The Light Is Green

India auto industry update (Part 7): Maruti and Suzuki

As a provider of dealer management systems to automobile dealerships in several emerging markets, we closely follow what happens in the auto industry in key regions around the world. I thought it might be interesting to share some of that information.

In the world's major markets, auto sales are slowing at the same time that competition increases, so global auto manufacturers are setting their sights on big emerging markets like the BRIC countries: China, Russia, Brazil and India.

This series briefly discusses the promising future of the automotive industry in India. We've already looked at what GM, VW, Honda, Ford, and Renault-Nissan. Today we'll take a look at the current king of cars in all of India...

Maruti Udyog, or Maruti Suzuki, in India

Maruti Udyog is the undisputed king of the auto industry in India, as they own a whopping 54% slice of the market, mainly thanks to their low cost cars. Japanese carmaker Suzuki owns a majority share (54.2%) of Maruti. They sell 500,000 cars a year in India, and export another 30,000.

The company has just announced their new name: Maruti Suzuki India Limited.

Their success has been thanks to extremely succesful models like the Maruti 800 (a million sold worldwide) and its succesor, the Alto, now India's top seller.

A little history... The Maruti 800 sparked the automotive revolution in India with the launch of a modern, fuel-efficient, low-cost car, at the same time that India's middle class began to grow. Maruti's incredible success also ignited the creation of India's component industry.

To top all of this off, Maruti also leads year after year in J.D. Power's annual customer satisfaction survey.

Maruti also owns Insurance and Finance endeavors in India.

Maruti's low-cost car for India

Maruti is virtually synonymous with the term low-cost car. In fact, the term "People's Car" which is currently used in India to signify the car with the lowest possible price, was born hand in hand with the creation of Maruti Limited in 1981.

Business Week says Maruti Udyog is now working on lowering the cost of its base Maruti 800, which currently sells at $4,130 and is today the cheapest car in India, to compete with Tata's own "People's Car" which will supposedly appear in 2008 for just $2300.

Models in India

Maruti Udyog offers eleven models, between its own and those of parent Suzuki, in India:

• Maruti 800
• Alto
• Omni
• Gypsy
• Zen
• WagonR
• Versa
• Esteem
• SX4
• Swift
• Grand Vitara

Plant plans

Suzuki will be investing some $650 million to expand capacity, manufacture diesel cars, and build a new plant in Manesar, in northern India. This plant will build a compact car together with Nissan. Output will reach one million units by 2010.

Jagdish Khattar, CEO of Maruti Udyog, recently said that the company wants to export over 200,000 cars by 2010.

Posts in this series:

• Part 1: Overview
• Part 2: GM in India
• Part 3: VW in India
• Part 4: Honda in India
• Part 4b: Honda in India, two-wheelers
• Part 5: Ford in India
• Part 6: Renault-Nissan in India
• Part 7: Maruti Suzuki in India
• Part 8: Hyundai in India
• Part 9: Toyota in India
• Part 10: Tata Motors in India

Tags: India, auto industry, automotive industry, India auto industry, Maruti 800, Maruti Alto, Maruti Ovni, Maruti Gipsy, Maruti Zen, Maruti WagonR, Maruti Versa, Maruti Esteem, Maruti SX4, Suzuki Swift, Suzuki Grand Vitara, Maruti Udyog, Maruti Suzuki, Jagdish Khattar

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Chrysler wants less dealers

According to the Wall Street Journal and Dealers Edge, Chrysler is warning dealers that they may get shut them down if sales don't improve in six months.

"Some 50 dealers in the Great Lakes region that have been missing monthly sales goals received letters from Chrysler saying they must improve their performance within 180 days or the company would begin the process to "terminate" their franchises.

Similar letters are expected to go out to other low-volume dealers across the country in the next few weeks."

Chrysler is now controlled by Cerberus Capital, and as part of their plan to lower losses in North America they say they to slash dealer ranks.

Tags: Chrylser, Cerberus, automotive, auto industry, automotive industry

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Ballmer hawking Windows

Here's a very funny video of current Microsoft CEO Steve Ballmer hawking Windows 1.0 in a 1981 TV commercial. Thanks to the folks at SimplexIT for pointing it out.

Tags: Windows, Steve Ballmer, Microsoft

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What can India learn from China

A very interesting article from the India Times, titled "What can Indian Elephant learn from Chinese Dragon".

The lesson: Agriculture reforms can spur growth in non-farming sectors, and the two together help to swiftly decrease poverty.

Here's what China did:

• China began agricultural reform in 1978. They changed the land tenure system from commune-based to household responsibility system. And procurement prices for most staple crops were raised by up to 20%.
• >>> This created incentives for private investment.
• China invested heavily in rural infrastructure, education and health. The adult literacy rate in India is 62% compared to China’s 92%. Most villages in China now have access to all weather roads, while India is far from that target.
• China invests twice what India does in agriculture R&D
• >>> All of this laid a basic foundation for agricultural growth.

Here's how China's plan played out:

1. Agricultural GDP grew at 7.1% per annum during 1978-84.
2. Agriculture income increased by more than 10% per year.
3. Poverty in China declined from 33% to 15% in six years.
4. This generated a huge demand for goods produced by town and village enterprises (TVEs) in China, spurring a next round of rural non-farm growth and employment.
5. These TVEs have been the real catalysts in making China as the manufacturing hub of the world today.

Concludes the India Times:

"Instead, in India, growth spurs from the IT boom (top of the economic pyramid), and the economic reforms focused more on industry and service sectors than on agriculture. As result, while India’s service sector is doing very well, and manufacturing has picked up momentum during the last five years or so, but agriculture is still limping."

Tags: agriculture, China, India

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Tallest building in the world

Dubai is now home to the world's tallest building, the Burj Dubai, currently at 141 stories, at a height of 512.1 meters or 1,680 ft. The final height when it is finished in 2008 is unknown. (The building has its own amazingly slow website here.)

The former champion was the Taipei 101 building in Taiwan, at 508 meters.

The developers want the Burj Dubai to be world's tallest building according to all four accepted criteria: structural top, highest occupied floor, top of the roof, tip of the spire/flagpole. So there!

Dubai, as you may know, is home to several monster projects: Internet City, the Palm Trilogy (palm-shaped islands off the coast), and The World (a cluster of man-made islands shaped like a world map).

More on the Burj Dubai here.

Tags: Burj Dubai, Dubai

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Eleven rules of choosing business management software: Rule 8

Continuing with our list of eleven "rules" to help guide small and medium sized companies when they evaluate potential suppliers of business management software...

Rule 8: Be wary if the system is too simple.

A dealer needs more than just an invoicing system.

A vehicle dealership has precise needs that do not exist in other industries: very specific parts inventory management, the management and tracking of warranty claims, finance plan management, and the treatment of repair orders.

Even marketing tasks are different than in other industries as they must take into account a totally different set of variables.

That is why a specific category of software called Dealer Management Systems (DMS) was created, to address these special requirements.

Of course in theory a dealer can be managed through a standard accounting or financial program. There a great many of these on the market, from small generic invoicing programs generally used by small shops, to expensive and bulky ERP systems used by larger corporations.

But however good an accounting or ERP package is, if the dealer wants to go beyond simple invoicing and bookkeeping and actually improve processes and operations, the need for a true DMS is clear.

As profit margins on vehicle sales continue to decrease around the world, the dealership’s after- sales department gains more and more importance.

A Dealer Management System has powerful, industry-specific tools and functionality to manage and maximize the profitability of the Parts and Service departments.

An accounting package, or even a world-class ERP system, does not.

Similarly, the dealer should be careful regarding the database used by their chosen system.

Small software programs tend to use small databases that are geared towards personal or very small-scale use, and totally inappropriate for a business, especially a vehicle dealership. Even the smallest dealership needs a business-sized database that can handle the appropriate volume of transactions and provide stability, security, and speed.

Posts in this series:

• Rule 1: Make sure the new system can accompany your company’s growth

• Rule 2: Does the system stay up-to-date regarding fiscal compliance?

• Rule 3: Attend a demo

• Rule 4: The system should be flexible

• Rule 5: Training is essential

• Rule 6: Choose a supplier that provides more than just a system

• Rule 7: Ask how technical support is handled

• Rule 8: Be wary if the system is too simple

• Rule 9: Discounts can be pyrrhic victories

Tags: Autologica, DMS, ERP, SMB, SMBs, dealer management systems, auto dealer software, automotive, auto industry, automotive industry, auto dealer, auto dealers, car dealer, car dealers, motor vehicle dealer, motor vehicle dealers

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What is BRIC?

I've received several queries regarding the term "BRIC", its origin and meaning.

So, what is BRIC?

BRIC stands for Brazil, Russia, India, China.

Goldman Sachs published a report in 2003 in which they created the term. You can see the report here.

Basically, Goldman Sachs maps GDP, income per capita, and currency fluctuations, to conclude that these 4 economies (Brazil, Russia, India, China) will undergo huge growth during the following 50 years, and will in that span surpass the economies of the G7 countries (U.S., Japan, Germany, France, Italy, UK, Canada), “if everything goes well”.

This last condition is little noteworthy, especially when we're talking about emerging economies with which it isn't crazy to think something MAY go wrong.

But the BRIC term is now well-entrenched and the point is that we all know what it implies.

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Brilliance China dims

Right on the heels of a very tough setback due to poor quality (their BS6 sedan was given a very poor one star crash test rating in Germany, read this post), now Brilliance China Automotive is delisting from the New York Stock Exchange (NYSE).

Forbes has more info, including Brilliance's explanation:

"...the company said the delisting stems from a decline in trading volume of its American Depositary Shares and increased costs related to complying with U.S. reporting and registration obligations."

Note that Brilliance also manufactures BMW 3- and 5-series models for the Chinese market.

Tags: Brilliance Automobile, Brilliance Auto, automotive, auto industry, automotive industry, China, Chinese auto industry, Chinese automotive industry, auto quality, China quality

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The world gets flatter

Alternative title: India outsources IT jobs

For the past decade, India has been the developed world's main destination for outsourced IT jobs.

The main reasons tens of thousands of white-collar jobs were shifted there were the Indian workforce's exceptionally high education level, which was also fluent in English, and at a much lower cost.

(I feel it is important to note that though the second item on the list is a market condition, the first was thoroughly planned and successfully carried out by the Indian government.)

But here's a strange turn of events: India is having its own problems now, mainly rising labor costs, declining margins, and a whopping attrition rate of 40-50%.

So Indian IT firms are now setting up development centers, or just outright buying firms, says the Business Standard, where they can find manpower at half the Indian wage rate. Places like Mexico, the Philippines, Thailand, Bangladesh, Sri Lanka, China, and Eastern and Northern Europe.

This is happening with many of the IT and business services typically outsourced to India: programmers, R&D specialists, business analysts, customer service representatives and finance and payroll process specialists.

Not very convincingly (at least to me), the Indian companies doing this say it's not just a matter of cost-cutting, citing that:

   
• India lacks skills in high-end product design and architecture (which is sure to be found in Bangladesh)   
• Industry or company specific expertise may be found elsewhere   
• Setting up shop where the clients are located helps win their business

Tags: India, outsourcing

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Chrysler signs with China

Chrysler finally went and did it.

Chrysler has signed a deal with leading Chinese automaker Chery, to manufacture small cars in China and then export them to the U.S. (as well as other markets).

The first vehicle on the table will be based on the Chery A1 compact sedan, but sold as a Dodge.

Step 1 in the Chrysler-Chery plan calls for the car to reach, within a year, less demanding markets... either Latin American or Eastern Europe, at an estimated cost of $10,000.

Eighteen months later the cars would reach North America and Western Europe. Chery has also said that it could move up its U.S. plans to 2008, and lower the price tag to $7,000.

Says CBS News:

   

Tom Lasorda, Chrysler chairman, said, “As of today, we're committed to building vehicles here for export. We will combine Chrysler's research and technology and global reach with Chery's lean manufacturing.”

   

Yin Tongyao, Chery CEO, said the deal gives his company the opportunity to improve its skills at it tries to expand exports of its own models. “Chery is still young, so we should learn from Chrysler and improve our own competitive edge in the near future.”

   

Both said that will jointly develop future models, "probably with Chrysler styling on a Chery platform".

Chery is a relatively newcomer to the auto industry, barely ten years old, though they are the fastest growing carmaker in China. Last year they produced 350,000 units, and plan to increase that by 10% this year.

Chery previously had a deal with Malcolm Bricklin's Visionary Vehicles (of Yugo "fame"), who was to bring Chinese cars to the U.S., but that went south and in fact the two are now in litigation.

Tags: Chery, Chery Automobile, Chery Automobile Co., Yin Tongyao, Tom Lasorda, Chrysler, automotive, auto industry, automotive industry, China, Chinese auto industry, Chinese automotive industry

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