Night is Cold, Night is Dark – March 2014 Sales Dispatches Provide Little Cheer


In our early sales reckoner two weeks back, we had mentioned the probability of Passenger Car sales falling by more than 4% in March 2014. The overall numbers surpassed our expectations (of the worse) and March 2014 ended with a 5.08% decline year-on-year in Passenger Car sales. More than the decline, the realisation that the excise duty reduction induced price cuts have had no impact on sales is far more terrifying.

This is the second month of sales dispatch numbers after the price reductions in car induced by the excise duty cuts. However, the data has hardly shown any uptick. This is an indicator that the market’s core is quite shattered and it would take many months quarters to return to near double-digit growth.

Recovery, when it happens eventually, would be slow, lame and would drag its feet for many months.

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What is also worrying is that new models are hardly creating any momentum. True, Hyundai has returned a near 30% growth in March 2014 over previous March, but that growth has been driven by the launch of two new volume models – Grand i10 and Xcent. Any other time, those two models would have grown Hyundai volumes by 50% – 60%. In fact, this being the first month of Xcent dispatches, it is likely that Hyundai volumes may moderate a bit over the next quarter and the overall sales growth may further dip.

The Numbers

On the Passenger Cars front, March 2014 saw 171,489 units being dispatched. This is a 5.08% dip from March 2013, which itself was a 21.4% dip from March 2012. Essentially, the drop in sales has wiped out three years of prospective growth as March 2014 Passenger Cars sales were even 10.73% below March 2011 sales.

Passenger Vehicles Sales Decline continued in March 2014
Passenger Vehicles Sales Decline continued in March 2014

In comparison, Utility Vehicles still appears resilient and was down only 4.55% from previous March. However, March 2013 was riding a 34% growth in numbers over March 2012, which itself was up 33.63% over March 2011. In short, March 2014 UV sales are down but not out and it is likely that

But like as we have fingered the numbers we have discussed in this space earlier. The UV sales growth numbers are a bit skewed over the last few months due to the launch and success of the Maruti Ertiga, Renault Duster, Ford EcoSport and Nissan Terrano. Taking these four models out of reckoning in both years, the UV market shows a decline of 17.9% over previous March.

A large chunk of utility vehicles are used for commercial purposes and their sales are a reasonable indicator of the health of the small businesses segment using these UVs. A back of the envelope calculation indicates that the sales of such UVs were down about 9.2% year-on-year.

The UV segment sales were also impacted by the collapse in Innova dispatches. This may be a result of the labor issues at Toyota’s Bidadi plant. However, the Innova’s collapse has not seemingly made a strong positive impact on the sales of other UVs, with Mahindra barely holding on to its numbers from last March.

Vans are hurting badly and there is no respite. The segment saw a decline of 31.77% in March 2014 over previous year. So strong was the decline that Vans segment March 2014 sales are now at the level of March 2010 numbers. However, the real story is when you look at the data with more granularity. The hard top vans catering mostly to urban businesses are doing well and their dispatches registered a growth of 10.46% over previous year.

However, soft-top Vans segment seems to have been shattered beyond recognition. Dispatches in March 2014 are down 63.73% over March 2013 dispatches. These vans are mostly used in rural areas and the huge drop in dispatches is an indicator of the continuing weakness in the rural economy.

The Brands

Maruti had the Celerio and Hyundai had the Xcent & Grand i10 cheering sales dispatches in March 2014. However, even with three new models out for the top two players, the sales numbers look disappointing. What seems to be happening is that the new models are cannibalising sales of existing ones.

Maruti’s Celerio has received more than 25000 bookings. However, the company’s sales dispatches in March 2014 still tumbled by 3.6% over previous year. It is worth noting that March 2013 had itself seen a strong decline of 12.17% over March 2012, which itself was a 0.8% decline over March 2011. This is the worst March ever for Maruti since March 2010.

Volume segments across brands
Volume segments across brands

While the Celerio has driven Maruti’s Compact segment sales upwards by 9.3% in March 2014, sales dispatches in the other segments drove down the numbers severely. It seems that the Celerio is nibbling at sales of the WagonR as dispatches in the Mini segment were down 11% over previous March. Maruti also suffered a 14.15% decline in DZire dispatches (Super Compact segment) as customers were likely waiting in anticipation for Hyundai’s Xcent.

Hyundai has done considerably better than Maruti-Suzuki with the dispatch volumes in March 2014. Volumes were up 9.54% over March 2013. However, two things should be considered. One, this was the first month of Xcent dispatches and dealers would be stocking up. Second, Hyundai sales in March 2013 were down 17.21% over March 2012 and so March 2014 was up against an unexpectedly low base. In real terms, Hyundai dispatches in March 2014 were still down 9.3% from March 2012 dispatches.

Numbers tell a strange story for Tata Motors. The carmaker witnessed a 7.5% jump in dispatches. Part of this came from the Nano, which now seems to be stabilising at about 2500 units per month. The other reason for the favourable comparison with previous year is because March 2013 was an unusually bad month where sales had collapsed by 68.2% over March 2012. However, overall Tata Motors is still in a worrying situation. Sales dispatches in March 2014 are more than 65% down from the highs of March 2012.

Honda is riding the high of its newfound product successes. The Amaze ensured that the brand returned a 36% growth in Micro + Mini + Compact segment dispatches.

Datsun has started shipping the Go to the dealers and this was the first month of dispatches. As a result, Nissan + Datsun numbers look unusually healthy, returning a growth of 633% over previous year. We will watch the next quarter for Datsun dispatches before forming an opinion about the same.

Things continue to be depressed for Volkswagen, Toyota, GM, Renault and Ford, all of whom reported strong declines in dispatches. Volkswagen was down 29.6% over March 2013 while GM was down 35% on a year-on-year basis.

Meanwhile, Ford is finding it difficult to stabilise the Figo. March 2014 was a 55.74% decline in dispatches. This came after March 2013 itself being a 38% decline in dispatches over March 2012, which itself was a 20.7% decline in dispatches over March 2011. Overall, dispatches are down more than 78% as compared to the highs of March 2011. Part of the reason for Ford Figo’s problems is the customer’s bulk migration to the EcoSport. However, even the EcoSport dispatches have moderated in recent months and we wonder if there are market headwinds that Ford is facing.

Dispatches were also down severely for Toyota. The company suffered a 72% fall in Liva dispatches over previous March. Part of Toyota’s problems is the labor unrest at its plant, which is affecting production.

Renault has perhaps found the absolute bottom with the Pulse and dispatches were down only 9.8% from previous March. However, with a base of only 488 cars, it seems that Renault is content in mostly peddling the Duster in the Indian market.

Special Issue – When will Trucks hit rock bottom?

It’s a question that the industry – wincing in pain with two crushing blows to it toes – is asking in despair. Buses & Medium & Heavy Truck (B&M&HCV) sales dispatches in March 2014 were down 20.8% over March 2013. This is when March 2013 was already a 25.93% decline over March 2012, which itself was a 1.12% fall from March 2012. This makes March 2014 the weakest March ever since 2009.

Strong fall in B&M&HCVs continues
Strong fall in B&M&HCVs continues

The B&M&HCV segment has often witnessed years of strong growth followed by two years of simultaneous strong decline. However, in the case of the present downturn, it appears that the market is entering a third year of downturn. March 2014 is the 25th straight month (not counting May 2013, which was an anomaly) of decline in dispatches for B&M&HCVs. More than it being the 25th month, it is the ferocity of decline, even after eight straight quarters of falling sales, which worries us.

If the downtrend persists for one more quarter, we would be firmly in a triple dip. Such a phenomenon is a first-of-its-kind and may indicate a slower than usual recovery in the market. Mostly, the B&M&HCV market recovers sharply after every double dip and hits new highs. This time the recovery may be slower and new highs would not be formed before 2017. In a survey (continuing) of major fleet operators, the preliminary indicators pointed towards fleet operators reluctance to replace or expand their fleets in the next six months. Operators cited reasons ranging from low utilisation levels, stagnant freightage values, low used truck values, political instability and continuously high interest rates as the main reasons for their reluctance to buy new vehicles.

Are we heading for an unprecedented triple dip?
Are we heading for an unprecedented triple dip?

Looking at the data with greater granularity, dispatches in the Buses segment were down 25.91%. Sales dispatches in March 2013 were themselves down 5.6% from March 2012 levels and dispatches in March 2014 were the lowest since March 2009. On an absolute basis, Buses dispatches are down 30% from their peak of March 2012.

Dispatches in the Medium Truck segment were down 36.5% over last March. This is when March 2013 was down 15.2% over March 2012, which itself was down 9.2% over March 2011. March 2014 dispatches were even lower than dispatches in March 2009, the downturn effectively wiping out half a decade of growth. From the peak of March 2011, dispatches in March 2014 have more than halved. The continuing slowdown in the MCV segment is worrying, as Ashok Leyland and Eicher have just released new models and platforms in the market.

The Heavy Trucks with Rigid rear axles segment witnessed a 13.16% fall in dispatches. This is after March 2013 was already down 39.3% over March 2012. In fact, dispatches in March 2014 were the lowest since March 2010 and the market is down 47.31% since its peak of March 2012. A large chunk of the Heavy Trucks with Rigid Axles are used in the Mining, construction and infrastructure applications like Concrete Mixers and Dumpers. A continuous slowdown in the infrastructure segment has kept operators from replacing their fleets.

The one major silver lining in the entire B&M&HCV segment was the Heavy Trucks – Articulated Axles (Artics or Tractor-Trailers) segment. These trucks are highway going and the health of their sales dispatches is an indicator of the health of the overall economy. Dispatches in the segment were up 49.6% from March 2013. However, it must be considered that the entire segment was all of 2922 units in dispatches in the month and data quality may be compromised by just one significant order. Also March 2013 was a terribly low base and was down 41.8% from March 2012, which itself was down 8.75% from March 2011. Overall, even with the significant jump in dispatches, numbers were still lower than even March 2010 numbers. Nevertheless, it would be interesting if the jump in the segment is sustained over the next quarter to signal a turnaround.

For now the night is still cold and dark.



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