Economy

Carmakers looking to increase exports to non-EU markets

Roudra Bhattacharya New Delhi | Updated on November 17, 2017 Published on July 04, 2012




Domestic carmakers have increased export efforts to non-European markets, as India’s top car importer – the Euro Zone – tries to pull itself out of the toughest economic crisis in recent times.

The renewed focus on exports is a result of a slowdown in car sales at home, and a reaction to the rupee falling to a record low of about Rs 57 against the dollar, its sharpest tumble in recent times.

“Exports are a major hedge against currency fluctuation and have become very important to us today. With Europe in a slump, we’re now focussing on non-EU markets such as Africa, Middle-East and South-East Asia,” a top Maruti official told Business Line.

Algeria has replaced The Netherlands as its biggest export market.

Maruti, which recently began supplying knocked-down kits of the Ertiga MPV to Indonesia for local assembly, hopes to export to other South-East Asian markets such as Thailand and Malaysia. It is also busy developing new markets for the Swift Dzire, apart from the A-star and Alto exports.

Increasing exports offsets the higher cost of imported components and materials such as steel – usually denominated in dollar or yen. For most major players, such as Maruti, Hyundai and Tata Motors, the imported content can be anywhere between 5 and 30 per cent of the cost of the final product.

Maruti-Nissan contract

Maruti is also re-negotiating the fourth year of its manufacturing contract with Nissan. Under this five-year deal, it supplies the A-Star compact (branded as the ‘Pixo’) for Nissan’s European markets. It expects to supply about 20,000 units to Nissan this year. Last year it supplied 18,000 units, apart from 36,000 in 2010-11 and 52,000 in 2009-10.

For Maruti, non-EU exports climbed six per cent to 84,000 units in 2011-12, while exports to Europe fell 27 per cent to 43,000 units.

Utilising capacity

While preserving profit margins, adding new overseas markets would also ensure higher utilisation of vacant capacity at home – especially for petrol engines. This is a good option for Maruti as 40 per cent of its 13.5-lakh annual petrol engine capacity is under-utilised.

Additionally, exports are usually a higher margin business than domestic sales, which makes it more attractive for carmakers.

Hyundai exports up

Hyundai, which has a 5.5-lakh petrol engine capacity at its plant near Chennai, also saw exports in June rise eight per cent (23,904 units), while domestic sales remained flat.

Mr Arvind Saxena, Director for Marketing and Sales, Hyundai Motor India said, “Being the largest exporter, we have the flexibility to adjust our volumes between the domestic and the export markets. Of late, we have witnessed good traction for the i10 in Latin America and for the Eon in Africa.”

He added that non-EU markets are doing well compared to Europe, but with the company already exporting to nearly 120 countries, there are hardly any new markets left to explore.

Ford focus

Ford’s ‘One Ford’ strategy also becomes relevant for such an export focus. Under this strategy, it sells similar car models across most markets, allowing it to easily adjust production between different locations as per the demand.

“With the continued growth of our core global platforms as part of our One Ford plan, expanding our export business in India continues to be a strong part of our strategy. The engine manufacturing plant in Chennai is positioned as a hub for low displacement engines across the region.

“We will continue to accelerate our export strategy as our second plant (Gujarat) comes on line,” Mr Nigel Wark, Executive Director for Marketing, Sales and Service, Ford India, said.

Its top-selling model, Figo, is currently exported to 35 markets and will eventually be expanded to 50.

Ford also hopes to export new models such as the upcoming EcoSport SUV from India.

>roudra.b@thehindu.co.in

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Published on July 04, 2012
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