DECEMBER 7, 2003
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Ad Asia 2003
Round-up

The Indian ad industry came back from Jaipur enlightened. True or false? Hmmm. To answer this question, BT Online recounts everything that happened that could have even a marginal bearing on the subject. It would be simpler to answer in a word, but then, this is about advertising...


Q&A:
Christopher Prox

Here's the man famous for advising Nokia to keep its cellphone handsets 'human', on brand innovation.

More Net Specials
Business Today,  November 23, 2003
 
 
Vroom!
Armed with newfound competitiveness, a clutch of Indian automakers looks to make a mark outside the country.
Revving up: Tata Motors' Ratan Tata (left) and M&M's Pawan Goenka are eyeing big export gains

Hear that noise? Good guess, but no, it isn't the noise of the CityRover's 1.4 litre mechanical heart as the car does 0-60 in 11.5 seconds. What you hear is the determined march of a clutch of Indian auto companies as it ventures into the wide world beyond where sharks like Toyota, gm, Ford, Harley, Honda, and Daimler-Chrysler (some ailing, but sharks, all) rule.

There's Tata Motors, which is close to acquiring South Korea's Daewoo Commercial Vehicle for around Rs 530 crore, a move that, apart from helping the company make inroads into the Korean market, will provide it with a convenient beachhead into the Chinese one. This, from a company that has already started exporting its small car, Indica, to the UK (badged CityRover) and will, over the next five years, sell close to 100,000 of these through its deal with Rover in the UK and Europe.

There's Mahindra & Mahindra (M&M), which has identified seven overseas markets for its UTE Scorpio. Two-wheeler makers such as Kinetic, TVS Motor, LML, and Bajaj are in various stages of going global. Even Hindustan Motors is in the process of setting up an assembly unit in Sri Lanka to manufacture its flagship product, the 50-year-old Ambassador.

This wasn't in anyone's script. In the face of global competition-there's no shortage of it in the local market-India's indigenous auto industry was expected to surrender. The signs were all there: falling marketshares, bleeding financial statements, even dispirited chief executives griping about how their companies hadn't been given a chance to get used to the rules of the open market. Then, surprisingly, the industry pulled itself up by the bootstraps: It focussed on restructuring operations, reducing costs, and optimising its supply chain. "The plans of all these companies are very real," explains Munesh Khanna, Managing Director, NM Rothschild & Sons (India) Private Limited. "We (Indian industry) are so cost conscious, and today, most input costs have been taken care of, even the quality has improved. So, it's logical to expand." That's just what the Indian auto industry is doing.

WHAT?
The products that are going global
Indica
The Indica is already being sold under the Rover marque in the UK. Now, the Tata Group wants to take it to other developed countries, including the US

Scorpio
M&M wants to sell a quarter of the Scorpios it makes overseas by 2005. It plans to target Ecuador, South Africa, Middle East, China, Indonesia, Turkey and the CIS countries by establishing assembling, even manufacturing facilities in them

Pulsar
Bajaj wants to vend the first motorcycle it developed without help from partner Kawasaki in Indonesia, the Philippines, and Brazil

Freedom
Two-wheeler maker LML is investing in joint ventures in Colombia and Egypt that will make the Freedom, its first home-grown motorcycle

Tata Motors' New Truck Platform
It's all very hush-hush now, but this truck, now under development, will be sold with value-adds in developed markets such as the US and Europe, and as a stripped-down version in under-developed ones

Tata Motors' Rs 100,000 car
Chairman Ratan Tata's dream already has takers, such as Senegal. Other African and Asian countries could lap it up too

WHERE?
The countries Indian automakers are looking at
Countries in a similar stage of economic or market development as India
South Africa, Ecuador, Egypt, Middle East, Malaysia, Sri Lanka, Peru, Argentina, Singapore, Latin America, Mexico, Iran

Developed countries that cannot match Indian costs
The US, the UK, Italy, Sweden, Germany, Spain, Australia, New Zealand

Under-exploited markets
Colombia, Nepal, Zambia, Zanzibar, Zimbabwe, Bangladesh, Afghanistan

Quid Pro Quo?

"If we are allowing products to come in from other countries," says Ravi Kant, Executive Director (Commercial Vehicles), Tata Motors, "then it is in the fitness of things that we go global as well." It isn't just a simple quid pro quo, but yes, that's more or less what Indian companies are doing. "In both commercial vehicles and passenger cars, Tata Motors will seek to acquire meaningful international presence, either directly or through regional alliances and partnerships," Ratan Tata, Chairman, Tata Motors, had told Business Today earlier.

At the heart of such strategic intent is the belief among Indian auto companies that the very factor that has helped them succeed in India-a combination of high quality and low price-can help them succeed in other markets as well. "The Indian auto industry has gone through one of the most intense business restructuring and cost cutting exercises seen in corporate India," says Jyotivardhan Jaipuria, the head of research at DSP Merrill Lynch.

Then, there's the small matter about the world being ready for made-in-India products. Pawan Goenka, Chief Operating Officer (Automotive Segment), M&M, is just back from the Harvard Business School where he was enrolled in an advanced management programme. While at the school, he polled his class of 50 on its perception of Indian products. The result pleased him. "Five or six years ago, Indian products were simply not acceptable; gradually, the perception is changing." "Indian products are increasingly becoming acceptable (to global customers)," echoes Rajat Dhawan, Senior Engagement Manager, McKinsey. However, Amul Gogna, Executive Director of rating agency ICRA, believes that while Indian products are gaining ground overseas, it will take some time before they are universally acceptable. Why does Maruti export under the Suzuki badge and Tata Motors under the Rover one, he asks.

Still, armed with their success in the domestic market-M&M's Scorpio, Bajaj's Pulsar, Tata's Indica, TVS' Victor, and LML's Freedom all fit the bill-and newfound aggression, Indian companies are venturing forth. TVS Motor Company has been evaluating the ASEAN (Association of South East Asian Nations) market in terms of exports, joint ventures, even acquisitions. Pune-based Kinetic Engineering is eyeing markets such as Indonesia, Vietnam, and Brazil. Bajaj Auto, for its part, has a global strategy that includes going overseas through distributors, establishing manufacturing bases, and developing a product for foreign markets and launching it through a joint venture (JV) partner. "On top of our priority-list are Indonesia and the Philippines, where we want to set up manufacturing facilities. After that, we will look at Brazil," says R.L. Ravichandran, Bajaj Auto's VP (Business Development and Marketing), who is spearheading its globalisation-drive.

Not every company has a global strategy that is as ambitious as Tata Motors', Bajaj's, or M&M's. "We are looking at small markets where there is no logic in setting up full-fledged assembly plants," says Rakesh Jayal, Senior Vice President, LML. In Colombia and Egypt, for instance, LML will soon set up JVs with local firms that will take care of the assembling and marketing. Kinetic Engineering, when it makes its move (in the next six months or so, according to the company) will follow a similar route. "You require a certain critical mass to set up a plant," says Manmohan Khera, Kinetic's Joint Managing Director. "We could opt for a JV or a technical collaboration."

Rothschild's Khanna believes Indian companies should be more aggressive and actively scout for acquisitions. He points to Europe where several small- and mid-sized auto- and auto-component companies are reeling under recessionary conditions. More than an acquisition, however, the industry, says Goenka, desperately needs one Indian product, any Indian product, maybe a computer, to become a global success. Its success, he reasons, will rub off on Indian automobiles too. Now, wouldn't it be ironic if this product happens to be a car, UTE, truck, or motorcycle. Stranger things have been known to happen.

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