Warren Buffet enters India through Auto Insurance

Legendary investor Warren Buffet’s Berkshire Hathaway is making its entry in to India through Auto insurance. Buffet who’s investment philosophy has been to remain within circle of competence is highly successful through its Insurance and reinsurance business.

Gecko the lizard, hallmark of Geico Insurance in US reminds me of my stint with Auto Insurance in US. When Gecko started popping up on TV and urging to check how much you could save on the car insurance through Geico, I cold not escape the temptation like any car owner. True to its claim, the quote was surprisingly lower to be believed. Called the customer service to make sure and remained with it for about 3 years. The first time talked to agent was to verify and then on it was purely an online business.

Geico, is one of the poster boys of BH’s portfolio now.

Berkshire Hathaway has put its foot on Indian market through online Insurance distribution model at berkshireinsurance (dot) com. It has no significant content presently and would be launched on 25^th March by the man himself who is touring India (first visit) on his philanthropy drive.

Presently in India the FDI for insurance is 26% , which BH feels a lot smaller by it's standards to invest as they believe the amount of efforts required for 26% is same as 50% or 60%. So may be that is the reason for them to be an agency than an insurance company themselves yet.

But I am sure it is the space to watch for millions of auto insurers in India.

VW, Honda, Hundai to be questioned on the grounds of fair price practice for the spare parts

In an interesting move, CCI (competition commission of India), the agency that works as watchdog to hold fair price/trade and practices  in India has ordered an enquiry in to Foreign automakers Honda/VW and Hundai. According to the complaints apparently by consumers, the auto spare parts are only available through the authorized dealer network and are sold at high price. They claim the parts are not available in normal retail outlets like parts from various Indian vehicle makers.

The availability and cost of genuine parts of these foreign brands are always an issue. If the claims are true, it is interesting to know the case for Hundai motors that is second highest selling brand in India now and has vast network and distribution system.

The other brands fairly lesser in sales, and often times the issues is to get the parts to be replaced in time. The dealers even order parts to replace. So it not sure why would they stack them at retailers or the retailer would be interested to stock them.

Honda has been facing issue in its aftermarket due to higher parts costs and has been struggling in sales, not necessarily due to the higher part cost, but it could be one of the prime factors when there is ample choice available for consumer. VW, started its journey through luxury segment and now it has Polo and Vento on market so might take a while to gain its spread.

However CCI, has ordered the investigation requesting a report within 45 days, so it would be interesting to know the outcome of report which most likely would not turned out anything significant.

TATA introducing Divo - Intercity luxury buses for India

TATA motors, the largest CV maker of India has decided to add competition to Volvo and Mercedes in luxury intercity bus segment. TATA that owns Hispano Carrocera, the Spanish bus body building and bus maker is launching its luxury intercity model Divo by 1^st quarter of 2011.

TATA took 100% control of Hispano in 2009 by acquiring balance 79% of remaining  stake making it 100% subsidiary called TATA hispano. TATA already has popular Globus model running on Indian roads with body built by hispano in Goa, India.

The Intercity luxury bus market is growing significantly with private and government owned corporations investing heavily in acquiring the fleets. Presently Volvo, the Swedish automotive major controls over 50% share in the segment followed by Mercedes. TATA, planning to price the Divo at around 10% less than the global brands and giving same luxury thinks it would position well in this segment.  

Picture - TATA hispano

TATA Pixel - TATA motor's answer to futuristic urban transportation

TATA motor’s newly showcased “PIXEL” looks as cool as its name itself. True to the name the car looks really made for the urban transport. The showcase of the concept came as surprise as Nano was pitted as TATA’s answer for global small car hunt. The car developed in its European Technology Centre looks elegant and seems to possess best engineering.

The car comes with a 1.2ltr, 3 cylinder turbocharged engine and offers just 3 meter turning radius. The engine is claimed to be highly fuel efficient and environment friendly.  True to its claim for urban usage, the concept car offers the scissor styled door. Not sure in the commercial vehicle it would really be viable from commercial cost perspective.  An electric variant also is on cards, however TATA is more keen to start its Indica EV running on European roads.

TATA as a car maker, has a lot of woes for its ambitions in India to capture the market share. However it seems to be making every good move to show its presence in European market. Undoubtedly TATA has made significant investments in its R&D/Engineering for PV segment from setting up an European Tech centre in suburbs of London, having seasoned Automotive professionals in engineering, management including its top management, collaborations. The much hyped Nano, really did not let TATA help realize it in terms of commercial success. TATA does not have enough models to fill the narrow segments on Indian road that is filled with best of the models from global car makers. Its Indica is by far the most popular model that helped TATA stand on its feet in PV segment following a series failed models. Like TATA, all pundits felt Nano would be a run away success due to its perceived low cost that was not there. Even if TATA tried to sell it at its hyped below $2500 price tag, it knows it can’t make money by selling at that price. 

India is a tricky market, as majority of the middle class the whole world is looking at is cost sensitive but has very high aspirations. Adding about 100,000 or so more for a bigger car is not an issue for the people whom Nano was targeted. TATA tried various marketing campaigns to pitch its value for money theme but has not shown in the sales yet.

But all its investments and visions might payoff in Europe in next 4-5 years. As the European market is matured and has one need – Small and electric.









Pictures copy righted by TATA Motors.

Indian Automotive February 2011 sales - positive overall, negative exports and cautious moving further

The February 2011 vehicle sales stood healthy in spite of increase in the car prices that the automakers are passing on to their customers time to time.

Barring Honda, all OEMs have shown positive growth and for Honda its been a disappoint phase. It announced a recall of its popular City sedan model due to a fault in a part of an Engine aggregator. The recall was the 2^nd of this model in one year. City has so far been Honda’s bread and butter. Honda posted a 22%  Year on Year decline.

The Ford, VW, GM, Nissan have made significant sales numbers mainly due to their models in A1-A2 segment. Figo, Polo, Micra, Spark have all helped their companies make significant overall continued sales. The backlog for these models is also creeping up to 3-4 months now. The Etios from Toyota has also shown very good response from the market. Close to 5000 units are sold since its launch in mid Dec-2010.  The segment wise gap has been narrowing due to launch of many new models and Martuti, Hundai are facing the heat due to this.

The luxury segment has been posting a steady growth with Mercedes leading the pack with its highest ever monthly sales.

The CV segment also has shown a positive growth Year on Year. The export numbers have declined across segment in Feb2011-compared the same month in 2010.

The industry was keenly watching the union budget for an anticipated hike in excise. However Government decided to keep the excise rate same. However there is a likely hood of yet another increase in Petrol price. The commodity prices have increased significantly and inflation is still a cause of concern for middleclass Indians who are potential customers for A1-A2 segments.

Highlights:

	Feb-11	Feb-10
Hundai Motors
growth	-4.77%
sales	52007	54610
domestic	32629	31001
export	19378	23609
Maruti suzuki
growth	15.50%
sales	111645	96650
domestic	101543	84765
export	10102	11885
GM
growth	126%
sales	11,111	4921
TATA motors
growth	12%
sales	77543	69427
Domestic	10%
	73039	66190
Export growth	39%
	4504	3237
PV growth	18%
	31909	26165
CV (domestic)growth	5%
	41130	39205
lcv	23498	21618
M&HCV	17632	17456
M&M
growth	20.00%
Domestic growth	20%
	31967	26580
PV growth	16%
	15439	13350
4W pickup growth	13%
	9903	8733
3W growth	57%
	5725	3641
CV	900	856
exports	1411	1314
Ashok Leyland
growth	25%
sales	9800	7869
domestic	8984	7092
export	816	777
Honda
growth	-22.83%
sales	4843	6276
Mercedes
growth	51%
sales	662	439
Toyota
growth	55%
cars, SUV	9308	5993
Ford
growth	188.00%
sales	9293	3223
Eicher
growth	29.00%
sales	3916	2780
skoda
growth	39.00%
sales	2512	1805
VW
sales	7077	422
Nissan
sales	2081	44