Too early to celebrate? Monthly Sales Analysis May 2014

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On the face of it, a 2.76% increase in passenger vehicle dispatches is hardly anything to celebrate. However, coming, as it does, after a continuous decline of eight months and a downtrend that started in December 2012. Any improvement in sales is welcome.

The improvement in sales is also being looked at with greater optimism as it comes right after the elections, which saw a government come in with a decisive mandate, a first after thirty years. A decisive mandate means that the government would be able to do the right thing without facing much opposition or hurdles.

Little wonder, that the industry is overjoyed. They see it as an opportunity for the government to accelerate economic growth, something that has fallen by the wayside. Over the last decade, the Indian economy has slowed down from growing at more than 8% annually in 2004, to growing at near 5% in 2013.

While the automotive industry and vehicle sales sustained through most part of the slowing down period, they finally gave under pressure post December 2012 as customers lost confidence in the economy and the sustainability of their wages.

Passenger Vehicle Sales – Why the jump?

In this background, the May numbers become quite important. Even though 2.76% is not a great jump, most of the leading carmakers did much better. There are three major reasons why May 2014 saw a small jump in passenger vehicle sales:

  1. Stable government is a signal of the economy turning around and fence-sitting customers are jumping into the market as they now have greater confidence in their future wage sustenance. The slowdown spanning nearly six quarters also means that we have quite a large pent up demand from these fence sitters who have stayed away from buying a car even though they have a genuine requirement for the same.
    Even though the government’s decisive mandate became clear only in the middle of the month, the writing was on the wall for sometime. It was not the mandate but the sheer strength of the same that has surprised everyone.
  1. A depleting dealer level inventory is another factor. Senior sales executives at leading carmakers (anonymous, obviously) admitted that during the last 2-3 months, the inventory at the dealer end was depleted and this turnaround in sales was waiting to happen.
  2. New models always help the sales cause and the healthiest jump in numbers was reported by carmakers that have fresh models in the market. Maruti-Suzuki saw a 16.4% year-on-year jump in dispatches as the dealers stocked up on the Celerio. The same is the case with Hyundai as it dispatched the Xcent small sedan to dealers, improving dispatches by 12.8% over previous year. Honda benefitted from the New City in the market while Ford benefitted (statistically) from the EcoSport, which wasn’t there last May. The biggest statistical improvement was from Nissan / Datsun who had the Go hatchback and the Terrano SUV in the market, two vehicles which were not around this time last year.
  3. Sometimes, a lower base benefits in a statistical analysis. May 2013 passenger vehicle sales of 202358 units were 8.5% down over May 2012 numbers. Beating such a low base is easier.

Segment Analysis

Breaking the data at the segment level, the growth seems to be secular across most segments. While Passenger Cars and Utility Vehicles have grown in May, the Vans segment is still lagging behind. This indicates that small businesses are still bleeding and would wait for some more time before committing to buying new vehicles.

Vehicle Sales May 2014 vs Previous Years

Meanwhile, the personal transport driven Passenger Cars and Utility Vehicles segments witnessed growth of 3.08% and 4.56% respectively. Vans were down 4.92% over previous May.

Comparing sales dispatches over the last six-year duration, Passenger Vehicle dispatches in May 2014 were nearly at the level of May 2010 numbers. Meanwhile, it was the best May ever for Utility Vehicles sales, as numbers improved riding on customer’s newfound love for small SUVs.

On the Vans side, the numbers in May 2014 were the worst since May 2009 as the segment is rattled by a weak economy.

Overall, Passenger Vehicle dispatches in May 2014 were 2.76% higher than May 2013 numbers, but still 5.96% down from May 2012 dispatches.

OEM Analysis – Micro, Mini & Compact Segments

Maruti had a fantastic May 2014 with a 16.4% jump in dispatches. The carmaker made up for the decline in the Mini segment by a healthy jump in the Compact segment. The new Celerio helped matters as customers are receiving it warmly. However, the decline in the company’s numbers in the Mini segment indicates that Alto / WagonR customers are migrating to the Celerio.

A similar decline in Hyundai’s Mini segment numbers indicates that customers may be moving upwards from the Mini segment to the Compact segment. As we had analysed a few weeks back, this is a phenomenon that will gain momentum as upwardly mobile customers increasingly move away from the A segment (Mini) to the B-segment (Compact). This is also a phenomenon that most carmakers, barring Maruti, will welcome as it allows them to align their global product portfolio better to the Indian market offerings.

May 2014 - Mini, Micro, Compact

Hyundai ended the month with a 12.8% jump in dispatches. The company’s Mini segment dispatches suffered a setback with a 29.7% decline in numbers. However, it managed a 64.9% jump in Compact segment dispatches, riding on the newly launched Xcent small sedan and strong numbers for the Grand i10.

The only other manufacturers who managed to return positive numbers in the Micro-Mini-Compact segments were Fiat and Nissan / Datsun. Fiat dispatched 571 Puntos in May, a 12.2% jump over 509 dispatched a year ago. For Nissan / Datsun, the newly launched Datsun Go has resulted in a 218% spike in numbers. Without the Go, we have a feeling Nissan would have been in negative territory.

Toyota managed to salvage its pride in a decent month by dispatching 1934 units of the Liva, exactly the number of units it managed last May.

The OEMs still bleeding heavily in the Mini-Micro-Compact segment were Volkswagen, Tata, GM, Mahindra, Ford and Honda – literally the remainder of the industry. Volkswagen was down 48% on Polo sales over previous May; General Motors down 15.5%; Mahindra down 86% and Tata numbers were down 23.5% on a year-on-year basis.

Ford too had a disastrous month with Figo sales plummeting 55%. It seems that Ford is losing its grasp on the Figo and letting the model die its natural death as the next generation is only a few quarters away. Also with EcoSport doing healthy numbers month-after-month, the motivation to revive the Figo seems to be waning.

Also losing track of numbers is Renault, which saw Pulse sales declining by more than 58%. Again the Duster’s success means that Renault executives are not sweating it out to make a success out of other products.

OEM Analysis – Super Compact & Midsize Segments

The overall Super Compact and Midsize segment sales stayed stagnant, rising by a mere 0.56% over May 2013. Maruti and Honda were the two true gainers in the segment with Maruti registering a 3.1% increase in DZire / SX4 sales while Honda jumping up 125% on the warm response to the new City.

Apart from the two, nearly everyone else was in the red. Hyundai suffered a 29.4% decline in Verna sales while GM Sail sales collapsed by 77% year-on-year. Mahindra Verito sales also crashed 73% over last May.

Super Compact & Midsize Segments

European carmakers had a troubled May with Renault-Nissan, Skoda and Volkswagen experiencing sharp declines in their Super Compact and Midsize segment sales. Volkswagen Vento sales halved over May 2013 while Renault Scala sales were down 84% from previous May. At 107 units, the Scala is fast becoming irrelevant in the market. The Nissan Sunny too witnessed a 60% drop in sales over May 2013. Meanwhile, Skoda Rapid sales were down nearly 30% year-on-year to 785 units.

Utility vehicles

The Utility Vehicles segment reported a 4.56% jump in dispatches. Small SUVs – Duster, Terrano and EcoSport – continue to do well. The EcoSport again had a 4000+ month with a slightly larger number exported. With constraint on production, Ford India is doing a fine balancing act between domestic dispatches and export shipments and domestic dispatches have hovered around the 4000 units mark in the recent months.

Meanwhile the Duster + Terrano sold less units than what the Duster did last year and Renault needs to add special variants to the mix to get sales going again.

Apart from the small SUVs, the Maruti Ertiga too witnessed a healthy 22% jump in dispatches.

However, the Mahindra range of UVs was under pressure as dispatches declined by 14.2% in May 2014, over previous May.

Tata could improve its UV dispatches by 8.4%, owing to a rise in Aria / Xenon dispatches.

On the urban cab front, Toyota Innova dispatches were up 32% over previous May. However, the Chevrolet Tavera / Enjoy dispatches were down 45% year-on-year.

Vans

The Vans segment was a story of contrasts as the increase in hardtop Vans dispatches was offset by the decline in soft-top Vans. Dispatches of the Omni / Eeco were up 50% year-on-year even as the Tata Ace Magic dispatches crashed 52% over previous May. Sales of the Gio / Maxximmo vans also crashed severely with may numbers down 68.5% year-on-year.

Special Analysis – Firing on one cylinder

One of the important aspects of Maruti’s success (that we analysed a few weeks back) is the company’s ability to push multiple products simultaneously in the market. So a successful new product adds to the Company’s overall volumes significantly as the older products hold their ground steadily.

For many other manufacturers, a new successful product often means a slowdown in sales of the incumbents. This is clearly evident in the case of Ford, Renault & Nissan.

Ford for instance has seen a consistent fall in Figo sales even as the company celebrates the EcoSport’s success. The Figo’s age clearly does not help. For now, Ford’s attention is on the EcoSport and the company would launch a fresh salvo at the Compact segment when it introduces the next generation Figo / Ka, sometime in 2015.

Would that mean easing off the EcoSport’s accelerator?

Similarly, Renault has the successful Duster small SUV to brag about and the single success is all the company has to show against four failures. Very similar is the case with Nissan, which recently had only the Sunny to show for its efforts in India as the numerous other models never reached any meaningful sales figures. Now the Sunny languishes as well and the brand has the new Terrano to show for its existence.

 

 

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