV : 241 1,291
Terracan 7 257
Vitara 6 106
Endeavour 177 1,908
Pagero 10 92
Prado 18 35

*Estimates

TOTAL UV’s 24,920 224,662

Scorpio, Balero and Tavera sales shot up with the stoppage of Qualis production at December
end. The successor Innova is expected during the last week of February. Utility vehicle sales now
account for 25% of India’s personal vehicle domestic sales.

Domestic News
January 28

Apollo Tyres has posted a net profit of Rs 16.85 crore for the quarter ended December 31, 2004 as
compared to Rs 15.64 crore for the quarter ended December 31, 2003. The total income (net of excise)
has increased from Rs 463.91 crore in Q3-03 to Rs 577.12 crore for the quarter.

Cummins India, maker of engines, has reported a net profit of Rs 32.86 crore in the quarter ended
December 31, 2004 compared to a net profit of Rs 26.94 crore in the year ago period. The net sales rose to
Rs 296.76 crore from Rs 224.39 crore.

TVS Motors posted a net profit of Rs 28.23 crore for the quarter ended December 31, 2004 as compared
to Rs 27.50 crores. The company’s total income has increased from Rs 681.93 crore in Q3-03 to Rs
815.23 crores.
Goetze India said its net profit in the third quarter of this fiscal grew by 69.5 per cent. Profit after tax
stood at Rs 5.68 crore during October- December 2004 over Rs 3.35 crore in the year-ago period. Sales
went up 10.4 per cent to Rs 106 crore. Net sales in the first nine months grew 32.8 per cent to Rs 15.98
crore over Rs 12.03 crore recorded for the corresponding period. Sales increased 13.3 per cent to Rs 305
crore during April-December 2004 over Rs 269 crore.

January 29

Escorts posted a net profit of Rs 5.72 crore for the quarter ended December 31, 2004 compared to net loss
of Rs 27.7 crore in the quarter last fiscal. The company’s total income increased 75.47 per cent to Rs
356.96 crore for the December quarter against Rs 203.42 crores

The government has decided to hold back carmaker Honda Siel’s proposal of revised royalty payments
for its new models spanning the next five years. The company saw its FIPB proposal deferred by the
ministry of heavy industries on the grounds that the new fee structure may exceed the permissible limit
under the automatic route. The ministry has also proposed to examine the company’s application in
greater detail. Honda Siel was looking to recast its royalty structure moving from a lump-sum to a model-
based formula. The automaker wants to move to a model-based structure. Under the new structure, the
Indian subsidiary will pay royalty only when it introduces a new model. For an FMC, which would
include changes in styling, engine, major components and sometimes a new platform altogether, the
Indian subsidiary would have to pay Honda Japan 800 million yen in three installments spread over six
months. For MMCs the royalty is lower at 400 million yen spread over four months payable in two
tranches of 200 million yen each. Apart from that, the Indian subsidiary has also proposed to raise its
remittance to Honda Japan from both domestic sales and exports.

Auto firms go the extra mile to beat higher input costs. Rising input prices have hit operating margins of
many auto companies in the third quarter ‘04-05. The companies have been hit by a double whammy of
higher consumption of key materials like steel at higher prices and higher costs of selling, thus, squeezing
margins. Maruti puts down margin maintenance to value engineering work and increasing localization
done on its cars, apart from a shift in sales towards higher value cars. During the second quarter, a strike
at Ashok Leyland’s Hosur plant prevented the company taking full advantage of the demand for LCVs,
but a higher realisation and better productivity from its labour, combined with a price hike, shored up
operating margins in the third quarter. M&M raised the prices of tractors and utility vehicles marginally
during the first and second quarters.

TVS increased the price differential and positioned its product between Victor and Centra, to stop
cannibalization. Industry sources say volumes are expected to improve in the fourth quarter, helped by the
growth of its latest model, the Star. Hero Honda resorted to large-scale promotions, like Rs 1,001 off on
very bike and the Reliance Mobile tie-up to maintain its lead against Bajaj Auto and Honda motorcycles.
This has impacted margins. However, volume growth remains strong, which should help it tide over raw
material price hikes. In the case of Bajaj Auto, rising unit sales were tempered by a high rise in raw
material inputs.

January 30

MUL is getting ready to move to the fast track with its premium compact car Swift, built on a new
platform. The car, which would be launched across markets in India, China and Hungary in the next few
months, was being extensively tested for quality and other parameters. The company will roll out the
premium hatchback, which will compete with Hyundai Getz and Palio, in the 1,000cc and 1,300 cc
versions. Maruti is expecting to sell around 50,000 units of the vehicle in the first year. The company is
thinking of pegging it in the Rs 4-5lakh range.
HM has posted a net profit of Rs 1.76 crore in the third quarter ended December compared with the loss
of Rs 29.82 crore. Net sales grew 47.79 percent to Rs 242.72. In the nine months to December, the
company suffered a loss of Rs 27.62 crore.

Shrinking margins put the brakes on tyre companies' profits. In the quarter ended December 31, ’04, four
of the largest tyre companies, Apollo, MRF, JK Tyre and Ceat, reported a cumulative operating profit of
Rs 135 crore, which comes to around 20% less than what they made in the December’02 quarter. The
industry’s margins have halved. Operating profit as a proportion of net sales has declined to 6.5% from
over 11% two years ago. There was an absolute decline in operating profit, despite a double-digit growth
in revenues. In the past two years, cumulative net sales of Apollo, MRF, JK Tyre and Ceat have been
growing at a compounded annual rate of 18%. It grew from Rs 1,476 crore in the first quarter of ’01-02 to
Rs 2,064 crore in the last quarter. In the past two quarters, three tyre makers have reported net loss
alternatively. While MRF and Ceat reported net losses in September quarter, JK Tyre is in red in the latest
quarter. Tyre makers blame this on rising material cost and their inability to pass on the increase in the
cost to their customers. While in the past, their profitability was eroded by higher prices of natural rubber.

January 31

Tata Motors reported a 49.8 per cent rise in quarterly profit as strong truck and car sales helped offset
rising raw materials costs. The automaker said net profit rose to Rs 316 crore ($72.3 million) in the fiscal
third quarter to December 31, from Rs 211 crore.

Tata Motors expects demand in the April-June quarter to be impacted as vehicle prices rise after new
emission rules are met. "Because of emission norms, cost will rise, a part of which will be passed on to
consumer because of which we anticipate an advancement of demand from the April-June quarter to the
current quarter," said Praveen Kadle, ED, finance and company affairs.

Auto parts maker Amtek India said its board would meet on February 7 to consider buying a 100 per cent
controlling stake in UK's Sigma Cast Group, which makes auto-casting components. Amtek shares rose
more than 2 per cent to Rs 162.95 in early trade in a firm BSE.

Amara Raja Batteries said it posted a net profit of Rs 1.42 crore for the third quarter to December 31,
compared with a loss of Rs 1.81 crore. It said revenue rose 54 per cent to Rs 60.5 crore. Amara Raja
Batteries will expand its annual capacity to make lead acid storage batteries to 2.4 million units in the
next 12 months, from 1.5 million now, the company said.

Sundaram Fasteners has posted a net profit of Rs 24.75 crore for the quarter ended December 31, 2004.
The company informed that the company's net sales has increased from Rs 247.67 crore in Q3-03 to Rs
139.46 crore.

February 01

Indo Asian Fusegear Limited has reported a 300 per cent increase in net profit for the quarter ended
December 2004 at Rs 3.29 crore compared to Rs 72 lakh. The company's revenues for the quarter ended
December 2004 have increased 20.45 per cent to Rs 32.22 crore from Rs 26.75 cr.

February 02

Talbros Automotive Components has entered into a 40:60 joint venture with Nippon Leakless
Corporation, Japan to manufacture selective gaskets. The new entity named Nippon Leakless Talbros
(NLT) will set-up a plant near Manesar in Haryana at an initial investment of Rs 10 crore. The
commercial production of the plant is expected to begin by the end of June this year and the outlay
earmarked for three years is Rs 12 crore. The JV company, which will specialise in rubber coated metal
and special non-asbestos gaskets mostly for the two-wheeler industry, may benefit from India’s Thai FTA
by sourcing from NLK’s large Thai operation which produces RCM. NLK’s MD said that the JV can
import RCM produced in our Thai plant through the FTA to make gaskets in India and the Thai plant can
source some stainless steel material from India. The JV expects to reach a sales turnover of Rs 50 crore in
next three years.

International News

January 29

PSA Peugeot Citroen said it was in advanced negotiations with Japan’s Mitsubishi Motors about
cooperating on a new sport utility vehicle. Peugeot chief executive Jean-Martin Folz planned to go to
Japan next week to finalise the deal. Peugeot’s stock meanwhile rose 0.24% to 46.80 euros. Peugeot
already has partnerships with five car manufacturers, including Toyota and Ford.

BMW is updating its luxury 7-Series saloon for early spring when the so-called "facelifted" version
appears with a revamped range of engines, the company said. The top of the range model will get changes
both to its interior and exterior design, including its controversial rear boot lid, while five of the six
engines available are either new or thoroughly updated. The company's iDrive systems control concept
would also be further refined to improve its user-friendliness. BMW said sales of the 7-Series prove that
the car has been a hit among buyers. "Accounting for almost 160,000 units delivered to customers the
world over, the fourth generation 7-Series is the most successful luxury performance saloon from BMW
so far," BMW said in a statement, adding that the car took the top spot in its class last year in its
demanding domestic German market. The 7-Series competes mainly with Mercedes Benz S-Class and
Volkswagen's Audi A8. The current version has already outsold the previous generation by nearly 8 per
cent. The new version will hit German dealerships in early April and will start at a price of €61,500
($80,040) for the 730 diesel while the gasoline-powered 730 begins at €62,000, including German value-
added tax.

Porsche said vehicle sales would rise to at least 80,000 in its fiscal year to July ‘05 after reporting higher
first-half sales, revenues and earnings. Headline earnings before taxes increased 6.5% to 225m euros
($293m) for the six months to end-January, while net income climbed 4.5% to 125m euros, in line with
consensus estimates. Revenues gained 3.4% to 2.9bn euros on the back of a stronger 9.7% rise in vehicle
sales to 35,660 vehicles. The carmaker reiterated it expected a continued high level of profits and revenue
growth for the full year, during which Porsche expects to benefit from demand for the new generations of
its iconic 911 sports coupe and its entry-level Boxster roadster. Porsche’s finance chief said he expected
full-year 911 sales to exceed 20,000, its Cayenne offroader to remain roughly flat at 40,000 and the
Boxster to increase sales above 13,000. The company is aiming for sales to hit an annual 100,000 vehicles
within the next two to three years and is making a big push into new markets like Russia, China and
India.

Mitsubishi Motors said it would get a lifeline of $5.3bn in a second bail out in eight months, and widened
its loss forecast as it battles a plunge in sales. After receiving a $4.8bn bailout from the Mitsubishi group,
investment funds and others last year, MMC is still in dire need of cash to shore up its finances, pay for
restructuring steps and develop new cars. Sales in the US are also tanking by double digits as it fails to
lure customers with its “best-backed cars” warranty campaign, leaving MMC to rely on emerging markets
in Asia and Europe for growth. As part of a new revival plan, three core Mitsubishi group companies,
Mitsubishi, Mitsubishi Tokyo Financial Group and Mitsubishi Heavy Industries, agreed to inject a
combined 270bn yen ($2.6bn) into MMC mainly through the purchase of yet another round of new
shares. With no end to the sales slide in sight, MMC now expects to sell 1.3m vehicles in the year to
March 31. That is 190,000 units fewer than the previous year and down from the 1.4 m units forecast in
November. Hit by sliding sales and provisions to account for a fall in the value of its assets, MMC
widened its full-year net loss forecast to 472bn yen from 240bn yen projected two months ago. MMC is
also expected to pay tens of billions of yen in damages to compensate DaimlerChrysler for recall
problems at Mitsubishi Fuso Truck & Bus, part of which it sold to the German automaker before the
scandal.

January 31

Encouraged by a higher-than-expected growth in India, maker of premier car Mercedes-Benz,

DaimlerChrysler has decided to foray into the CV segment in the country with the launch of a heavy-duty
truck and luxury coach and is buoyant on the Indian market in the medium term. The company sold 1,860
units of Mercedes-Benz in the calendar year ‘04 in India; a year-on-year growth of 15% and its turnover
grew more than 20% to post Rs 530 crore.

February 01

Honda Prospect Motor is to expand its production facilities in Karawang, West Java, after Honda sales in
Indonesia more than doubled last year. The expansion, expected to cost five million US dollars, is for the
welding and painting production lines. It should lift production capacity from 40,000 units to 50,000.
Honda Prospect sold 46,500 vehicles in 2004, up from 21,650 the previous yet. It hopes to move 53,000
units this year for a projected 10 percent market share.

Toyota Australia says its Melbourne assembly plant is meeting export orders even though a strike at a
local supplier has forced it to fly in steel from overseas. A six-month industrial dispute at the BlueScope
steel plant in Victoria has caused problems for many manufacturing companies in the automotive sector.
Toyota has no intention of changing suppliers at this stage despite the disruption.

February 03

Guangqi Toyota Engine held a line-off ceremony for engine parts, on February 02. It is the first output
from the first joint project undertaken by Toyota and Guangzhou Auto. In addition to engine parts, GTE
will begin production of 2.4-litre AZ gasoline engines in the autumn. The factory has an annual
production capacity of 300,000 units and is slated to produce 25,000 engines by the end of this year. All
engine parts and engines produced in 2005 will be exported to Japan. Toyota and Guangzhou Auto also
established a vehicle production and sales company, Guangzhou Toyota Motor, last September. It is due to
begin production and sales of the Camry in mid-2006. GTE will supply it with engines.