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Tough times for Goodlass NerolacGMI
Tough times for Goodlass Nerolac Mumbai: Growth amidst tough times continues to be the theme in automobile paints for Goodlass Nerolac Paints Ltd (GNP), market leader in the segment. The company's acrylic cathodic electro deposition (CED) primer, has grown to be a Rs 50-crore - Rs 60-crore business, Murali Sundaram, Vice-President (Industrial Marketing), GNP, said. It is the sole manufacturer of the product in the Kansai-fold. TVS Motor's Hosur plant was the first automobile unit to use the product, which helps save cost by cutting the earlier two-stage primer coating process to a single stage, thus reducing cycle time. Currently, TVS Motor, Bajaj Auto and Honda Motorcycle & Scooter use the primer. There is expectation of Hero Honda also joining in. Further, GNP has begun exporting the primer to Honda in Indonesia and efforts are on through Kansai to ship the product to China and Thailand. However, the primer is one of the few bright spots in an industry otherwise jammed between high input costs and OEMs aggressively beating down costs. The impact of that sales mark is partly diluted in the paint industry by virtue of its focus on surface area for painting as opposed to the automobile industry's interest in unit sales. Much before passenger vehicles limped across the one-million-unit-sales mark, Indian 2-wheeler sales became the worlds' second biggest. Individually, a 2-wheeler offers one-tenth of the surface area of a car for painting, but collectively their numbers are huge. At GNP, almost a quarter of its automobile paints goes for 2-wheelers. Second, domestic automobile sales peaked alongside the onset of global sourcing as an industry practice. Import duties have lowered and leading vehicle markets such as North America, Europe and Japan are no more as robust as they used to be. Everyone has their eyes on vehicle sales in India and China, implying in turn greater competition for GNP and its ilk. Adding to it has been the effect of crude oil prices. In August last year, H.M. Bharuka, Managing Director, GNP, had pointed out that since refining capacity failed to keep pace with the rise in crude prices, the prices of derivatives had risen more than that of crude oil. Solvents and resins used by paint manufacturers are petrochemical derivatives. Till 2007, petrochemical prices are expected to remain high, Sundaram said. With its prime customers in cost-cutting mode, passing on the price rise is not a viable option for players such as GNP. Instead, they have to examine internal cost reduction and value addition, the latter often as sheer incentive for OEMs to stay interested in the paint supplier. Such value addition ranges from using returnable packaging to reducing the consumption of paint per vehicle body, improving transfer efficiency in painting and maintenance of CED tanks. In terms of product value addition, one of the big steps ahead would be manufacture of water-based paints. But it is environment-related industry regulations that make the market for it and such rules are not only absent in India, but are yet to be mainstream in sizeable swathes of the global vehicle market. Thus, the ratio between solvent-based and water-based paints is currently 60:40 in environment conscious North Europe but falls to 40:60 in the South. It is 40:60 in the US and a low 20:80 in Japan. However, these ratios are forecast to improve for water-based paints. The market for it here can be nudged open both by industry norms and value addition by OEMs. It is restricted by the need for major investments by paint manufacturers and OEMs, the latter requiring paint shops capable of handling the product. GNP's new plant near Delhi has the capacity to make solvent-based and water-based paints, Sundaram said.
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