Indian auto firm Atul plans CKD unit in Sri Lanka

Business Standard: At a time when overall three-wheeler exports from the country is down by 40 per cent during the first quarter of the fiscal 2012-13 with major players like Bajaj Auto reporting a dip in exports, Rajkot based Atul Auto has drawn up plans to set up a small assembly plant in Sri Lanka to negate the impact of a recent import duty hike in the country.

Atul Auto posted 50 per cent growth in exports during the first quarter to 114 units on the back of a low base in the corresponding period last fiscal. The assembly unit would come up with an investment of less than Rs. 100 crore and is likely to be operational within the next six months.

“We are focusing on Kenya and Bangladesh for exports this year, and are also working on Sri Lanka which is a huge market for three-wheelers. To combat the recent import duty hike in the country, we are planning to set up a small assembly plant in Sri Lanka partnering with a local player,” said Vijay Kedia, Director, Atul Auto.Sri Lanka has recently hiked the import duty on three-wheelers from 51-61 per cent to 100 per cent, thus impacting the exports of major players like Bajaj Auto.

The company had to slash its prices by 10-15 per cent to compensate for the increased duty. According to data provided by the Society of Indian Automobile Manufacturers (SIAM), Bajaj Auto reported a 41 per cent drop in exports during April to June 2012 to 51,511 units, while Mahindra & Mahindra exports dipped 62 per cent to 438 units, Force Motors exports dipped 58 per cent to 266 units, Piaggio Vehicles reported a close to 60 per cent dip at 1838 units, and TVS Motor Company saw exports declining by around 25 per cent to 5812 units during the same period.

Kedia said that Atul Auto would be setting up a small assembly plant with a capacity of 10,000 vehicles per annum. “We are in talks with some local players. This would be a completely-knocked-down (CKD) units plant, so the investment would not be huge,” he added.

Atul Auto had earlier tied up with Bangladesh Machine Tools Factory for assembling a six-seater passenger vehicle Atul Gem in May last year.

Meanwhile, the company is eying a 20 per cent growth in the domestic industry, and expects to up its market share to six per cent from a current five per cent.

Atul Auto has reported a 22 per cent rise in sales in the country during the first quarter of the fiscal, selling 6,726 units. It is planning to increase the number of dealerships to 150 from a current 120 by March 2013.

“Last year we did not focus much on exports as we were concentrating on meeting domestic demand. However, this year we have firmed up strategies to enhance our exports as well,” Kedia said.

The company sold 27,000 units in 2011-12, up by around 40 per cent from 19,404 units in the previous fiscal.