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Indian auto majors in driver's seat - Views on News from Equitymaster
 
 
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  • Jun 25, 2009

    Indian auto majors in driver's seat

    Once upon a time, the US auto industry was the poster boy of American industrial might. Given the license quota raj, most Indians could not even dream of driving the prized vehicles, let alone compete with their makers. How times change! Today the US auto industry is in shambles and Indian auto major Mahindra & Mahindra's (M&M) small trucks will be available in there by the end of 2009, while Tata Motors' Nano will debut in 2011.

    In all likelihood, they will succeed too. According to an article on CNNMoney, the US auto makers are in an all out cost cutting mode, leaving their dealers interested in signing up new car manufacturers. In fact, M&M already has tie ups with 350 dealerships in its kitty. Interestingly, the company already has a strong presence in the US as one of the biggest tractor manufacturers.

    Of course, mere presence is not enough. Both M&M and Tata Motors will have to match the high quality standards the US consumers are used to. And they have to do it at an attractive price. But the fact remains that the present situation was unthinkable a couple of years ago. Just goes to show how far some Indian companies have traveled over the years.

    Housing and car finance to get cheaper
    A couple of days ago, Finance Minister Pranab Mukherjee had urged public sector banks to reduce their lending rates. The largest of them all has responded. As per a leading business daily, the State Bank of India (SBI) has cut its benchmark lending rate (BPLR) by 0.5% to 11.75%. This is likely to have a ripple effect, with other banks and financial institutions also lowering their rates.

    It may be noted that the bank had previously cut the BPLR by 0.75% with effect from January 1, 2009. Of course, this means that the bank's NIMs will go down. In order to take care of that, it has also reduced the deposit rates by 0.25% earlier this month.

    This move is likely to help people finance housing and car purchases. But we believe the real issue still persists. As Mr. Deepak Parekh has said , "Affordable housing is not about box-sized, budget homes in far-flung places where there is no connectivity to work places and little surrounding infrastructure. Affordable housing has to be able to cut across all income segments and has to make economic sense in terms of proximity to work place."

     

     

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