2014 Trends; 2015 Expectations

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In our series of analysing vehicle dispatches in 2014, we look at the trends that defined 2014 and those that will matter in 2015.

Year 2014 was a roller coaster year. At the start of the year, the industry was battling with depression and the first four months were a whitewash in terms of Passenger Vehicle dispatches. However, with the new government assuming charge at the centre, a sense of optimism engulfed the market.

The next few months were a dream run before we had the hiccups again in October when Passenger Vehicle dispatches dipped again. In the end, December saw a jump in dispatches driven by fear.

In this roller coaster of a year, some trends across vehicle segments were clear.

 

NEW BODYSTYLES

Passenger Vehicle customers had more maturity and they looked past the traditional hatchback and sedan body styles. Newer body-styles like Small Crossovers and Compact seven-seater MPVs became the preferred choice. Renault Duster, Nissan Terrano and Ford EcoSport sold  good volumes and so did the Maruti Ertiga and Honda Mobilio.

In choosing these vehicles, customers favoured better interior packaging, greater seating capacity, flexibility of space and ruggedness (relative to traditional hatchbacks). At the same time, these new body styles, being gym-toned monocoques by nature, were not gas guzzlers by nature.

Some manufacturers did try to take shortcuts into entering the new segments and resulted in debacles like the Mahindra Quanto.

Entering 2015, we have seen a new extension to the segment with the apologetic seven-seater. The Datsun Go+ MPV is the example of the same — a five seater with two seats that almost fail to get counted.

However, 2013 & 2014 were just the start of the boom in the Compact MPV / Crossover segments. The next three years will see nearly every manufacturer entering the segments. Maruti-Suzuki has multiple products lined up in the Crossover segments and already sells the Ertiga in the Compact MPV segment. Hyundai has the iX 25 lined up for introduction in the market.

Honda, experiencing initial success with the Mobilio is now planning on launching the Vezel Compact SUV in the market by 2016.

Marketshare Trends - Compact MPVs : CrossoversRenault, having experienced huge (and only) success with the Duster crossover, has the Lodgy Compact MPV lined for launch in end 2015. Sister badge Nissan has a smaller SUV planned to be slotted below the Terrano.

Similar products are also being planned by Mahindra to be introduced in 2015 and by Volkswagen, once they get the accounting right.

In a nutshell, the industry has realised that unconventional body styles make a lot of sense and customers would be inclined to experiment with them in the future. EMMAAA forecasts the Compact MPV / Crossover segment to account for nearly 13.2% of the Passenger Vehicle market in 2019. In 2014, the segment accounted for 6.85% of Passenger Vehicles volume.

 

FRESHNESS RULES

As we have elaborately discussed earlier, and even earlier, Freshness of products has been growing in significance in the Indian market. EMMAAA’s Model Freshness Index (MFI), a unique indicator that is a count of the average Freshness of all Passenger Vehicles in the market in a year has been firmly inline with the vehicle sales in a year. On January 1st, 2015, the MFI had a value of 53.01. In comparison, the MFI had a value of 48.35 on 1st January 2013 and 43.38 on 1st January 2014. A nearly ten-point higher value of MFI indicates that the mainstream model line-up in 2014 was significantly fresher than that in 2013. As a comparison, while five new models were introduced in 2013, ten were launched in 2013.

Showroom MFI Score by brand

Freshness helped Hyundai, Honda and Maruti to grow in 2014 as customers could only be pulled in with new models. In contrast, companies with stale model line-ups – Volkswagen, Fiat, Ford, GM and Toyota – suffered from poor sales in the year.

However, Freshness for many manufacturers is a cyclical thing. Not everyone can launch new products every year and keep their showroom freshness high.

In 2015, Ford should be able to improve its MFI score significantly as the Figo / Ka twins would be launched soon while the old generation Figo and Classic models would be discontinued.

 

SHORTENING LIFECYCLES

A direct result of the impact of Freshness on car buying is Shortening Lifecycles. While most global manufacturers have synchronised Indian product lifecycles with global product programs, Indian manufacturers – Mahindra, Tata, and even Maruti, lived in their own la-la land world for long and we saw lifecycles stretching a few decades.

All that is up for a change and the Maruti 800 may be the last of the decade runners in Passenger cars. Things may be more resilient in UVs as Mahindra has a whole flock of them running on antique mechanicals. However, the company is working on all-new fresh product line-up that has a replacement for everything – Thar, Bolero, Xylo planned.

Some companies would still be innovative with product lifecycles and run the old generation programs in parallel with the new generation. Hyundai has done that with the i10 / Grand i10. However, in all of such cases, manufacturers would be cautious to create a major differential between the products so that there is no negative cannibalising.

However, if your name is Tata, you would continue doing your own thing and run old generation products in parallel with new generation. The new generation itself would be a major resin of the intermediate generation. And meanwhile, just to make analysts like us miserable, you would take the oldest generation and rework it as the next future generation. Five years hence, it is possible that you may have everything running together in parallel.

 

RURAL MARKETS

Urban markets are growing in maturity and a large share of the customer is returning to the market for his second car. As a result, many end up buying bigger cars or different body styles. The entry level of the market — Micro and Mini segments — are being looked at by the first time buyer who in many cases is the rural customer.

Maruti-Suzuki for many years has been working on rural market sales and the results are evident. Executives (anonymous, obviously) on the sales side admit that as much as 30% — 32% of the overall sales are coming from the rural market. As a result, while Maruti-Suzuki lost only 5.97% sales volume in the Mini segment, rival Hyundai saw volumes in the Mini segment go down by 16.65%. With Pareek moving to Tata Motors, we expect greater focus on rural sales from the company.

Rural sales would also be a focus for companies like Hyundai, Mahindra, and even Honda, as they spread their dealer networks.

IN THE NEXT POST IAR LOOKS AT FIVE INTERESTING DATAPOINTS FROM 2014

 

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2 Responses

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  1. Atul Bahel
    Sep 13, 2015 - 12:57 PM

    Like teh monthly sales analysis and vehicle trends. Can I bemailed the pdf documents on a regular basis please

    Regards

    AtulBahel
    Marketing manager Shell India

    Reply
    • IAR Team
      Sep 13, 2015 - 01:09 PM

      Dear Atul and all readers,

      Subscribe to our mailing list. If you are getting IAR’s mailers then the link to download the monthly sales analysis is provided in the same.

      Deepesh Rathore

      Reply

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