Five Data Highlights that Cocked Our Ears in 2014

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The year 2014 is over and SIAM has graced us with the dispatch data for December. A quick tabulation of data indicates how the major vehicle segments performed in the year. However, looking beyond that, there are five data highlights that matter the most to the industry and made us sit up and take notice.

We start the analysis by getting the big things out of the way first.

 

GET THE BIG THINGS OUT OF THE WAY

Passenger Car dispatches in 2014 were up 2.46% over 2013 dispatches, while Utility Vehicles were up 2.08%. Vans were down 18.43% even though Hard-Top Vans segment was up 16.67%. Overall, Passenger Vehicles dispatches in 2014 were up 0.65% from 2013 volumes.

In the B&M&HCVs segment, Medium Commercial Vehicles were down 17.23%; Buses were down 17.07%; Heavy Commercial Vehicles with Rigid Axles were up 13.95% and Heavy Commercial Vehicles with Tractor-Trailers were up 86.26% over previous year. Overall, the Medium & Heavy Haulage Trucks segments were up 4.29%.

The Light Buses segment declined by 2.56% in the year. The Small Trucks Segment (GVW<3.5T) declined 19.4% over previous year while Light Trucks declined 10.9%. Overall LCV Goods Carriers dispatches in 2014 declined 18.76% over 2013.

In Two-Wheelers, Scooters kept their momentum and dispatches were up 28.89% over previous year. In contrast, Motorcycle dispatches gained by 6.21% only. Even Mopeds did better than Motorcycles and dispatches were up 6.48%.

And that completes all the big data-points of 2014 vehicle dispatches.

However, the devil is in the detail and there were a number of major five datasets that made us sit-up and take note.

 

COMPACT SEGMENT EXPLODES; MICRO / MINI FIZZLE

The year 2014 was a year of growing maturity in the market. Customers started looking for better packaging and features in their cars and not the car just as a means of transport. For the increasingly discerning customer, the Compact segment has started making much better sense than the Micro or Mini segments. Compact cars have better interior space, are safer, pack in more features including better navigation and infotainment systems and hold more prestige.

Entry Level Pie Split 2013vs2014

Even manufacturers are more favourable towards the Compact segment. More new product launches happened in the Compact segment than in the Micro or Mini segments combined. At the end of 2014, the Compact segment had 22 products being offered as compared to six in the Micro and Mini segments combined. While nearly every carmaker is competing for a slice of the Compact segment pie, the entry level segments have only Tata, Maruti-Suzuki and Hyundai competing.

The move towards the Compact segment, at the cost of the entry segments was very apparent in 2014. While dispatches in the Compact segment grew by 9.05%, they declined 8.49% in the Micro and Mini segments combined. The Mini segment was hit even worse, declining 8.77% on its own.

The Micro segment, where the Tata Nano is the sole player, maintained a flat trajectory in the year as the Nano was able to sustain its sales graph in 2014.

 

MARUTI LOSES GROWS ITS MARKET SHARE

“With increasing competition in the Indian market and the entry of multinationals, Maruti-Suzuki is likely to see a decline in its market share,” read many a research report about ten years back. These included reports written by this analyst.

Mea Culpa!

Maruti-Suzuki has managed to prove everyone wrong, partly due to their persistence and correct strategy and mostly due to the gross incompetence of the competition.

Winners Grab Marketshare 2013vs2014

Any which way, MSIL has managed to prove critics and analysts wrong. In 2013, MSIL had a 41.66% share of the Passenger Vehicle market. At the end of 2014, the company had gleefully increased it to 44.82%, an absolute gain of 3.16%. In a nutshell, not only is MSIL the biggest player in the Passenger Vehicle market, it was also the biggest gainer of marketshare in the year.

 

SOFT-TOP VANS CRASHED

And it’s a worrying indicator of small business health. The Soft-top van segment crashed 61.8% in 2014 as dispatches averaged just about 3000 units a month. These Vans are used as shared cabs in rural and semi-urban areas and a sharp fall in volumes is worrying. On one hand, it signals the poor health of small businesses outside big cities and on the other hand it is an indicator that we might have hit a short-term peak for the segment and are currently experiencing a downtrend in the cycle.

Collapse of Soft Top Vans 2013vs2014

HUB-AND-SPOKE MODEL FINALLY MOVES

The Hub-and-Spoke model is an interpretation of how the Commercial Vehicles market is likely to move in the future. The model theorises that in the future, the M&HCV market would shift decidedly towards HCVs as the quality of highways and their length improves. These Heavy Haulage trucks would connect the big city hubs to each other. The areas around the big cities would be connected by the Spokes, which would be serviced by LCVs. As a result, LCVs and HCVs would should grow faster than MCVs.

The year 2014 saw some of the predictions of the Hub-and-Spoke model come partially true. HCVs did grow significantly faster than MCVs. At the start of the year, MCVs accounted for 13.87% share of the overall Commercial Vehicles (Goods Carriers) market. By the end of the year, this had come down to 13.06%.

Shifting Commercial vehicle Pies 2013vs2014

In the same duration, HCVs improved their share of the market from 14.99% in 2013 to 21.18% in 2014. However, most of the gain came from the decline in LCV sales as the segment lost significant marketshare. LCVs’ share of the market came down from 71.14% at the start of the year to 65.76% by the end of the year.

Arguably, the market share shifts may be reversed to some extent in 2015 as the commercial vehicles market is just at the start of the upward trend cycle. While HCVs have already started recovering, MCVs have only turned around in end 2014 and LCVs are still in a downward trend.

 

HONDA NARROWS GAP WITH HERO TO SCARY LEVELS

The year belonged to Honda Motorcycles & Scooters India (HMSI) as it charged after Hero in the quest for numbers. The Japanese company launched multiple models across segments and even went into the budget category with the CD 110 Dream, a bike that looked suspiciously similar to the Hero HF Deluxe.

In almost all segments, Honda has a healthy lead over Hero. However, the Indian manufacturer catches and outmatches Honda when it comes to the entry-level commuter segments (90cc — 125cc) and emerges ahead of Honda by a significant margin.

Honda Narrows Gap with hero 2013vs2014

However, Honda’s aggressive push and the general trends of the market where the customer is moving upwards towards slightly larger engines (read our post on Average Motorcycle Engine Displacement Index here…and here…and here) is slowly tilting the balance in favour of Honda.

In 2013, HMSI had a 22.37% share of the market, which had increased to 26.06% by the end of the year. In contrast, Hero’s share of the market declined from 42.13% at the start of the year to 40.24% at the end of the year.

Significantly, while Hero leads in the 90cc — 125cc segments, Honda leads everywhere else and an accelerated change in AMEDI may tilt the balance in HMSI’s favour.

Hero will counter Honda’s product onslaught with its own product blitz, starting 2015 as a number of new products are under development. Some Engineering executives (anonymous, obviously) at Hero put the number of new products under development at about 40. Even after discounting the same by 60%-70% for sticker jobs and experimental exercises, the magnitude of new product onslaught is huge. Hero is not giving in without a fight and this battle is going to get heated, very soon.

NEXT WEEK WE LOOK AT PROBLEMS PLAGUING RENAULT-NISSAN-DATSUN GROUP EVEN AS DATSUN HAS LAUNCHED THE GO+ MPV

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2 Responses

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  1. prof Sri Ram Khanna , univ of Delhi
    Jan 22, 2015 - 11:59 AM

    Need your permission to use some of the 2014 analysis and graphics for cars and two wheelers in my new book on ” Consumer Relations and Customer Care” . Will give credit to your co as indicated by you. please respond if some figs and grapes can be used ? Plea indicate an email I’d for correspondence along with name and phone no. Regards prof s r Khanna , dept of Commerce ,Delhi school of economics , univ of Delhi M: 9891081399

    Reply
  2. Avik Chattopadhyay
    Jan 22, 2015 - 03:53 PM

    DR and team – very good start to the year – very cocky too!

    In the passenger vehicle market, while not taking anything away from the gains of Maruti Suzuki, Hyundai and Honda, the sheer limpness of the other brands is the biggest fear. If they keep hurtling down with ever-increasing levels of incompetence [and arrogance] than we will someday end up in an oligopolistic situation. Like the 3 Khans in Hindi films. You can correlate the ones you want to a Maruti / Hyundai / Honda.

    Do you see a market for MCVs five years from now? Also with the ever-increasing share of articulated HCVs [also called tractor-trailers!!!], will the hub and spoke constituents not get re-defined to HCVs, LCVs and MiCVs [micro CVs]? Your take on this…

    I eagerly look forward to the fight between Hero and Honda. Will be good for consumer, for sure. And how TVS and Bajaj make the most of the situation to slip in their numbers will be worth the effort!

    Reply

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