[SmartCat]

Originally Posted by Turbanator

This explains better
https://lga-consultants.com/seven-gl...profitability/

According to this article, Gross profit = Raw materials/Components + Employee costs.

So wow! Gross profit of Maruti (approx 25%) is higher than that of Toyota, VW, GM, Ford, BMW & Mercedes Benz!

[Beelzebub]

This is indeed significant achievement by Kia motors, it shows proper management, prior experience (Hyundai) and right strategy can help overcome any challenges.

I think the incentives given by Andhra govt also played a role in achieving operating profit in just 1 year. Govt has waived state goods and services tax (SGST) for the company for 22 years. Also, the state government spent over ₹450 crore on land and infrastructure development (roads, electricity, water supply, besides other facilities, for the plant. Several tax incentives and power tariff concessions were also offered for 20 years.

While the incentives given are controversial (see AP Industries minister comment below) and given political angle by multiple reports, it did help in attract investment in state.

Further, the then Andhra government also waived off the state goods and services tax (SGST) for the company for 22 years. While this was a loss to the state’s tax revenues, Naidu hoped this would develop an automobile ecosystem in the region and create thousands of jobs for people. (Source)

The Andhra Pradesh government was "paying a penalty" for getting Kia Motors to set up its car manufacturing plant in the state by way of giving incentives assured by the previous government, Industries Minister Mekapati Goutham Reddy said here on Monday.

Addressing a press conference here, he said the incumbent government was bound to fulfill the obligations, "whether I like it or not", for the next 20 years. "Kia investment...no doubt it's a very good investment and I compliment that (previous TDP) government for getting it. But we also have to pay a penalty for getting it...by way of incentives," Goutham Reddy pointed out. "If that was the call of the government then...that we got the company strategically...as a government I have to fulfill that obligation also. I may like it or not, but I have to fulfill the obligations. For the next 20 years, I have to pay them," the Industries Minister noted.

The then government of N Chandrababu Naidu signed an agreement with Kia Motors, offering a slew of incentives to set up its car manufacturing plant at Erramanchi in the backward Anantapuramu district with a capacity of three lakh units a year.

The state government spent over ₹450 crore on land and infrastructure development (roads, electricity, water supply, besides other facilities, for the plant. Several tax incentives and power tariff concessions were also offered for 20 years. (Source)

On a different note, the (unfare?) advantage given to any company are not new in the market. We have seen example of Maruti, how they setup their plant and incentives received from the government at the time. If interested, you can read about company's history. Giving some quick reference here ->(Maruti-an-illicit-extraordinary-love-affair, Maruti Scam!,
Maruti Commission report, Emergency and Sanjay Gandhi).

The government issued a letter of intent in September 1970, which allowed Sanjay to produce up to 50,000 cars in a year. Bansi Lal, the chief minister of Haryana, just to be in the good books of Indira Gandhi, the prime minister, sent his officers to help Sanjay choose a site for the factory. They offered him land at Sonepat, but he wanted it closer to Delhi. Sanjay’s eyes were on a parcel in Gurgaon, except it was farmland and there was an ammunition dump close by.

But that was hardly an obstacle. Land was acquired at throwaway prices from the farmers by the Haryana government and handed over to a company called Maruti Ltd that Sanjay had floated in August 1971. The ammunition dump was removed. Banks gave concessional loans. When charges of nepotism began to fly thick and fast, it was decided to get a feasibility test done on Maruti by the Vehicle Research & Development Establishment, Ahmednagar.

Straight away, a company by the name of Maruti Motors Limited was incorporated on June 04, 1971 with Sanjay Gandhi as its first managing Director. Reports suggest, the company or the man himself had no prior experience of building a car, had a working prototype, or even a tie-up with a car maker. They did not even forward any design proposals, yet, under the leadership of his mother, the Congress government awarded Maruti the contract and an exclusive production license to manufacture India’s first indigenously built people’s car.

Companies, which are on the other end of spectrum (who received comparatively less benefits/incentives), have complained about Indian Tax regime on multiple occasions. The latest examples are Toyota and Force Motors.

“The message we are getting, after we have come here and invested money, is that we don’t want you,” Viswanathan vice chairman of Toyota Kirloskar Motor said in an interview. In the absence of any reforms, “we won’t exit India, but we won’t scale up.”

In September, Pune-based Force Motors, a manufacturer of popular cross-country and multi-utility vehicles, said that high taxes were restrictive for the industry, and asked for reforms.

Hoping that some tax reforms in automobile sector will give boost to investment, create new jobs and will be beneficial for end users (like us ). While many of us want Indian manufactures to succeed in the sector, the entry of foreign manufactures do create a healthy competition and pushes the companies further to improve in their service/product. And if localization is achieved close to 95-98%, this is win-win situation for all.

Note to mods: The details given here are for information purpose only. If it seems biased/controversial/not according to forum rules, please delete this post.

[ayankm]

I think Kia as a manufacturer unterstood the Indian car buyer's mentality really well and also did good home work of the kind of cars on offer in the market.
Just add some bling, some flashy leds, reduce the structural integrity and you have a car that everyone will love.
And of course Indians being Indians, will buy a lemon with their hard earned money even if it is coated with chrome.

Well done Kia!

[deetjohn]

Originally Posted by vsrivatsa

I would like to add that Kia could not have done this without the Knowledge Transfer and Resource Transfer from Hyundai. Hyundai backed them up in every step and provided the know-how of the Indian market which Kia was fortunate to receive.

+1

That's the key here! And also the fact that Kia is extremely aggressive and street smart. I have said this before, they are a late entrant to this market. So, they knew very well that their cars will get pulled up by GNCAP. Yet, they went with their main objective - profitability above all. That shows a mentality very few can muster!

I usually do not comment on YouTube, Maybe here or there for international reviews. But hardly for the Indian cars or brands. But when I got the notification for the crash test results for the Thar, it was a pleasant surprise and I was buzzing after watching the video. Because the sight of the mighty muscular Scorpio crumbling like a pack of potato chips is still fresh in my mind. So, I did make a comment under the GNCAP video asking both Maruti and Hyundai/ Kia to learn from Mahindra. And guess what, I got some replies for my comment - in both English and Hindi. The gist of it was like Seltos is 3 stars and not that far away - So, it is okay! I didn't bother to reply.

Maybe Hyundai/ Kia know the market too well!! And that all these hullabaloo within pockets about the crash ratings will pass and that isn't going to affect sales in the long run. Maybe that score of 8.03 wasn't by chance! Maybe the question on the drawing board was, "How can we get 3 stars with the minimum hit on profitability??" Maybe Genesis will be primed to hit profitability in 6 months!!

Originally Posted by SmartCat

According to this article, Gross profit = Raw materials/Components + Employee costs.

So wow! Gross profit of Maruti (approx 25%) is higher than that of Toyota, VW, GM, Ford, BMW & Mercedes Benz!

I haven't read the article or any reports, but it is not really a surprise to see the high profitability for Maruti when compared to the others you have listed there.

From a fair distance, I can see that each and everyone of them blow a significant amount of money on:
1) R&D
2) Motorsports
3) Building each car (material quality + craftmanship + material quantity even)

All that affects profitability. And they have to do it - that's non negotiable to sell in the advanced markets. But our market doesn't hold the manufacturers (successful ones i.e.) to the same level of scrutiny and they can get away with it. Guess, each market gets the makers that it deserves!

Just think about it! A large pool of customers were shortchanged by some manufacturers regarding safety. And within a few days we have news celebrating the giant killings made by the brand within such a short time period. This would be another PR disaster for any other market, but over here, we still go gaga over it! It looks like some of them can get away with anything in this country as long as they are successful. I guess that's our culture.

[shabeermohamed]

Highly commendable from a manufacturer who has just been in the country for less than three years. The main reason is that they have done their homework well and are hitting the sweet spot with most of the Indian consumers.
Our market has not reached that level of maturity like Europe where majority of the customers are ready to pay more for safety.
Classic example is Maruti where more than half of their products sold are with a safety rating of 0, 1 or 2 (Celerio, Alto, Espresso, WagonR, Swift etc)
As the market matures and when government makes it mandatory for these ratings, you will see more and more safer cars.
I feel Kia's strategy is justified. Have a model for all price segments. The more you stretch your budget, the more you get in terms of safety, features and technology.
I am sure if the GTX+ versions of Seltos or Sonet were tested, they would have got at least 4 Stars. (Thar Top end variant scored 4 stars. Would it have got the same if the entry level variant was tested)
Anyway great job by Kia andi wish them more success. I hope they sustain this momentum by hiring ng more and good resellers and establish a reliable and good after sales network.

[Nithesh_M]

Originally Posted by TrackDay

With mainly the Seltos and Sonet, Kia has achieved this !

What are the other manufacturers doing ? Is it that hard to come up with such two products ? I am looking at Honda and Toyota who have immense R&D and global products.

I think with platform sharing across two brands right from R&D stage both Hyundai and Kia managed to keep their individual development costs down and that also allowed for both parties to price their products well to cover two segments at once.

Toyota understands this hence their proximity to Suzuki. Honda has not much option. They'll have to invest more all alone with not much chance of meeting the Korean pricing levels. Ford jumping on Mahindras back is also an indication of this. VW leaning on Skoda another example. Brands will now share parts more and more amongst them and develop many products out of common platform.

Those brands that are still individual will suffer the most.

[Sandy Damodaran]

Originally Posted by ayankm

And of course Indians being Indians, will buy a lemon with their hard earned money even if it is coated with chrome.

Well done Kia!

I do agree with you! Unsafe cars being sold here are as much an indicator of our preference as it's of the car manufacturers trying to cushion up their margins.


I don't think it's the job of any car company to force end users to select safest possible cars, in the given budget.

The three key things I see driving auto sales, with other things being constant (Mileage/ Cost of ownership/Service costs etc) are
1) Brand dependability
2) Vehicle reliability
3) Features in a car
There are very few Actual buyers, who would give precedence to safety over "Features" in a car. An average Joe going to plonk in 10-12 lakhs on a car, taking it on a loan, isn't too interested in 5* NCAP as opposed to say start stop button or 100 inch Display connected to a smart phone with Sunroof and alloy wheels and premium leatherette seating.

If Innova Crysta, was sold by any brand other than Toyota, I'm pretty sure everyone would be arguing about lack of "Features" in it, and not bat an eyelid for the same 5*NCAP.
They are able to go about selling vehicles without too many bells and whistles simply because it's Toyota.

M&M have gone the other way, they have safety and bling but XUV is probably the worst handling vehicle I've driven. Dont blame them either, as their target is people looking for vehicles with road presence etc and not pushing it's minimal handling capabilities. Doubt it would have run up such impressive sales figures if they had bumped up the price by a few lakhs to make it handle better.

Personally if possible I'd delete most of these features, and spend it on Safety, Mechanicals and suspension but I doubt anyone would buy a car like that, devoid of Touchscreen infotainment and Keyless entry etc.