[locusjag]

Ola and Uber are indeed taking a hammering themselves from what I can see in my office commutes. Office Ride and Shuttl are providing cheap vans for office comnuters and QuickRide and Sride are whittling away at this market at the other end. A friend of mine just wanted an Ola and was scolded by a driver before getting rejected - "all of you office-goers have migrated to Quickride. Don't expect us to come to you"

[wheelguy]

Originally Posted by SpideyBoy

Attachment 1915042

The number of rides, the number of drivers, the number of users, number of miles per day, usage per user, all these graphs matter, but the one graph that matters more than anything to any investor(here Mahindra) is the one that talks/shows about sustainable profits, talks about profit per user.

Originally Posted by SpideyBoy

Is it really??

Yes. Regarding Ola/Uber and the likes and their growth in India, I think we are at one of the red dots in zone-1 in the rough graph shown below:

• And they are yet to expand to many more cities and countries too!
• Ola, as of 2018 is present in 169 cities, presently their website states that they are present in 250+ cities.
• Apart from domestic expansion, they are expanding overseas, they entered Australia in Jan'18, New Zealand in Sept'18, and UK in March'19, and many more in the pipeline.

Cited Ola as an example but there are many other such companies popping up all over the country each with different business models and with different focus areas, which still have the scope to grow as they are yet to scale up. One with rental service, one with subscription service, one with only bike rentals, one with only luxury fleet, and one with bouquet of services, etc.

They came, they changed the way we travel, but to initially onboard drivers and users without the chicken & egg problem, they showered huge discounts on both riders & drivers while burning vaults and vaults of investor money. Now since the bases are set, they started concentrating on profits, this fall of Ola/Uber in India is because of their pruning and consolidation operations to shift their focus towards profit.

If you notice, whenever they enter any city newly, they offer huge discounts to the users & huge incentives/rewards to the drivers. But over time after acquiring sizeable userbase & driverbase and after the stabilization of their operations in that city they will start cutting(or stop being aggressive) on discounts & incentives and start concentrating on profit making. So their operations are profitable in few cities, while they are making losses at other newly entered cities.

During the initial years their sole focus was establishing themselves, once that was done they shifted their focus towards the next required thing. This fall in growth, userbase, and driverbase is because they are shifting their focus towards profit making and so they are increasing prices while cutting on discounts & rewards. Despite the reduced growth, they started their journey towards profit making which is what matters to the investor. One may bring up the accounting stats and say they are not yet making profits, but one should understand that they just started and they are yet to go there.

Stats are sourced from Wikipedia and Ola India website. Mentioned stats are as on today.

[N33raj]

Originally Posted by imidnightmare

1. Sub-scale industries - because of decades of socialist policies
Most of our industries are sub-scale.
This inhibits these businesses from growing in quality - and of course, inhibits "economies of scale".

I am involved with a company that manufactures a highly specialised piece of equipment and no we are not planning to expand our factory footprint here.

Originally Posted by imidnightmare

2. No quality focus across the board
Now, in a vicious circle, there was historically a far greater focus on "cost" than on "quality" in our economy.
Across industries therefore, the higher-end requirements continued to be met through imports;
To date, the quality infrastructure of the vast majority of suppliers to critical organizations in Defence, Railways, Automotive etc. are below "sub-par". They're abysmal.

I agree and let me add specialised manufacturing equipment to the list. I have seen it first hand due to the unique nature of my work. Please do not ask me details!

Originally Posted by imidnightmare

3. Success in the auto sector seemed immune to this - because "duties"
Success - exemplified by MSIL - however, seemed immune to quality. MSIL churned out death-traps as vehicles and the market lapped it up because "kitna deti hai" overrode "marenge to nahi?". Hyundai for example, has just mirrored the MSIL strategy - and seen good returns.

Oh tell me about it. I have the first gen i20 top spec. That thing is still tight as a drum though it is more than a decade old! Cannot say the same for the new cars though.

Originally Posted by imidnightmare

4. Interest rates
I run a business and compete solely against importers. The cost of finance however, is crippling for us compared to them.
This inhibits high tech firms that rely on high levels of automation coupled with high quality talent - since the costs are not justified in India. That's why we remain a destination more for lower-end work than any manner of high-end work.

I can complain all day about this!

Originally Posted by imidnightmare

What can fix it?
Short-term:
- Reduce / remove the import duties on critical parts which are driving up core costs; this is risky though, since it removes a key incentive to localize even in the future - though cost / convenience factor should help localization should expertise arise.

Yes and no. If barriers are lifted, no one here will level up and we will be left doing the bottom of the ladder work. However, there is always a chance that local industries will pull up their socks, roll up their sleeves and get trained and upgraded which will be very good.

Originally Posted by imidnightmare

- Admit that this whole "all EV by 2025 / 2030" plan is bunkum and alleviate concerns about "what happens to the ICEs after this?"

I think this is already done in some fashion, what with the PM announcing that EV tech will coexist with fossil fuel tech. And besides, fossil fuels are not running out tomorrow or the next month or year or decade. There is also promising research going on in turning plastics into fuels.

On a side note, if fossil fuels are so bad, give them to me so that i can burn it in my G Wagen and finish it off!

Originally Posted by imidnightmare

Long-term:
- Eliminate the incentivization for companies to remain small; encourage companies that scale up rather than those that remain small. Also, incentivize CapEx investments that help scale and quality. This is mission-critical across sectors.

Not going to happen any time soon methinks.

Originally Posted by imidnightmare

- Reduce tax rates: Income tax as well as corporate tax rates must be competitive. This helps increase spending power for consumers and encourages businesses to stay legit as well as to invest! It helps attract FDI as well, of course - and bolsters the business case for foreign OEMs to localize.

A major reason for me to subscribe to something called Nomad Capitalist (not related to them in any capacity)! Of course, political stability and governmental policy stability matter for foreigners to come and invest here. I remember reading about some project in AP (or was it TS?) which had Japanese investment; apparently due to some change in policy, the Japs ended up being unsure of their investment's security.

Originally Posted by imidnightmare

- Reduce interest rates: In a global market which is increasingly automated and tech-driven, the cost of technology and talent is not too different across multiple markets. The cost of finance however, differs vastly - and can make or break a business case. Already, the power, water and infrastructure in India is sub-standard compared to even economies like Malaysia, Thailand etc. Add to it the high interest costs and no domestic maker will be able to compete in the sector. There is a critical need therefore to make the environment suitable for businesses in these areas to grow.

Again, not going to happen any time soon would be my stance.
Yes, my locus standi is a rather pessimistic one but it has served me and my clients well over the years. I would love to be proven wrong though!

[imidnightmare]

Originally Posted by N33raj

I am involved with a company that manufactures a highly specialised piece of equipment and no we are not planning to expand our factory footprint here.

I agree and let me add specialised manufacturing equipment to the list. I have seen it first hand due to the unique nature of my work. Please do not ask me details!

Yes, my locus standi is a rather pessimistic one but it has served me and my clients well over the years. I would love to be proven wrong though!

You sound like you’re in a similar position to mine. We design and make highly specialized lab equipment that costs a lot. We’re the only Indian firm in the space and it takes me a while to convince people that we don’t import / brand / sell imported stuff. Our issues range from the lack of talent to the interest rates and also the infuriating lack of support or even basic incentives leave alone subsidies for R&D and investment.

For the record, my segment has 0 import duties on finished goods. But, there are duties imposed on critical parts that I’m forced to import because of lack of any domestic expertise in those areas. Go figure. The mess has taken decades to create. It won’t go away easily. If at all. We plough on. We write and plead and have seen some positives in the last 4-5 years. But I don’t hold out hope for sweeping change that will alter everything. That would be anti-populist and so will never transpire...

PS: I do have plans to expand. Shockingly though, all inputs right now are that it’ll be easier for us to expand overseas.

[N33raj]

Originally Posted by imidnightmare

You sound like you’re in a similar position to mine. We design and make highly specialized lab equipment that costs a lot. We’re the only Indian firm in the space and it takes me a while to convince people that we don’t import / brand / sell imported stuff. Our issues range from the lack of talent to the interest rates and also the infuriating lack of support or even basic incentives leave alone subsidies for R&D and investment.

For the record, my segment has 0 import duties on finished goods. But, there are duties imposed on critical parts that I’m forced to import because of lack of any domestic expertise in those areas. Go figure. The mess has taken decades to create. It won’t go away easily. If at all. We plough on. We write and plead and have seen some positives in the last 4-5 years. But I don’t hold out hope for sweeping change that will alter everything. That would be anti-populist and so will never transpire...

PS: I do have plans to expand. Shockingly though, all inputs right now are that it’ll be easier for us to expand overseas.

Yes sir i am in a similar boat. We make some machines which cater to an important segment of the country's population and we get nothing from the govt as support.

While we make all the components in house, we still have a hard time convincing clients that our equipment is completely India made; they simply cannot believe that an Indian firm can make something so high quality with high accuracy and repeatability!

The inputs you have received as regards expansion are correct. It IS easier for us to setup our bigger capacity plant in a neighbouring country than in India! While talking about these machines and their potential sale with an associate in the Africas, he did ask me if i was interested in setting up a bigger plant in his country! The govt there is interested and willing to provide me with a lot of facilities for setup and my production cost will come down a bit as well with no reduction in quality!

[PrideRed]

Emission testing guys seem to be the only one's who are extremely happy in Automobile Industry. Their business has sky rocketed, thanks to new fines.I don't know what their margins are but they are easily making 15000 a day compared 1-2K earlier.

Off-topic, I was at Koramangala probably after a year, me and my friend were the only customers for lunch at a popular place! Felt awkward and visited nearby place the situation was same. the bylanes which used to be packed with vehicles, wore a deserted look. Well this was the scene on Sunday, wonder what these restaurants do on a weekday.

[wheelguy]

Originally Posted by wheelguy

Instead of ranting on the slowdown, they are investing where there is scope for growth. Wise, isn't it?

Originally Posted by SpideyBoy

Is it really??

Attachment 1915042

Attachment 1915043

Originally Posted by wheelguy

Yes. Regarding Ola/Uber and the likes and their growth in India, I think we are at one of the red dots in zone-1 in the rough graph shown below:
Attachment 1915068
Now since the bases are set, they started concentrating on profits, this fall of Ola/Uber in India is because of their pruning and consolidation operations to shift their focus towards profit.

If you notice, whenever they enter any city newly, they offer huge discounts to the users & huge incentives/rewards to the drivers. But over time after acquiring sizeable userbase & driverbase and after the stabilization of their operations in that city they will start cutting(or stop being aggressive) on discounts & incentives and start concentrating on profit making. So their operations are profitable in few cities, while they are making losses at other newly entered cities.

During the initial years their sole focus was establishing themselves, once that was done they shifted their focus towards the next required thing. This fall in growth, userbase, and driverbase is because they are shifting their focus towards profit making and so they are increasing prices while cutting on discounts & rewards. Despite the reduced growth, they started their journey towards profit making which is what matters to the investor.

Here's an excerpt from an article talking about pruning(down-scaling from FoodPanda) and profits:

“The company is expected to start making an actual profit by the second quarter of FY21. Mobility business is almost at a break-even level at the moment, but losses in financial and food tech services are causing losses,” added sources. They assert that Ola has down-scaled the loss-making Foodpanda and has set a definitive target for the financial services unit to turn profitable.

Here's an excerpt from another article wherein Bhavish Aggarwal himself talks about Ola's profit:

In July last year, Aggarwal had said that Ola was making a profit on every ride and would become cash-flow positive soon. He and cofounder Ankit Bhati were aiming for an IPO in the next “3-4 years”, Aggarwal had said.

[volkman10]

Shows signs of recovery in September-19, but continues in the negative trend and woes are far from over!







ET

[Sebring]

I was making a purchase in the market and this slowdown has not changed dealer behaviour in any way. They continue to be unconcerned. It's 'business as usual' for staff. No promotions, price-offs or eagerness to sell. They still continue to fleece customers. For example, we picked up an NTORQ from Preetham Motors paying 88,850, cash. But when I cross-verified this with TVS, I was supposed to pay 88,100. That's Rs.750 overcharging. Now they say sorry and have given accessories and a scratch card. Has any tax benefit been passed down to buyers? Nothing! So in a way - there are no lessons learnt, and this slowdown could be artificially created, is my guess. By the way, they say there is slowdown in real estate, but builders still offer no discounts. Just few deals, here and there, that too regarding interest rates. Government has to note the ground realty, rather than just industry speak! Strictly my two bit.

[wheelguy]

Here starts the blame-game.

Auto industry problems are essentially derived from SC order to upgrade to BS-VI, says Sitharaman.

"The problem in the automobile sector was essentially derived because of the emission orders which came from the Supreme Court which said BS-IV should be done away with and with two years' time given BS-VI standards should come into place," the finance minister said during a discussion on economic situation.

"And if that decision is taken two years in advance, naturally, there is a churn in the automobile industry because they will have to change their business model, they have to move into production of BS-VI models for which R&D (research and development) funds are required," Sitharaman said.

While asserting that the government is "conscious of the challenges that are being faced by many of the sectors", she said, "We have already seen many of these segments responding, like the automobile sector."

The finance minister reiterated that while each sector has its own issues, "We are quite careful and taking opinions from everybody. We are not really hurrying through the decisions but we are coming with solutions."

Full article at: Link

[volkman10]

Slowdown forces aggressive cost cuts at Tata Motors, co may offer VRS to 1,600 employees.

The scheme will be offered to employees of different departments, across its businesses of passenger and commercial vehicles.

Tata Motors is working on a voluntary retirement scheme (VRS) for 1,600 employees of its passenger and commercial vehicle businesses across locations and hierarchies.

Earlier, the company let go of excess staff with its Jaguar-Land Rover (JLR) business. The economic slowdown has hit the carmaker hard and it made aggressive cost cuts this fiscal.

Link

[fhdowntheline]

Originally Posted by wheelguy

Here starts the blame-game.

Auto industry problems are essentially derived from SC order to upgrade to BS-VI, says Sitharaman.

The lesser said about the government's role in the auto industry slow down, the better. And people in high posts who are unqualified to comment on specific industries, must refrain from doing so. They still haven't come out of the "Millennial buying mindset" reaction, now this. The government is clueless about demand stimulation, and has now squeezed out every percentage possible of the repo rate. Any further contraction will hurt the retail savings/investment process. The automotive industry too has played its part by not being bold and innovative in many aspects. For example, MSIL leadership have publicly sworn to 'bare minimum' compliance to safety standards, that too if push came to shove. They could have easily pushed the electric/hybrid tech in a big way, given their massive reach across the country. That would have spurred a new mindset towards cars. Instead of that, they provide us more tinpots like S-Presso.

[imidnightmare]

Originally Posted by fhdowntheline

The lesser said about the government's role in the auto industry slow down, the better. And people in high posts who are unqualified to comment on specific industries, must refrain from doing so. They still haven't come out of the "Millennial buying mindset" reaction, now this. The government is clueless about demand stimulation, and has now squeezed out every percentage possible of the repo rate. Any further contraction will hurt the retail savings/investment process. The automotive industry too has played its part by not being bold and innovative in many aspects. For example, MSIL leadership have publicly sworn to 'bare minimum' compliance to safety standards, that too if push came to shove. They could have easily pushed the electric/hybrid tech in a big way, given their massive reach across the country. That would have spurred a new mindset towards cars. Instead of that, they provide us more tinpots like S-Presso.

Some corrections here.
1. There will likely be further rate cuts - I don't rule out rate cut by another 25 bps down to 4.9% levels - though any lower is tough
2. The issue isn't the government squeezing rates down; they're not being passed on! The fact is that most lending is still at a spread of 4% from the repo as loans in the retail segment and MSME segment aren't repo-linked at all. The TBLR, MCLR etc. are still very high with most banks
3. The issue isn't about the automotive sector alone - it's about the state of the economy and there are multiple key drivers

A. Lack of new sunrise segments
The previous decades have brought forward new sectors which have driven growth for the economy - software, outsourcing (BPO), pharma being the examples from the decade before this one. But nothing else has come up. A combination of atrocious skill-level from educational institutes, horrible contract enforcement laws (we remain Leftist to the core), horrid labour laws and high prices of resources have stunted growth in "sunrise" segments. Our Balance of Trade is collapsing - simply because we aren't creating world-class industries and exports therefore just aren't rising in tune with what's needed. It's all (at best) nominally inflation-linked here. Bottomline - when you don't innovate, you stagnate and then recede.

B. The crisis caused by subsidy culture
Very under-reported but the DisComs are in crisis. This could well lead to another financial / banking meltdown given the scale of the issue. DisComs owed 74,710 crores to Gencos in July 2019 - of which 55,091 crores was overdue. Where will the money come from? Given the scale of subsidies, recovery is highly unlikely without drastic and politically suicidal reform OR a very expensive bailout - which would then affect (at political cost) other schemes that need funding. This is a driver for low PLF (plant load factors) at most Gencos. This in turn leads to Genco losses as well as poor power supply quality (load-shedding) which in turn increases effective cost of electricity for industry and specially commercial establishments even further (switch on the DGs) when they're already paying higher prices to cover the cost of subsidies. Fantastic.

C. Increased coverage of core infra
Economics 101 tells you that government spending can dramatically aid the growth number and improve liquidity. Since about 1998-2000, government spending was massive (including PPPs, sanctioned projects and direct investment) in core infra - power plants, railways, roads and highways etc. But now, we've reached saturation in some areas. At the same time, government subsidies just kept expanding. From MGNREGA to housing to loan waivers and more, there is an increasing drain on the exchequer - all while the present dispensation increased tax rates and therefore led to a dramatic miss in collections against expectations. So, government spending in areas that aid liquidity has fallen - and revenues haven't increased.

Savings etc. is another bomb. Most Indians want high deposit rates - and PSU banks set the floor here. Also, falling deposit rates would lead to a potential flight of FIIs as we stop offering the risk-return proposition that we present today. This too hurts the space the regulator has for maneuvering.

Final point; if we are to see long-term gains, it's essential to have:
1. Drastic reform in power sector
2. Immediate relaxation in labour laws and land acquisition too
3. Overhaul of the system for ensuring contract enforcement and IP protection
4. Education system reform - till we start churning out better graduates, we are condemned to remain third world / "developing".

[avishar]

Some good news coming in. Maruti has reported domestic sales of 143686 for November 2019 which is just a percentage less than November 2018, but it is a higher than October 2019. October was big festive month, so it is heartening to see auto sales seemed to have held going into November, and looks like the industry has stabilized.

https://economictimes.indiatimes.com...w/72315766.cms

[fazayal]

Wholesale numbers for Nov 2019. Some numbers are approximate. KIA has reached number 4 and is agonizingly close to the number 3 player. They have reached here with just one product and in just 4 months! I had predicted that they would become number three the moment they launch their second offering. However, it looks like they can become number 3 with just Seltos!