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Old 13th October 2011, 10:08   #1
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Default Vehicle demand overtakes output for new launches

Car cos Mahindra & Mahindra, Toyota Kirloskar, Honda and others rework strategy as demand overtakes output for new launches - The Economic Times

This article gives a glimpse as to why Honda is struggling to meet the demand for Jazz.

@ Mods: Please merge it with appropriate thread if there is any older thread on this topic.

MUMBAI: Automobile companies, which have recently launched vehicles, have underestimated demand, fuelling lower production targets and a consequent increase in waiting periods.

Demand for diesel variants for Etios and Liva and the Honda Jazz risen more than the production targets.

The XUV 500, launched last month, has booking orders of more than 7,000 units leading to a waiting period of 17-18 weeks. The utility vehicle major, which planned to produce 2,000 units a month, will scale up production to 3,000 units. "While we can ramp up capacity, it's always more difficult to ramp up capacity at the supplier end. Every supplier has to increase capacity, only then can we increase production," said Pawan Goenka, president, automotive sector, M&M.

M&M, which has also launched the XUV in South Africa, plans to defer its plan of taking the vehicle to other global markets till the situation improves in the domestic market. It has deferred new bookings from October 11.

This has been necessitated due to overwhelming response across Mumbai, Pune, Delhi, Bengaluru and Chennai. It has received over 8,000 bookings in 10 days. The priority is to expedite deliveries for existing bookings and hence a decision has been taken to not open up new cities immediately.

Toyota Kirloskar sold 6,000 units of Etios and Liva in September. But the company feels that it could have sold 2,000 units a month more but for production constraints. "We will see the share of diesel cars moving up from 45% to 60% from next month. With the new plant coming up, it will ease supplies," said Sandeep Singh, deputy managing director (marketing), Toyota Kirloskar Motor.

The capacity constraints have led to a waiting period of over two months on Etios and Liva diesel cars. The Japanese auto major is enhancing production from 90,000 units to 1,00,000 units in the plant which makes Innova and Fortuner. In another plant, where Etios, Etios Liva and Corolla Altis are manufactured, production is being ramped up from 1,20,000 units to 2,10,000 units .

"The immediate and long-term demand is very different for new launches. A good indication would be to see if the product has real demand even after a period of 6-8 months," said Abdul Majeed, auto practice leader, PwC.

Honda Siel produces 600 Jazz a month and has an order backlog of more than 3,000 cars. "The shortage of a micro-chip which comes from a factory in the quake-hit North Japan has led to a waiting period of more than 4 -5 months," said Jnaneswar Sen, senior VP, Sales & Marketing, Honda Siel. Supply constraints are likely to be resolved by the middle of November," Sen said. The Jazz saw sales picking up after a price correction this year

Last edited by aaren : 13th October 2011 at 10:11.
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Old 13th October 2011, 17:41   #2
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Default Re: Vehicle demand overtakes output for new launches

thanks a lot of this article , i think for many it would have put an end to the debate on why the Jazz production is at the limit it is on - and now we know the reason!

Although i am sure the microchip could be manufactured elsewhere as well.


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Honda Siel produces 600 Jazz a month and has an order backlog of more than 3,000 cars. "The shortage of a micro-chip which comes from a factory in the quake-hit North Japan has led to a waiting period of more than 4 -5 months," said Jnaneswar Sen, senior VP, Sales & Marketing, Honda Siel. Supply constraints are likely to be resolved by the middle of November," Sen said. The Jazz saw sales picking up after a price correction this year
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Old 13th October 2011, 18:02   #3
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Default Re: Vehicle demand overtakes output for new launches

This is such a fine balancing act because the manufacture will have to estimate the average annual sales say one year down the line and plan for such production. The initial delivery planning is also very important.

Take for example the New Ford Fiesta, they did a soft launch with no proper delivery schedule. People lost interest by the time deliveries started.

Hyundai has played it smart with EON. In Sept they had 7+K dispatched and by the time the car was launched this morning, I am sure they would have 10K+ vehicles for delivery. Car would be delivered almost immediately. People will start seeing these cars on the road and they feel that the car is a major hit and bookings will multiply. Added advantage for Hyundai is that MSIL is on strike.

Now can the EON strategy work for every launch? The answer is very difficult to get. Manufacturers will always play safe by a conservative production plan with an ability to ramp if the demand exceeds expectations, especially in the C and above segments, or even B+ segment by not so established manufacturer.

Cheers

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Old 13th October 2011, 18:10   #4
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Default Re: Vehicle demand overtakes output for new launches

All most many manufacturers including two wheelers also never give delivery against Payment. For example All New Swift 3 months time they told but it seems it will take 6plus months due to strike. Volkswagen delivery also delayed one. Hero motor corp and Honda also deliver after a month or tow. Slowly the eagerness drain out when the vehicle is delivered.
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Old 13th October 2011, 18:56   #5
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Default Re: Vehicle demand overtakes output for new launches

Quote:
Originally Posted by KPS View Post
This is such a fine balancing act because the manufacture will have to estimate the average annual sales say one year down the line and plan for such production. The initial delivery planning is also very important.

Take for example the New Ford Fiesta, they did a soft launch with no proper delivery schedule. People lost interest by the time deliveries started.

Hyundai has played it smart with EON. In Sept they had 7+K dispatched and by the time the car was launched this morning, I am sure they would have 10K+ vehicles for delivery. Car would be delivered almost immediately. People will start seeing these cars on the road and they feel that the car is a major hit and bookings will multiply. Added advantage for Hyundai is that MSIL is on strike.

Now can the EON strategy work for every launch? The answer is very difficult to get.
Cheers

KPS
Well articulated points. I guess, not for nothing it is said that "strike while the iron is hot !!!" From what you say, Hyundai appears to have done a superb work in the area of supply chain management and timing the launch of Eon to a 'T" and just before Diwali. The entire launch took place in one swoop - vehicle unveiled, booking opened and prices announced and Hyundai was ready with deliveries. Compare this with the New Fiesta - the vehicle lost its fizz even before the car was launched formally. Ford lost the game here when the New Fiesta could have done a lot better with appropriate pricing, of course.
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