A major beneficiary of the fall in Asian currencies has been Hondas Indian operations which has been able take advantage of the crumbling Thai currency, baht, to price its City model, to be introduced in early 1988, almost 30 per cent less than what it would otherwise have been. The price, Rs 5.8 lakh for the basic model, has come as a surprise for most auto buffs.
While other Japanese and Korean car manufacturers too have benefited by the fall in South East Asian currencies, Honda appears to be the biggest beneficiary as the bhat has fallen from 35 a dollar in September to around 47 per dollar in December. The City, a car engineered by Honda for the Asian market, is built in a Thailand plant. Largely based on the Civic model which is among Hondas largest selling cars worldwide, the City is cheaper by about 25 per cent compared to the Civic.
The pricing of Honda City may prompt other automakers to reduce their prices. According to BVR Subbu, director, sales and marketing, Hyundai, there is a possibility for some manufacturers who import kits benefiting because of the lower currency value in South East Asian countries.
But as far as Hyundai is concerned, we are aiming at an indigenisation level of 70 per cent from day one and the import of the balance 30 per cent components will not begin till the second quarter of next year.
He said regarding capital equipment being imported as part of installing the Chennai plant, the cost was being denominated in dollars though the source of import was Korea, Germany and some other countries.
An industry source said manufacturers like Dawewoo Motors should have benefited from won depreciation. Signific antly, their breakevens must have improved. Though Daewoo has accelerated its indigenisation programme, it continues to import components of the Cielo car.
A Daewoo Motors spokesperson however said, all our dealings with the Korean parent are in dollars.
Our indigenisation level has reached 70 per cent and we have started exporting to Korea from our Surajpur plant. Some 25,000 Indian manufactured cylinder heads have been sent to Korea for use in Daewoo cars sold worldwide.
Yet, with the depreciation of won being far more sharper than that of the Indian rupee, the possibility of higher profits for these manufacturers exists in view of the invoicing of components and capital goods in dollars. All Korean manufactures imports into the country are invoiced in dollars. While won depreciated by about 70 per cent, the rupee depreciation by about 10 per cent.
Following the same logic, the won has depreciated against the rupee by over 50 per cent the returns of these manufacturers are bound to show a quantum increase.
In addition it also allows these manufacturers the leverage to import kits from such low value currency regions and sell into high value currency regions.
