Up in Smoke – Monthly Sales Analysis – October 2014

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Over the last few months the analysts at EMMAAA have been skeptical about the recent recovery in the Passenger Vehicle market. We have been worried about the narrowness of the recovery and how wobbly sales numbers were being held together by discounts and incentives.

October 2014 is the month when the house of cards came crashing down.

It would be hard to pick up OEMs who still smell of roses after compiling the October dispatch numbers. Most are in the Red, though the crimsonness of the hue varies.

Leading on the positive side are the usual leaders from the last few months – Maruti-Suzuki, Hyundai and Honda. However, even their October performance seems painfully stitched together than overtly convincing. MSIL dispatches were up 1%, Honda up 18% while Hyundai was 5.6%.

MSIL rationalized its relatively mediocre dispatch numbers with pointing out that October had only 19 working days. Less working days mean less dispatches and MSIL claimed that actual retail sales were around 108,000 units. Going by the explanation, MSIL’s November dispatches should show a healthy spike and we will hold our sarcasm till we see the November numbers.

Surprisingly, none of the other carmakers bothered to use the ‘Less working days’ excuse for the poor October show.

Hyundai’s modest dispatch growth was expected considering that the carmaker, along with Honda, has the freshest product portfolio in the market.

Honda’s 18% jump looks impressive, but is not. The company has the Mobilio, new City and Amaze bringing in the numbers and most of the sales growth is due to the Mobilio’s incremental numbers – the MPV is still in the ‘data honeymoon’ period. Honda’s dispatch data performance was also aided by last (year) October’s numbers of the City – the company had dispatched only 31 of its Mid-Size sedans this month, last year, as it was preparing for a generation change.

Re-look at Honda’s numbers after removing the above considerations and they are in tatters.

Even then, at least the carmaker was firmly in the Green zone. Not many companies could boast of that. Apart from Hyundai, Honda and MSIL, the only other brand reporting an improvement in dispatches was Fiat. At 1356 units, Fiat’s dispatches were nearly 12% up year-on-year.

All the other brands were competing with each other in the Red zone. Amongst the volume brands (i.e. not counting Ashok Leyland and Force), the worst performing was GM India. The company had another month when they found themselves sprinting downhill without pausing for breadth, losing 46% of volumes from last year.

Renault too was down 30.5% from last October while sister brand Nissan was down nearly 19%. However, Nissan’s fall appears more grimacing considering Nissan also had Datsun numbers added to them for this year and even with those additional numbers, the overall volume has dipped sharply.

Skoda was down 40.5% as the new Octavia has failed to take off due to its atrocious pricing and the new Corolla. Data was also skewed due to the absence of the Fabia – the small car was still in showrooms last October and accounted for 363 units.

In comparison Volkswagen was down a very respectable 3.4%; an almost so good performance that we almost sent them a congratulatory email.

Ford India was down 26.7% as EcoSport dispatches have hit a glass ceiling while Figo is still rumbling downwards.

Mahindra had a depressing month as well with dispatches down 20% over previous year.

In comparison to everyone else, Toyota had a comparably steady month with dispatches down only 4.6%.

It Dies if You Take Your Eyes Off

The Indian passenger vehicle market is running on ventilator support. Like with anything on ventilator support, the patient dies as soon as the doctor turns his back. A patient needs to be nurtured carefully, pushed relentlessly, the effort never ceasing, for the patient to recover eventually. The same is happening with the passenger vehicle market in this downturn.

Companies who are relentlessly pushing models have been able to survive the downturn better than those who took their eyes off the road and their feet off the accelerator.

Take MSIL – even though the Mini-segment has been under pressure, incentives, discounts, and a relentless pushing by the dealers has kept sales flat. Mind you, the MSIL Mini segment portfolio is not exactly very fresh or head-and-shoulders above its competition.

Also commendable have been Toyota’s efforts in preserving sales of the Etios Liva – the company has escaped with a relatively small cut. Ditto for much maligned Volkswagen – they have a problem smaller than they think.

The same cannot be said for Ford and GM who have been terrible with lifecycle management of their mainstream models. Ford Figo sales have been falling relentlessly and GM has been sharper in its fall.

Your Brand Matters, More Than Ever

When the market is on fire, everything sells, crap included. When the market is depressed and fewer customers are seriously buying cars, prospective customers mysteriously fish out 210-point checklists for new car purchases. And suddenly things like initial quality, service satisfaction; dealer’s efficiency & attitude and the brand’s word-of-mouth reputation gain importance.

Unfortunately that hits companies with a low brand image – GM India and Tata Motors, we are referring to you. The situation is also not good for new entrants who do not put in effort to establish their brand first – Datsun.

In contrast, well-established brands like Honda and Toyota are more resilient to a market downturn. At times they may not have the right products – Honda in the past and Toyota at present – but customers are ready to reward them when the right product is introduced – Honda with the Amaze and Mobilio.

In the future, brands with serious ambiguity about their image and positioning – Volkswagen, Skoda, Renault and Nissan – will encounter indifference from customers.

A Lone Warrior Cannot Save the Showroom

We have been increasingly witnessing this trend when, otherwise fine organisations, turn into single product companies. It is an almost indicator that most car companies do not have the management bandwidth or are making enough efforts to keep the entire portfolio on track.

Again, Ford India is the leading case here. Figo sales have gone downhill steadily since the launch of the EcoSport and a revival now hinges on the launch of the next generation.

If Ford India has the Figo’s age and lifecycle issues to blame, Renault and Nissan+Datsun don’t even have that liberty. Renault sells the Duster and the rest of the range is not even a honorable mention.

Similarly, there was a time when Nissan+Datsun could shift nearly 3000 Sunnys every month from its showrooms. The Sunny sank soon, to be replaced by the next hot balloon – Terrano. Now, with the launch of the Datsun Go, the Micra is history. We bet with the next hot balloon around the corner, Renault and Nissan would dump their present failures and move ahead as if nothing happened.

Segment-level review

October was a bad month all around with negative growth for Passenger Cars, Utility Vehicles and Vans alike. However, the decline was most severe for Vans, which saw a near 28% decline in dispatches.

Passenger Vehicle Sales - Oct 2014

Utility Vehicles too faced a 15% decline in dispatches in October 2014 over previous year, while Passenger Cars, down 2.6% nevertheless, fared the best amongst the segments.

Overall, Passenger vehicle dispatches were down 7.5% from previous year, a severe decline considering the last four months had seen a gradual revival.

Mini-, Micro- and Compact Segments

Hyundai (thanks to fresh products), Toyota (relentlessness), Fiat (hard work), Nissan+Datsun (thanks to Datsun) and Volkswagen (surprise!) were the brands that reported a year-on-year improvement in dispatches in the lowest segments in October. Everyone else came down.

Mini, Micro and Compact Segments-Oct 2014

The surprise loser was Honda which saw dispatches of the Brio + Amaze reduced by half in October 2014. Another volume shocker was Mahindra – at 77 units, the Vibe hatchback has hit a new low.

Another surprising loser was Tata Motors – we were hoping that the new Zest will shore up numbers. However, dispatches were still down.

Super Compact and Mid-Size Segments

Only Maruti-Suzuki and Honda reported positive growth numbers in the segments. MSIL has the Ciaz working for them. In the second month of deliveries, it is hard to tell how the initial euphoria will pan out in a few months or if these 6000+ volumes are anything more than dealers creating stock.

Super Compact & Midsize Segments - Oct 2014

Meanwhile, Honda is helped by the aforementioned statistical nod – last October the company had shifted only 31 units of the City in October as a generation change was in process. So this October’s 5000+ dispatches of the City is a serious jump.

Everyone else had a serious fall in October with GM and Hyundai registering the most severe declines.

Commercial Vehicles – B&M&HCVs

On the Commercial vehicles side, things were much better in the high tonnage zones. HCV (Rigid Axles) dispatches were up 43% while HCVs (Artics / Tractor-Trailer) dispatches were up 37%.

The revival indicates an improvement in sentiment of fleet operators, as they grow confident in the revival of the economy and infrastructure projects.

Heavy Commercial Vehicles - TRACTOR TRAILERS - Oct 2014

In both cases, Ashok Leyland was the fastest growing brand, followed by Tata. Meanwhile, VECV, which looked very promising a few months back, had a relatively sedate month.

 

In comparison, MCV dispatches were down 2.6% from previous year. However, this is a big improvement in situation from last month.

Medium Commercial Vehicles - Oct 2014

While Ashok Leyland could grow its MCV dispatches, Tata and VECV scored lower dispatches from last year.

Buses - Oct 2014

Meanwhile, Buses grew at a sedate 3.9%, again Ashok Leyland managing to nudge up its market share. Both Tata and VECV saw heavy declines in Bus dispatches.

Small Commercial Vehicles

The SCV segment, lead by Tata Motors with its Ace range and Mahindra with its Maxximmo range and pick-up truck models has been heavily hit in recent months. While dispatches were down in October as well, there was a marginal improvement from September. At 13.15% down from last year, there seems to be a slight improvement in sentiment.

Small Commercial Vehicles - Oct 2014

Tata Motors was still the worst hit in the segment, with dispatches down by nearly 20%. In comparison, Ashok Leyland dispatches were flat while Mahindra SCV dispatches were down only 7.5%.

Light Commercial Vehicles

The LCV segment has also seen a severe slowdown and dispatches stayed 11.5% down from last October.

LCVs-Oct 2014

Both Tata (down 22.7%) and Mahindra (down 16.2%) were severely hit even though SML Isuzu dispatches were sharply up, though off a very small base.

Two Wheelers

Normally, two-wheelers salvage the situation for the industry with healthy growth numbers. The performance of the segment has been very strong over the last few months. However, October was the month when the segment chose to disappoint.

Scooters - Oct 2014

Scooters

Scooters are still growing at a healthy pace and October was not very different. Dispatches were up 10.9% from last October. While Hero dispatches were flat from last year, Honda and TVS maintained steady growth. However, better growth was recorded by the small players – Mahindra, Piaggio and Yamaha – as their new models are helping them gain market share.

Commuter Motorcycles (<125cc)

The bottom end of the motorcycle market is heavily dominated by Hero and October saw some lethargy in dispatches. Hero dispatches were down 9.9% from previous year and that upset the applecart for the segment.

Motorcycles <125cc - Oct 2014

Bajaj had another dismal month in the segment with dispatches down 36.5% while Yamaha lost 13.7% of its volumes. Suzuki too saw its segment volumes halved in October.

Overall, the segment saw a 13.1% decline in volumes.

Premium Commuter / Super Commuter Motorcycles (125cc – 250cc)

Whatever Bajaj loses in the segments below, it makes up (and more) in these segments. Considering these segments have better margins, this churn is actually good for the company.

Overall, the segment recorded a 9.4% improvement in sales. This was mostly driven by a 46.5% growth in Bajaj dispatches. The new KTM range is helping Bajaj notch impressive gains.

Motorcycles (125cc-250cc)-Oct 2014

Suzuki too saw an astronomical increase (in percentage terms) in dispatches due to the new Gixxer even though the company’s overall volumes are quite small.

TVS managed to improve its volumes by a relatively sedate 2.5% while everyone else saw a decline in dispatches.

The decline was the most severe for Hero (down 56.6%) and Honda (down 34.4%) as aging models are not helping matters.

Big Bikes (>250cc)

The high rate of growth continues in the Big Bike market as market leader Royal Enfield reported a 47% jump in volumes.

Big Bikes (>250cc) - Oct 2014

Harley-Davidson saw a 155% increase in dispatches all thanks to the Street range.

The only disappointment in the segment was Bajaj-KTM which saw volumes declining by 32.7%.

 

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4 Responses

Leave a Reply
  1. B Chethan Kumar
    Nov 17, 2014 - 06:26 AM

    Relying on your data is very difficult. In your LMV sales analysis Mahindra and SML Isuzu having same no of sales. how it is possible.
    Please give attention to minimize the data error.

    Reply
    • DR
      Nov 17, 2014 - 11:57 AM

      We apologise for the error. The correct graphic has been uploaded again.

      Reply
  2. Ameya
    Nov 29, 2014 - 10:04 AM

    Guys can you please make the graphs more carefully (for CVs)
    Specifically, the growth numbers, the growth trend line obstruct the number behind, i.e the number of sales.

    Reply
    • DR
      Nov 29, 2014 - 03:03 PM

      Yes, we will keep that in mind. Thanks for the feedback and for reading IAR.

      Reply

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