At a time when export-intensive sectors like IT, BPO, textiles and garments and others have been hit by the rising rupee, the Indian automobile industry seems to have bucked the trend with the sector actually witnessing a double-digit growth in the number of units exported, thanks to the pre-commitment made by dealers abroad.
According to the figures released by the Society of Indian Automobile Manufacturers (Siam), while overall exports went up 14.57% at 90,444 units, export of two-wheelers grew by 26.01% to 59,087 units and that of passenger cars went up by 13.39% at 15,464 units during November.
?Commitments for the number of units to be exported are made at least three quarters in advance and if there are any fluctuations in the rupee rate against the dollar later, dealers overseas cannot cut down on numbers,? says Rajiv Mitra, spokesperson, Hyundai Motor India Ltd (HMIL). Hyundai exported 9,898 units in November compared to 8,426 units during the same month last year, a growth of 17.47%.
However, there is no denying the fact that the appreciating rupee has hit the bottom-line of all major auto exporters in the country to an extent. ?While the numbers are growing due to the cost advantage that India offers, profitability has declined over the last few months,? says Mitra, adding that the company is gradually shifting exports from dollar to euro keeping in mind the stability of the euro over the last few years. Hyundai exports Santro, Accent and Getz to over 65 countries in the European Union, Latin America, Africa and Middle-East.
Ditto for Maruti Suzuki India Ltd (MSIL). The company, which has launched three global cars Swift, Grand Vitara and SX4 in the last few months and will roll-out the recently announced A-Star in late 2008, is actually looking at moving to the euro to offset the impact of the fluctuating rupee against dollar.
?About one lakh units of A Star will be exported to Europe and it will be done in euro,? said Osamu Suzuki, chairman, Suzuki Motor Corporation, Japan, on his recent visit to India. Maruti, which currently export M-800, Alto and Zen Estilo to countries like Indonesia, Nigeria, Philippines, Chile, Bangladesh and Nepal among others, posted 84.82% growth at 4,382 units exported during November as against 2,371 units exported during the same month last year.
?Often, the orders are placed well in advance and numbers of units cannot be changed later whether the rupee appreciates or depreciates,? says Dilip Chneoy, director-general, Siam, adding that in cases where there is no prior commitment, players easily cut down on exports to keep margins under control.
This is precisely what Tata Motors seems to have done as a result of which its exports have come down, says an industry expert. The company witnessed a dip of 4.58% at a mere 834 units exported and to cope up with declining exports, it is now mulling plans to set up assembly units overseas to nullify the impact of the fluctuating rupee. ?To counter the impact of fluctuating exchange rates, we plan to set up an assembly unit in South Africa to supply to the local market as well as other markets, depending upon cost advantages,? says Debasis Ray, spokesperson of Tata Motors. The company?s export portfolio comprises of Indica, the Indigo family and the Safari and it has presence in South Africa, Italy, Spain, Turkey, Ghana along with the recent addition Venezuela.
In the two-wheeler segment, motorcycles witnessed a robust growth of 30.47% at 56,785 units sold during November with Bajaj Auto Ltd exporting 34,940 units as against 22,139 units, a growth of 57.82%. TVS Motors also witnessed a an increase of 34.40% in exports at 8,768 units sold during November compared to 6,524 units sold during the same period last year.
?Exports of branded products is not much of a problem in the context of the appreciating rupee as these products have a demand and are well-accepted overseas. This is unlike the garment or the leather industry where the products made in India are sold under a global brand name,? says HS Goindi, senior vice-president (international business), TVS Motors.
However, for two-wheeler manufacturers shift in exports from dollars to euro will not help in the long run. ?Unlike passenger cars where cars are sold as buy-back products, for two-wheelers change in currency will only add to the problem with customers asking for discounts once the respective currency appreciates,? adds Goindi. The company exports a whole range of its products to 48 countries across Asia, Africa and Latin America, and expects to grow at the rate of 40-45% a year and consequently double volumes every two years. Overall, exports of Indian automobiles has grown at the rate of 39% CAGR over the last five years, led by passenger cars at 57% and two-wheeler exports at 35%.
According to the Automotive Mission Plan (AMP), a 3% growth in global demand is anticipated over the next five years. No wonder, industry is buoyed that the export targets set by the AMP will be achieved much in advance. ?With the rising number of export from India, AMP?s target of exporting one million units by 2015 seems to be achieved much before that,? adds Chenoy.
And it?s not just the passenger cars or two-wheelers that are driving fast into the overseas markets. Even utility vehicle majors are entering into global markets with Mahindra and Mahindra recently bagging an order for exporting 45,000 units of Scorpio in the US in 2009. This, despite the fact that dollar will continue to weaken against rupee in the near future as predicted by industry analysts.
