consumer zing matches New Year ring

North to South, consumer zing matches New Year ring:

For most of 2010, consumers battled with double-digit inflation, especially in food. As the curtains fall on the year, battle-weary consumers are in no mood to allow the prices of essential commodities to dominate their day. December 31 is supposed to be an occasion to celebrate, and most will do so, despite the pressures eating into their budgets.

Malls and organised retail stores across major metros and cities are choc-a-bloc with consumers doing their New Year’s shopping. Last year, the mood was a bit sober, as the economy had just begun to a turn a corner at this time. Sales growth last year was about 15-20 per cent. This year, the expectation from New Year sales is about 25-30 per cent.

The mood is decidedly upbeat,New Year’s shopping is catching on. Of course, most retailers are leaving no stone unturned. On an average, discounts on consumer durables and apparel — products that fly fast during the festive season — are at 25-30 per cent. For popular products such as LEDs and LCDs, discounts are even steeper, at close to 50 per cent.

Up the wave

But consumer durables’ retailers are not the only ones benefiting from buoyant consumer sentiment. Hotels and restaurants are also raking in. According to hospitality industry sources, grade-1 hotels and restaurants in Mumbai and other metros have achieved bookings of close to 80 per cent for New Year’s Eve. This will be full by the time the day arrives.

There are about 1,600 Grade-I hotels and restaurants in Greater Mumbai, where bookings have been done in advance. The rates vary for place to place. At our restaurant, for instance, bookings have been done for Rs 1,900 per head for vegetarian food and Rs 2,500 per head for non-vegetarian. This excludes drinks. In five-star hotels, the going rate is anywhere between Rs 5,000 and Rs 8,000 for a couple wanting to eat out for the night.

But if standalone bars, restaurants and hotels expect brisk business on New Year’s Eve, so do fast food joints, cafe chains and quick service restaurants.

hose wanting to celebrate at tourist destinations have to shell out at least 10-15 per cent more this year over last year, Goa tops among travel destinations this year during New Year’s.

Last year, it was Kerala which was the top destination during New Year’s. Himachal Pradesh is also a perennial favourite for people from the north.

The total cost for travel and stay at a three-star hotel in Goa, works out to about Rs 20,000 per person for four to five nights.

To Kerala, the cost is about Rs 15,000-16,000 per person, while Himachal Pradesh works out to about Rs 5,000-7,000 per person.

Indian Car makers: In the new year

Indian Car makers likely to see slower growth in the new year:

Industry gears up for inflation-driven cash crunch amid rising costs; fiercer competition ahead

Even as global peers struggled with the after-effects of the 2008-09 economic slowdown, Indian car makers enjoyed double digit growth this year and saw their share prices outpace the benchmark market index.

But as they enter 2011, they may have to get used to a new normal—slower growth and fiercer competition.

Asia’s third largest auto market sold 1.6 million cars and utility vehicles in the eight months to November, one-third more than a year ago, according to the lobby group Society of Indian Automobile Manufacturers, or Siam. At least 33 models were launched in the first half of the current fiscal.

The auto index, which indicates the performance of auto makers in equity markets based on the share prices of 14 companies, rose 34.72% to 10,017.28 points in the calendar year—while the Bombay Stock Exchange’s benchmark Sensex rose 14.94%.

The auto industry is expected to post revenue growth upwards of 25% in the year to March 2011.

The brisk growth came on the back of accelerating economic growth, driven by healthy farm and industrial output, which boosted consumer confidence.

The growth posed challenges of its own. Auto firms such as Maruti Suzuki India Ltd, Hyundai Motor India Ltd, Mahindra and Mahindra Ltd and Toyota Kirloskar Motor India Pvt. Ltd, among others, grappled with capacity constraints as demand outstripped supply.

The demand caught many vendors off-guard. Vehicle and part makers were forced to rethink production strategies to push plants beyond their installed capacities as the waiting queues lengthened.

India’s largest car maker Maruti, for instance, has been churning out 100,000 cars per month since March from its units in Gurgaon and Manesar, against their combined capacity of 84,000 vehicles, the company said earlier this week.

Hyundai Motor India, the largest exporter of cars, has been diverting supplies meant for export to meet domestic demand. Director of sales and marketing Arvind Saxena said India’s second largest car maker is removing bottlenecks and expects to scale up production from 600,000 to 670,000 cars per year.

Capacity investments by auto makers will take the annual capacity of India’s passenger vehicle industry from 3.3 million to 6.52 million by fiscal 2015, according to an estimate by Ernst and Young automotive research.

Global auto makers such as Volkswagen AG, Nissan Motor Co. and Ford Motor Co. claimed a stake in the Indian compact car segment—which sells three out of every four cars—by launching models such as Polo, Micra and Figo, among others, in 2010.

Some of them plan to export these cars as well from India, making the country a hub of the global compact car industry. The makers of luxury cars, such as BMW AG, Daimler AG (maker of the Mercedes-Benz), Audi AG and Tata Motors Ltd’s Jaguar Land Rover unit, also enjoyed an exuberant year, selling a growing number of vehicles to the swelling ranks of high networth individuals (HNIs) in the country.

BMW sold 5,345 units against 5,109 units sold by Mercedes-Benz in January-November, according to Siam. The number of HNIs in India rose 50.9% to 126,700 in 2009-10 over a year ago, according to the world wealth report, co-released by Capgemini and Merrill Lynch Wealth Management in September.

But auto makers fear the party may not continue into the new year. High inflation is sucking liquidity out of the system. In addition, the prices of key raw materials such as rubber, steel and aluminium are shooting up, putting pressure on profit margins.

The price of rubber rose 23.09% in October-December to rs.27,340 per metric tonne and aluminium increased 16.57% to rs.422.7 per kg, according to the Multi Commodity Exchange of India Ltd(MCX).

If prices continue to rise, car makers will have to raise the cost of vehicles accordingly, hurting demand. Rising prices will impact cost competitiveness. Industry experts agree it may not be easy to sustain this year’s growth rate. The cash inflow for most car makers would be better because of strong volumes, but raw material prices may dent profits.
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Rising prices will impact cost competitiveness. Industry experts agree it may not be easy to sustain this year’s growth rate. 

The cash inflow for most car makers would be better because of strong volumes, but raw material prices may dent profits.