Mico Is Focussing On Passenger Car Segment In A Big Way

Updated: Jun 29 2002, 05:30am hrs
With the growth curve in the Indian automobile sector expected to settle down to a moderate level of just over three per cent, key players in the automotive component industry are adopting new strategies to retain existing business as well as to chart newer areas of growth. The auto industry is expected to grow on an average of 3.8 per cent in the 2001-2010 span. In the 1990s the average growth was around 9.5 per cent while in the 80s it hovered around 7.1 per cent. The slowdown in the industry and the sedate phase of growth is having a direct bearing on the fortunes of component makers. Speaking to K P Sethunath of The Financial Express, Motor Industrties Corporation of India (MICO) managing director Andreas Nobis shares his perspectives on the emerging scene of automotive industry in the country.

MICO has projected a flat growth for the company in the current year despite signs of revival in the economy. Could you elaborate on this
According to our earlier projections the growth rate for the four-wheeler industry in the country for 2001-10 period was around 4.5 per cent. But we have scaled it down to 3.8 per cent taking into consideration the over all growth in the economy. It is well known that fortunes of automotive industry largely depends upon a faster rate of growth of national income and GDP. Since the GDP growth is pegged at between 5 to 6 per cent we cannot expect the autmoble sector breaching that and growing faster.

For the short term in the current year according to our estimates the passenger car segment is expected to register a growth of 7 per cent plus, commercial vehicles 3 per cent plus. But tractor segment is expected to regsiter a negative growth of 10 per cent.

In your view what are main factors inhibiting the growth of the sector
Unpredictablity in decision making, non-existance of a VAT system, low productivity and inflexible labour laws, regional and communal tensions are some of key factors identified by us as problem areas. These are factors that will impact the long term business and investment plans.

The case of emission standard is one example in this regard. According to the earlier decision the Euro-II standard was to be implemented in the whole country by 2002. But this was postponed to 2005. As a company we invested a good amount to set up a factory in Jaipur to manufacture components to meet the Euro-II standard. But the decision to extend the date had made our investment idle.

I think these issues needed to be attended with a long-term perspective and changing business environment at the global level.

For a company like MICO these could impact us on two ways. We export a significant quantity of our products to the parent firm Bosch. Bosch is having manufacturing centres all over the world and they may find sourcing from India not be as attractive as sourcing from China or Brazil. Product transfer decisions not going in favour of MICO is another worrying factor.

What are the steps taken by the company to overcome these problems
The short term measures include reduced production days, block closures, no over time, no replacement of retirees, freeze on recruitments, VRS scheme to discharge surplus manpower, postponement of investment decisions till the very end.

Increase exports, market share and new products introduction are some of the other steps taken by the company. We are focussing on passenger car segment in a big way and these have shown encouraging results.

At present 70 per cent of MICOs revenue comes from the commercial vehicle segment. With the focus on passenger car could you provide details on the share from this segment to the over all revenue of the company.

It is too early to take a call on specific numbers. But we are introducing new products to cater the segment and this is going to be a key area of focus for the company.

MICO had completed three rounds of share buy-back in the recent past. Do you plan any more buy-backs
No. With the completion of the third buy-back the stake of Bosch in MICO is at 60.5 per cent. The buy-back was mainly to reward the share holders as the slowdown in the economy has compelled us to postpone some of the investment decisions. So we thought that some of the surplus cash will be used to reward our shareholders through the buy-back route. It has nothing to do with the current fashion of de-listing. We have no such plans.

Besides automotive components, MICO has also introduced car audio systems and some other products in the market. How is that doing
Our car audio system Blaupunkt was launched in 1996 and today it is the leading brand in the country. We have also introduced a wide variety of Bosch electric power tools since 1993.

The latest to come from the MICO stable in the country is Terra-25 packaging machine. We hope this machine will evoke good response from the market in the country as it is one of the best in its category in terms of price and performance.