17-04-2012 07:00
+++ Automotive News reports AUDI may make a decision on where the automaker plans to build a North American facility as soon as Wednesday of this week. The Volkswagen supervisory board is already scheduled to meet on April 18, and an unnamed source claims the new plant is on the agenda for discussion. Earlier reports indicated the manufacturer plans to build a new plant in Mexico, though Audi has been quick to denounce the notion, saying the board had yet to make a decision one way or the other. Publicly, Audi has made noise about locations in both Mexico and the United States. Volkswagen investigated the possibility of building Audi vehicles alongside the Volkswagen Passat in Chattanooga, Tennessee, though it's now clear the luxury automaker is hungry for a plant of its own. Either way, the new plant will likely produce vehicles for sale in North America and export to other markets. +++ In a new marketing effort to promote its pure-electric Focus, FORD says it will make history this month, as the battery-powered version of its compact hatchback will become the first all-electric pace car to lead the pack at a Nascar race. The new Focus Electric, which rolled off the production line in December at the company's Michigan Assembly Plant, will perform all pace care duties for the Nascar Sprint Cup Series race at the Richmond International Raceway on April 28. The Focus Electric pace car will make its public debut at the Virginia State Capitol in Richmond on April 25. "Ford research shows the majority of Americans would consider buying an electrified vehicle but do not yet understand the different technologies", said Mark Fields, president of The Americas. "Highlighting the Focus Electric as a pace car is a fun way to educate consumers about the kinds of benefits our electrified vehicles deliver". Ford noted that according to research, around 35 percent of new car intenders are motorsports fans and 78 percent of them support Nascar. The company added that Ford race fans are 67 percent more likely to consider Ford products than general market consumers. +++ HYUNDAI will prioritize upgrading its brand image across the globe, shifting from its earlier business focus of expanding market share overseas. Last week, the world’s fifth-largest automaker revealed its ambition to cultivate brand power approaching the level of top global brands such as BMW and Mercedes-Benz. “Hyundai has been successful in selling many cars. But the performance in brand power is lagging behind in the overseas markets”, company executive director Cho Won-hong said in a statement. “So we have decided to put more investment in improving the brand image”, he said. He argued that “the image of premium cannot be seen at dealerships of General Motors or Ford”. Hyundai has the goal of attaining a premium image, he said. But the company clarified it would not introduce a premium brand benchmarking Toyota’s Lexus or Nissan’s Infiniti for the time being. “As we are posting thriving sales of the Genesis and Equus sedans, there is no necessity to have a premium brand”, Hyundai executive Lee Dong-joo said. Instead, Hyundai plans to pour huge investment into advertising to notify global consumers of its product quality-oriented management policy. It is fronting a new advertising campaign dubbed “Live Brilliant” to create close brand relationships in foreign markets. A coordinated series of TV commercials and print advertisements will be published across North America, Europe, Africa, and Asia starting April, portraying Hyundai as a common brand for modern family life. Company executives said the company aims to be recognized as a brand that creates new values for owners, not just a vehicle manufacturer. Its time for Hyundai to brainstorm for a new set of strategies to achieve that goal, they said. There will be four 30 or 60-second television commercials. The campaign will be Hyundai’s first launched globally. Hyundai was the world’s 61st most popular brand with an estimated brand value of $6 billion, brand consulting firm Interbrand said in its 2011 report. The report, in addition, showed the brand value of Hyundai jumped 19 percent compared to the year earlier. In the 2010 list, Hyundai’s brand value was rated at around $5 billion, at 65th place. The carmaker last January launched an advertising campaign called “New Thinking, New Possibilities”, aimed at increasing Hyundai’s brand recognition. +++ Honda's Indian marriage is on the rocks. Accusations by its local partner of inappropriate corporate governance and a tussle over future investment have exposed the perils of operating in a business model that has run out of gas for foreign automakers in the booming car market of INDIA. As sales and their confidence rises, overseas manufacturers are tearing up local partnerships and pumping billions of dollars into wholly-owned Indian units, encouraged by the government's hands-off policy that gives it an edge over Asian rival China. With more foreign car makers choosing to have complete control of their Indian businesses, investment is increasing, capacity is rising, and Asia's third-largest economy is fast challenging Thailand and China as an automobile export hub. The automotive industry requires significant investment, particularly at the initial stages, coupled with a lengthy product development cycle, Michael Boneham, president of Ford's wholly-owned India unit said. Such capital intensiveness can be burdensome on partnerships, and the need for large investment and R&D can be difficult to maintain if it's not your core business. Like Honda, Ford entered India in a joint venture, with Mahindra in 1995. That lasted 10 years and sold a total of 120,000 cars. By comparison, Ford's subsequent solo venture, which has committed $2 billion to India, shifted almost 100,000 cars in the last financial year alone. As companies look to tie-ups and joint ventures in Europe and other developed markets to cut costs and share technology, 8 of the world's top-10 car manufacturers operate in India without a domestic partner. "Carmakers now want to do further value addition and bring in proprietary technology, and want to run it on their own. So they determine the fortunes", says Chandresh Ruparel, managing director of the Indian unit of Rothschild, who has advised Indian automakers on partnerships with foreign companies. Honda's troubles stem from a battle over 32 billion rupees ($622 million) worth of fresh investment. The Japanese company wants to boost diesel engine production to meet a surge in demand. Local partner Usha International isn't happy. The relationship has been weakened recently through inappropriate behaviour by Honda in the governance processes adopted by its board on significant decisions, said Krishna Shriram, Usha executive chairman. "We have heard through press interviews that Honda would like to merge their companies in India together for greater flexibility, partly because of difficulties with their Indian partners", Shriram said. "We're quite hurt by these statements due to our belief we have been committed and true". A spokesman for Honda in Tokyo declined to comment on whether the company is considering consolidating its two-wheeler and automobile operations in India. "We are constantly in close contact with our partner", said Tomohiro Okada. Insiders at the company had privately lamented the difficulties of getting things done at Hero Honda, the Indian motorcycle joint venture between the Japanese firm and India's Hero Group. Since Honda exited that joint venture last year in an $851 million deal, the company's fully-owned subsidiary has raced to second place in India's motorcycle sales rankings. Honda's troubles are not unique. Fiat, which has a joint venture with Tata Motors, is severing its distribution agreement with the Indian company in an attempt to boost sluggish sales. Tata's chief financial officer said in February that the relationship was not producing the expected results. Renault's 3-year joint venture with Mahindra was dogged by disagreements and poor communication between the partners: its sole product, the Logan sedan, was mauled by critics and was 25 centimetres too long for a lower tax bracket rivals enjoyed. "We're late, but not too late", Renault India Managing Director Marc Nassif said this month as the French car maker takes a second crack at the market, this time on its own. Joint ventures in India used to be all the rage. Devoid of car making expertise, India scouted for foreign companies to kickstart an industry best known for the Ambassador, a chunky sedan based on Britain's 1948 Morris Oxford that is still made in Kolkata by Hindustan Motors. In 1982 it sold the idea, and 26 percent of nationalised Maruti Udyog, to Suzuki, and the concept was born. At the time, India was an automotive backwater where annual sales, mainly of foreign knock-offs, were below 40,000, or one car for every 14,000 of its then 550 million people. Subsequently, global majors such as General Motors and Toyota wanted local expertise to help scout for suppliers, set up sales networks, negotiate land purchases and (most important) navigate India's infamous bureaucracy. That's no longer the case. While India makes it tough for foreign operators in many industries, it has rolled out the red carpet for foreign car makers. States offer huge discounts on land for employment-boosting factories and the domestic supply chain for components and materials is well established. "Today, it's easy to come in alone", says Vishnu Mathur, director-general of the Society of Indian Automobile Manufacturers, a domestic trade group. Traditionally, an Indian partner was always required to take you through a labyrinth of government process, procedure and policy, Mathur said. But when the policy is so transparent, then the need for a local partner diminishes. Late arrivals such as Nissan and Volkswagen entered with wholly-owned units. Those still weighing up the joint venture or subsidiary model, such as Mazda, are unlikely to pick the former, analysts say. Foreign subsidiaries accounted for 73 percent of India's car sales in the year to March 2011. Joint ventures in which foreign firms hold stakes accounted for just 7 percent. Total passenger vehicle sales in India were around 2.6 million in the year to end-March 2012. India's open-door policy towards foreign car makers, which has allowed for 100 percent foreign ownership since 2002, mirrors the approach taken by Thailand, and stands in direct contrast to China, where foreign manufacturers must join up with a local player and get the deal stamped by authorities. It's an approach that has paid off. Unfettered by partners, Ford, Nissan and Hyundai have set up export bases in India, and total installed capacity has doubled to 3 million vehicles over the past 5 years. India exported 520,000 cars in the year to March 2012, against Thailand's 2011 exports of 735,000 and China's 850,000. Honda, shackled in an unhappy partnership, is finding it tough to ramp up capacity. We do not wish to stand in their way, but will insist on transparency and acknowledgement of missteps in a mature manner, said Usha's Shriram. +++ In the United States, struggling SUZUKI is shrinking in many ways. Insiders say the company is slashing marketing while sales and the dealer roster dwindle. The many signs of trouble: 1) In a market up 13 percent through March, Suzuki was down 2 percent to just 6,561 sales. 2) The brand skipped the Detroit and Los Angeles auto shows this year and suspended social media activity on Twitter and Facebook 2 months ago. 3) Steve Younan, the top U.S. product planning and marketing executive, left in January and will not be replaced. No national TV commercials have aired since 2009. 4) In January, Suzuki stopped getting customer satisfaction data from J.D. Power and Associates; data that help track dealer performance. A memo obtained by Automotive News says another vendor will replace Power, but sources say no successor has surfaced. 5) The dealer body continues to shrink. The brand shed 32 franchises last year, nearly 12 percent of its total. The number of U.S. Suzuki franchises has dropped every year since 2005. The company's strategy has become "very much focused on short-term profitability", says one source familiar with the company's recent cost-cutting moves who spoke on condition of anonymity. "They're limiting their future in the U.S". Nobody at American Suzuki wants to talk about the troubles and the strategy for battling them. But Suzuki's hard-pressed dealers are feeling the pain. "At one point I really thought they were going to support it, but it was kind of like a downward spiral: no sales, no money, no advertising", says former dealer Bill Kay, who dropped his Suzuki franchise last summer even though he had a vacant Chrysler dealership in suburban Chicago available for Suzuki. Seiichi Maruyama, former president of Suzuki Canada, was named president of American Suzuki last April. Takashi Iwatsuki, chairman of American Suzuki, arrived in California at the same time to help steer the company after being previously based in Japan. Maruyama and Iwatsuki have been cutting costs wherever possible, sources say. And Suzuki's global parent is wrestling with falling sales in various key markets. "They seem to be more interested in controlling expenses than increasing revenue", said a second source, who also asked not to be identified. The casualties in the United States have been many tools that most automakers use to promote their brand and products. The last Facebook and Twitter presence was Feb. 6. After skipping auto shows in Los Angeles in November and Detroit in January, Suzuki displayed vehicles this year at the Chicago and New York shows, but freshened versions of the SX4 and Grand Vitara, expected to arrive this year, were not among them. The changes to the vehicles are the first cosmetic updates to Suzuki's meager 4-vehicle lineup in more than 2 years. "The strange thing to me is, even at this bare minimum, when the opportunity is presented to make some news and provide something positive for customers and the dealers, they avoid it", the first source says. Suzuki's newest vehicle, the Kizashi mid-sized sedan, went on sale in late 2009. Its SX4 has been on the market since 2007 with few updates. The current-generation Grand Vitara has been around since the 2006 model year, and the Equator pickup, essentially a rebadged Nissan Frontier, arrived in November 2008. In 2007, Suzuki's U.S. sales reached 101,884. But last year they dropped to just 26,618. In the memo announcing the termination of the J.D. Power customer satisfaction data, Chris White, Suzuki's sales director, told dealers that Suzuki planned to sign a different vendor within 4 to 6 months to provide the scores. But no sign of a successor has surfaced. "A lot of fundamental things that car companies need to track when they're operating, they were just jettisoning for the sake of saving costs", the first source says. Some marketing efforts have continued. Suzuki produced a regional TV commercial for the 2012 Super Bowl to promote the Kizashi that ran in about 20 markets. And a few regional TV spots have followed. Suzuki's troubles and its lack of marketing have led many dealers to call it quits. Former dealer Kay in suburban Chicago says his store sold fewer than 10 new Suzukis in an average month before he bailed out last summer. The few vehicles he did sell had "terrible" profit margins, he says, and the dealership had little service work. Kay, who owns Ford, Chevrolet, Buick-GMC, Honda and Nissan dealerships in Chicago's western suburbs, says poor consumer awareness in his market hindered sales at his dealership. "The problem is that, while it's not a bad product, it's not on anybody's radar to look at", Kay says. Low-volume Suzuki dealerships such as Kay's accounted for most of the Suzuki dealers that closed in 2011, says James Morrell, owner of Advantage Suzuki in Albany, and chairman of the Suzuki Dealer Advisory Board. "Suzuki didn't lose any volume because those dealers weren't selling any new cars", Morrell says. He says about 150 of Suzuki's remaining 246 dealers still sell 5 or fewer new cars per month, despite recent efforts to weed out poorly performing dealers. In 2010, for example, Suzuki offered 150 of its worst-performing dealers $50,000 to terminate their franchise. About 50 accepted the offer. Suzuki is not offering buyouts now. But with more than half of its dealers selling 5 or fewer vehicles in an average month, Suzuki still has many dealers unwilling to focus on Suzuki and adequately promote the brand in their local markets, Morrell says. Many Suzuki dealers use their franchised-dealer status for easier access to financing to support big used-car operations, Morrell says. Indeed, Chicago dealer Kay says used-car sales were the primary focus of his Suzuki store. "It didn't seem like there was any possibility of ever increasing the volume enough to support a stand-alone dealership", Kay says. Despite the struggles of many Suzuki dealers, some have found success with stand-alone Suzuki stores. Greg Sloan, president of Five Star Suzuki in Altoona, says he has a "very positive" outlook on Suzuki's future U.S. prospects. His dealership, which sells about 60 new vehicles a month, is one of Suzuki's highest-volume U.S. stores. Sloan expects new and updated products within a few years. He says that many of the failed dealers were not committed to the Suzuki brand. Sloan advertises heavily in his local market, something most of the smaller-volume dealers failed to do, he says. "I think that some weak dealers have been weeded out, and I think that there are some dealers that lacked focus in retailing Suzukis by the wayside and we're left with guys who are really focused", Sloan says. "There's nowhere to go but up". +++ TATA today said its global sales increased 26 per cent in March to 139.655 units over the same period last year. For the entire 2011-12, the company's total global sales jumped by 16 per cent to 1.252.173, units over the previous fiscal, Tata Motors said in a statement. Sales of luxury brands from Jaguar Land Rover were at 36.471 units during March, up 51 per cent from the same month last year. While sales of luxury sedans of Jaguar brand increased by 42 per cent last month at 5,343 units, Land Rover sales were higher by 53 per cent at 31,128 units. The company said total passenger vehicles sales stood at 75,864 units in March 2012, a jump of 41 per cent from the same month last year. Commercial vehicles sales were up by 12 per cent to 63,791 units from the same month last year. During 2011-12, the total passenger vehicle sales went up by 14 per cent at 652.246 units. Commercial vehicle sales jumped by 17 per cent at 599.927 units in the last fiscal. The Tata Motors Group's global sales comprises Tata, Tata Daewoo and Hispano Carrocera range of commercial vehicles, Tata passenger vehicles, along with the distributed brands in India, Jaguar and Land Rover. +++ TOYOTA, which was overtaken by Volkswagen in global vehicle sales last year, is striking back on the German automaker's home turf. Toyota is rolling out the Yaris hybrid, Europe's first hybrid subcompact, and the image-boosting GT 86 sports coupe this year in a bid to claw back market share in the region after sales plunged 41 percent since 2007. Toyota will further bolster its European business by outfitting its vehicles with diesel engines from BMW from 2014. "It's unacceptable for Toyota to be at this volume level in Europe", Didier Leroy, Toyota's European chief, said in an interview. By cutting management layers to streamline decision-making over the past 2 years, "we made ourselves much leaner, much more agile. We strongly went for the fighting spirit in everything we do". That shakeup is likely to pay off this year, with Toyota predicting its first profit in Europe in 5 years. Market share in the European Union is set to rise to 6.6 percent from 5.7 percent last year, while the VW brand slips to 18.2 percent from 18.5 percent, according to data from IHS Automotive. By making gains in Europe, Toyota aims to halt VW's march to become the world's biggest automaker, overtaking General Motors. Toyota lost the top spot last year when disruptions caused by the earthquake in Japan and the lingering effects of global recalls in 2009 and 2010 caused the automaker to drop to third as VW leapfrogged Toyota to become number2. "The real issue for Toyota is winning back customers", said Jonathon Poskitt, head of European sales forecasting at LMC Automotive in Oxford. "Toyota really needs to refocus on the requirements of what are sophisticated European customers that already have a great choice in new vehicles". The hybrid version of the Yaris, which competes with VW's Polo, is part of the campaign. Toyota's hybrid lineup in Europe currently comprises the UK-built Auris compact hatchback and the Japan-built Prius. Production on the gasoline-electric Yaris started at Toyota's factory in Valenciennes in northern France earlier this week after an investment of 25 million euros. On the other end of the scale is the GT 86, which sports a low-slung grill and dual exhaust pipes. The aggressive design is meant to challenge VW's Scirocco and the Peugeot RCZ and pep up Toyota's image. The brand's current models "haven't seemed to capture the customer's imagination", said Ian Fletcher, an analyst at IHS Automotive in London. The GT86 "might be a car that brings people back into the showroom". Still, with hybrids lacking widespread acceptance in Europe and Toyota targeting a modest 15,000 GT86 deliveries in the region, the Japanese carmaker will need to do more to reach its goal of selling over one million cars in Europe, Russia, Turkey and Israel, 20 percent more than its 2012 target of 835,000. Facing tough competition and lacking in-demand technology, Toyota's performance in Europe has declined faster than elsewhere. In 2007, when Toyota's sales reached a record of 9.37 million vehicles, deliveries in Europe accounted for 13 percent of the total. Last year, Europe accounted for 10 percent of Toyota's 7.95 million auto sales globally. "Toyota's strengths are in hybrid cars, and this has led to strong sales in the United States and markets that are sensitive to increases in gasoline prices", Satoru Takada, a Tokyo-based analyst at Toward the Infinite World. "Europe is already dominated by the German carmakers, because diesel cars are popular. Eastern Europe is one area where Toyota may be successful, but every company is targeting those markets, so competition there will be tough for Toyota too". A lift in Europe could come when BMW starts delivering diesel engines to Toyota in 2 years. Diesel, which is taxed less than gasoline in many European countries, fueled nearly half of the new cars sold in Germany last year. BMW agreed to supply Toyota with diesel engines in Europe as part of a cooperation pact on research into next-generation batteries. Toyota's thrust in Europe comes as VW makes a push in the U.S., where the Japanese company outsold VW five-to-one in 2011. Volkswagen last year opened a $1 billion factory in Tennessee to build as many as 150,000 Passat sedans a year. Toyota's improved finances in Europe are in stark contrast to some rivals. Ford predicted a loss of as much as $600 million in Europe in 2012. GM lost $747 million in Europe last year and is considering further cost cuts. Even with the improvements, gaining and holding onto customers in VW's home region will remain a challenge. +++
