Friday, October 31, 2014
Harley-Davidson Inc, battling upstart competitors in its traditional markets, says it is betting on India's young and affluent urbanites to help establish a "leisure riding" culture there and boost sales of its first new bike in over a decade.
With Lynyrd Skynyrd and Deep Purple playing in the background, the iconic United States motorcycle company on Thursday launched three new bikes in India, a country more associated with pot holes and traffic snarl-ups than open roads.
"I think there's a lot of people (in India) who are enthusiastic, who are riders at heart, and are now seeing an opportunity to enter into this lifestyle. It is much more accessible," India Managing Director Anoop Prakash told Reuters on the sidelines.
The bikes launched included the company's costliest offering in India to date, a limited edition CVO Limited, priced at 4.9 million rupees. That is the equivalent of a BMW 5 Series sedan or almost seven decades of pay for many families in country where average income is closer to $1,200 a year.
But Prakash, a former U.S. Marine, said he was confident the brand -- which Harley nourishes in India with rock music festivals and bike rallies -- would prove attractive to aspirational young Indians, for whom a motorcycle is more than simply the cheapest form of motorised transport.
India is the world's largest motorcycle market after China, but the roads are packed with cheaper models. Makers of high-end motorcycles, from Ducati to Yamaha Motor, are only just breaking into the market.
"We are reaching out to a lot of younger riders," Prakash said.
Harley Davidson has suffered recalls that tarnished the roll-out of the "Street," its first entirely new bike in more than a decade and its first Harley-badged lightweight motorcycle since the 1970s.
But in India, its stripped-down 'Street' series launched earlier this year at $7,000 has helped it more than double sales in the six months through September, according to data from the Society of Indian Automobile Manufacturers.
"We're looking at the establishment of a long-term leisure riding culture and doing it the Harley-Davidson way," he said.
Harley, which entered India five years ago, has since set up its own assembly line in the country. Earlier this year it set up its first manufacturing facility outside its parent market in northern India.
Thursday, October 30, 2014
Wednesday, October 29, 2014
Monday, October 27, 2014
India’s Oil and Natural Gas Corporation plans to launch a “huge” global acquisition spree, as the state-backed energy flagship delivers an aggressive Rs11tn ($180bn) investment push to take on Chinese rivals and drive foreign production up sevenfold by 2030.
Dinesh Sarraf, ONGC chairman, said that the group aimed to raise its international oil and gas output from 8.5m tonnes of oil and oil equivalent last year to 60m tonnes over that period, as India prepares to meet projections of rapidly rising domestic energy demand.
The foreign expansion is likely to see India’s largest industrial company by market capitalisation ramp up operations in almost all of the world’s energy-producing regions.
“The kind of investments which we will require is huge,” Mr Sarraf told the Financial Times. “Our goals are so high we can’t pick and choose [parts of the world]; it will come from virtually everywhere.”
ONGC has historically been viewed as a conservative, midsized global energy player, held back by cautious management and risk-averse political leadership in New Delhi. It also has often lost out to more aggressive state-backed Chinese energy groups in the race to snap up foreign oil and gasfields, analysts say.
Recent years have seen a markedly bolder approach, however, following the launch last year of a strategy known as “Perspective 2030”, designed to bolster overseas operations. ONGC has invested about $7bn since mid-2013 to acquire foreign assets in countries such as Mozambique and Brazil.
Mr Sarraf pledged that this global expansion would now accelerate, potentially aided by a rapid recent fall in global oil prices. “We see this as a time we can make certain deals,” he said. “Prices are lower, and so some [new] deals may be available.”
India is set to overtake China to become the largest source of growth in global oil demand by 2020, according to the International Energy Agency. Almost of all of this increase will be met via imports, given India’s limited domestic production.
ONGC’s plans have been helped by recent economic reforms launched by India’s prime minister Narendra Modi, who last week moved to deregulate diesel controls and increase natural gas prices, boosting the energy explorer’s share price.
Later this year Mr Modi also plans to sell off a further 5 per cent stake in ONGC, which is 69 per cent-owned by India’s government, raising in the region of $3bn that could be used for further acquisitions around the globe.
Mr Sarraf confirmed that ONGC was considering an offer from Rosneft of Russia to invest in both its Vankor and Yurubcheno-Tokhomskoye oilfields in eastern Siberia, along with other potential assets in the Arctic region.
ONGC plans to build up its presence elsewhere in the former Soviet Union, he said. Expansion was also likely in Africa, in particular Angola and Nigeria, alongside large swaths of Latin America, and in both the US and Canada, where ONGC would consider assets ranging from shale gas to tar sands.
Mr Sarraf took over as ONGC’s chairman earlier this year, having previously led the group's overseas arm, ONGC Videsh, and held positions in various other state-backed energy groups, including explorer Oil India.
ONGC generated revenues of Rs1.8tn ($2bn) during its past financial year, up 7 per cent from the previous year, but has struggled to raise overall production levels. Output from Indian oil and gasfields has declined over the past decade, including during the past financial year.
But Mr Sarraf rejected concerns that ONGC’s expansion target would prove unrealistic, given its limited success increasing production and a shortage of appropriately-priced foreign assets. “It is very difficult. But it is achievable,” he said.
The group also has “full political support” from Mr Modi’s government to make aggressive bids against foreign rivals. “Now all of the world is our competitors,” he said. “Earlier it used to only be the Chinese; now it is Thailand, Malaysia, even the IOCs [international oil companies].”
Mr Sarraf cautioned that ONGC would not follow the path taken by China’s energy giants, however, who he suggested had secured global assets by paying inflated prices.
“Whether we are more successful, or the Chinese are more successful, that is a matter of perception,” he said. “If success is defined in terms of making rational decisions, I would say we are more successful.”
Saturday, October 25, 2014
Plunging demand for steel in China has pushed prices in some markets as low as the cost of cabbage, as worries mount that annual steel consumption may shrink for the first time in 19 years.
Some grades of rebar, a steel product widely used in construction, fell to Rmb2,600 ($424) a tonne in northern Chinese markets this week, according to prices on industry website SteelHome – equivalent to the retail price of cabbage.
Chinese steel consumption has been bolstered for years by the boom in demand for the refrigerators, supermarkets, train wagons and greenhouses that now allow Beijingers to enjoy green vegetables all winter long. But that demand is falling sharply as China’s economic growth peaks.
Meanwhile, cabbage is not the ubiquitous product it one was. Trucks laden with the vegetable no longer lumber into Beijing in the crisp autumn days, and few residents stack them in their stairwells in preparation for the cold winter.
The drop in steel demand “is a long-term trend”, said Li Xinchuang of the China Iron and Steel Association, which represents the nation’s largest mills. CISA data show steel consumption dropped in both July and August compared with the previous year. Mr Li said the decline continued in September.
The fall in steel consumption in the third quarter largely reflects slower housing construction. A similar drop this quarter would make 2014 the first year consumption has shrunk since 1995, when the Chinese economy was recovering from a bout of inflation.
“All the indicators we look at show the fourth-quarter economic recovery is unlikely to be strong,” said Song Chunlei, vice-director of steel consultancy LGMI in Beijing. He said mills in Tangshan, the heart of the Chinese steel industry, are already planning output cuts for the rest of the year.
Gross domestic product data for the third quarter, to be released next week, are expected to show the weakest quarter since early 2009, when China was still stung by the global financial crisis. But a shift in economic activity to the less steel-intensive services sector will mean steel and other heavy industries will underperform the broader economy.
Ballooning steel exports are another sign that China’s mills are producing more than the country can consume. Exports reached a record 8.5m tonnes last month as traders sought profits in other markets. Steel exports for the first nine months of the year are up 39 per cent.
Steadily dropping global prices for iron ore, the main ingredient in steel production, have also lowered costs for mills and allowed them to sell steel more cheaply. Average steel prices in China have dropped 13 per cent this year.
Plunging share prices for US oil and gas companies in recent days have highlighted a potentially decisive factor in the looming crude price war: investor confidence.
On Monday, shares in Goodrich Petroleum, a small oil and gas producer, fell 30 per cent, making it the day’s most spectacular casualty, but much larger companies were hit too. Continental Resources was off 5.1 per cent, Hess off 5.8 per cent and EOG Resources off 6.8 per cent. Most of them recovered a little on Tuesday morning, and Goodrich was up more than 7 per cent, but all were below the levels at which they had started the week.
After three years of what was described by Christof Rühl, former chief economist of BP, as an “eerie calm” in the oil market, volatility is back.
Saudi Arabia’s apparent willingness to let crude prices fall to damage its competitors will test the capital markets’ support for US producers. It is shaping up to be the North American industry’s toughest examination since the shale revolution started to revive US oil production in 2009.
Bob McNally, a former White House official and now head of Rapidan Group, a Washington-based consultancy, argues that rather than reining in production to support oil prices at about $100 per barrel, Saudi Arabia can easily afford to let them drop for a while.
A rough calculation indicates Saudi Arabia would lose only a fraction – between $10bn and $20bn – of its nearly $750bn in foreign exchange reserves were it to let oil prices fall to $80 per barrel for a year, he says.
“When it’s needed, the Saudis are not going to be the ones that cut production,” adds Mr McNally.
“Recent comments by Saudi officials imply that if anyone has to cut, it has to be the Americans.”
With internationally traded Brent crude at below $88 a barrel – a four-year low – and US benchmark West Texas Intermediate at below $85, down from over $107 in June, most US shale production is still profitable, analysts say.
Wood Mackenzie, the consultancy, estimates the majority of US shale production will break even at $75. The International Energy Agency said on Tuesday steeper drops in the price of oil are needed for US shale and other unconventional energy production to take a meaningful hit.
If prices continue to fall, however, the pressure on the industry will grow. The smaller and midsized oil and gas companies that led the shale revolution have been running at a cash flow deficit for years. Capital spending has exceeded companies’ operating cash flows.
The steep decline in production from shale wells – it can drop 60 per cent or more in the first year – means that companies have to keep drilling merely to maintain their output, let alone increase it.
Nokia’s gamble on telecoms equipment following the sale of its handset division to Microsoft last year is paying off, reporting its first year-on-year sales increase in more than three years in the third quarter.
However, the Finnish technology group suffered a pre-tax loss of €834m, compared with a profit of €202m in the same period last year, owing to a writedown of €1.2bn in the value of its mapping software business called Here.
Nokia said that net sales increased to about €3.3bn, the first annual rise since the first quarter of 2011, compared with €2.9bn in the previous quarter and the same period in the previous year, as it won new contracts to roll out networks in North America, Europe and Asia.
The majority of the increase came from the telecoms equipment and services business that now accounts for almost 90 per cent of sales, with smaller contributions from Here and a technology unit that oversees essential smartphone patents that rivals pay to use.
Rajeev Suri, Nokia chief executive, said: “Nokia’s third-quarter results demonstrate our strong position in a world where technology is undergoing significant change. We saw growth in all three of our businesses.”
The closely watched gross margin at Nokia rose to 44.5 per cent from 44 per cent last quarter, slower than in the previous quarter. The adjusted operating margin at the network business rose to 13.5 per cent from 8.4 per cent a year earlier.
Analysts at Natixis have highlighted a “group dilemma” in balancing sales growth against margins, which has raised doubts about the future level of operating margin.
However, Nokia now expects its operating margin – using a non-IFRS measure – for the full year 2014 to be slightly above 11 per cent, confirming it will be higher than guidance given at the start of the year. It expects net sales to increase on a year-on-year basis in the second half 2014.
Mr Suri said that the networks business benefited from a business mix weighted towards lucrative mobile broadband sales and regional mix that included strong gains in North America.
The group has forged a strong relationship with Sprint in the US, which is spending more on networks in the short term than rivals such as AT&T and Verizon as it seeks to close the gap on mobile coverage and performance.
Nokia is batting for market share with European companies such as Ericsson and Alcatel-Lucent as well as Huawei and ZTE from China. However, the Finnish group has recently won a number of other contracts in this highly-competitive market, including a $970m deal with China Mobile to provide 4G networks.
Shares in Nokia have increased by more than a third in the past year since the decision to sell its handset operations to Microsoft. The US group has since been forced to cut jobs at the division as it seeks to stem a loss of market share of a once dominant business that proved too much for the Finnish company.
Shares in Nokia were 5 per cent higher on Thursday on the back of the results, which exceeded analyst expectations, valuing the group at about €25bn. Nokia’s market capitalisation sank to a low of less than €6bn in 2012 amid mounting problems in its handset business.
Nokia said that it needed to writedown about €1.2bn from Here to reflect the group’s valuation in a market where online maps are being provided by a number of group, including Apple and Google. Here had been included in the original talks with Microsoft before being pulled out of the sale.
Nokia took a radical decision last year to sell its mobile business, which was losing money rapidly as it lost sales to US groups such as Apple and Asian rivals such as Samsung and Huawei.
Mr Suri has said in the past that the long period of declining sales should end in the second half of the year. The group has previously focused on boosting its profitability through cost cutting at the division, with analysts remaining cautious about sales growth given the competition in the market. Sales fell in the first half of the year as the company sold or closed unprofitable and low-margin services contracts.
Net cash dropped sharply to €5bn, from the €6.5bn in the previous quarter when about €5bn was received from the proceeds of the sale of the devices business, as Nokia paid dividends and started share repurchasing.
It’s rare to have a moment of technological revelation in McDonald’s. But it was there among the Big Macs that I realised how Apple Pay, the iPhone’s new digital wallet, could really change things.
It wasn’t actually my first try at using the mobile payments service, which launched with a software update for the iPhone 6 and 6 Plus on Monday. To be on the safe side, I had decided to start with the Apple Store itself. Buying a case for my thin new smartphone (lest it bend in my pocket), I asked a blue-shirted “Apple Genius” if I could use Apple Pay to settle up. I held my phone to his handheld credit card machine (which is itself an iPhone) and put my thumb on the Touch ID fingerprint reader. It pinged, and I’d paid. We looked at each other in amazement at how easy it was.
Checking out checkouts
Using an Apple product in an Apple Store is cheating a bit, so I crossed the road to Walgreens, the ubiquitous pharmacy and general store. As I arrived at the counter with my groceries, I asked if I could use Apple Pay. “I don’t know if we support that,” said the chap behind the till. “We have Google Wallet.”
This surprised me, twofold. First, because Apple had mentioned Walgreens as being among the first two dozen US retailers to adopt its payments service. Second, because in two years of intermittently trying to pay using Google Wallet – a tap-to-pay feature, similar to Apple Pay, that is bundled with many Android smartphones – no cashier has ever suggested using it. Most looked at me blankly when I mentioned it so I gave up.
But it turned out that Apple Pay does work in Walgreens, thanks in part to the terminals that had been installed to support Google Wallet. It does not always pay to be first in the technology industry.
After just three days of testing, I feel confident that Apple Pay can succeed where other mobile wallets have failed. Thanks to its own stores and its clout with other retailers, Apple can educate consumers about a new technology better than any other company.
So when I put aside my food snobbery, step into a local branch of McDonald’s in San Francisco’s South of Market district and buy a Hot ’n Spicy McChicken sandwich with just a tap of my iPhone, it no longer feels like a novelty. The McJobber doesn’t even get excited, since I’m not the first to use it (this is start-up central, after all). That’s the revelation: very soon, paying with a smartphone could be as normal as French fries. “I just want to get rid of my wallet,” says another iPhone 6 owner in the queue, although he has not worked out what to do with his driver’s licence. “I’ll probably try Google Wallet now,” says his friend.
Take a photo of your card
Setting up Apple Pay is almost as straightforward as using it. Open the iPhone’s Passbook app, take a photo of the credit or debit card to add the long number automatically, then type in the other details.
More than 500 banks are expected to support the app but the service is only available to users with US accounts so far. A European launch is expected next year, where plastic cards using the same contactless payment technology (NFC, in the lingo) are already widely in use, so there should be plenty of readers at the checkouts.
The US is behind Europe in checkout technology: chip and pin cards are still rare.
So for now, despite the usual risk attached to any early technology adoption, Apple Pay feels more secure than swiping a regular credit card. After scanning a card, Apple says, it does not store the number itself, but creates an account number kept on a “secure element” in the iPhone. The fewer places that a credit card number ends up, the fewer opportunities there are for hackers to steal it.
Security is an important point because there is one remaining detail to mention: when I tried to use Apple Pay at a Subway, one of the food outlets Apple lists as participating, the checkout had not yet installed the right NFC reader. I swiped my card instead. It took less than 10 seconds, no slower than using my iPhone.
Apple Pay feels like a big step forward for mobile payments, but perhaps there is a reason that plastic cards have stubbornly resisted technological disruption for so long. They just work.
Planet of the apps
What it is: Uber’s “Ride Now” feature, free, in its app for iPhone 6 and 6 Plus
Why you should try it: As the world’s most popular (and controversial) car-hailing app, Uber needs no introduction. But an update makes impressive use of Apple Pay’s in-app payment capabilities by reducing sign-up for new customers to a single finger press on the Touch ID reader. Entering your name, address and credit card details on a smartphone is laborious, which is why OpenTable, Instacart, Groupon and others are integrating Apple Pay. But Uber’s implementation is the best. “The beauty of Apple Pay is that it simplifies Uber’s sign-up process to a single tap,” it said in a blogpost. “No forms, no fuss.”