Now We’re Screwed – Monthly Sales Analysis April 2014

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An atheist explorer in the deepest Amazon forest suddenly finds himself surrounded by a group of bloodthirsty cannibals. Upon surveying the situation, he says quietly to himself, “Oh God, I’m screwed this time!”

Suddenly there is a ray of light from Heaven and a voice booms out, “No, you are not screwed. All you have to do is pick up that rock at your feet and bash the head of the chief cannibal standing in front of you”.

So the explorer picks up the rock and proceeds to bash the chief unconscious.

As he stands over the body, breathing heavily and surrounded by hundreds of cannibals with looks of shock and anger on their faces, God’s voice booms out again and says, “OK…..Now You’re screwed”.

R Gopalakrishnan, Executive Director – Tata Sons started his note with this joke while speaking at this analyst’s B-school convocation. That was many years back and I vaguely remember that he wanted it to highlight the uncertainties of business and life.

Or maybe he just wanted to wake us up.

Any which way, the joke is quite representative of the mess that group company Tata Motors is in.

Tata Motors – Can things get even worse?

At many times in the past, Tata Motors has looked around and found itself in a depressing mess. “Now we’re screwed” is a thought that may have crossed the collective minds of the company’s senior management multiple times in the past. However, every time, Tata Motors has managed to land into an even more spectacular mess.

As of now, the company is facing an unprecedented triple dip in the Buses & Medium & Heavy Commercial Vehicles (B&M&HCV) segment, the company’s traditional breadwinner. Further, the LCV segment too is witnessing a slowdown and even the evergreen Ace micro-truck has come under pressure in recent months, with sales dispatches declined by 50% in April 2014.

It is the perfect storm for Tata Motors as it witnesses a collapse in every segment in the domestic market

It is the perfect storm for Tata Motors as it witnesses a collapse in every segment in the domestic market (Click to enlarge)

 

The local passenger vehicle operations fare even worse as existing platforms continue witnessing declining sales dispatch volumes while new launches like the Aria fail to even take off. The promising Nano has failed to take-off even after numerous attempts, variants and paint jobs, and to add to the woes, the company’s marketing head has now put in his papers just weeks prior to the launch of two of the most important models in recent times.

“ We are screwed and things cannot get worse than this.”

Except that they have. A look at April dispatches puts Tata Motors at 10055 units in the Passenger Vehicles segment, a fall of 42.3% from April 2013 dispatches of 17416 units. To put it in perspective, this is the worst April in last six years for the company in terms of passenger vehicle dispatches.

Signs of weakness were visible all around the Tata portfolio. The Nano, which had sustained sales around 2500 units per month since the launch of the Twist edition, crashed again to about 1000 units. The Indica platform dispatches fell below the 4500-unit mark. In April 2013, the same had sold close to 8000 units.

(Kindly note that a detailed analysis of Tata Motors domestic business issues would be run in a few weeks.)

Problems also plague the Manza, which saw dispatches of 131 units and the same is the case with the Aria crossover, which had 79 dispatches. Ironically, this represented a 70% improvement in Manza dispatches and a 558% jump in Aria numbers, so poor have the sales for both products been.

Sales also dipped yet again in the M&HCV segment with Tata managing to dispatch 7305 units, a decline of 15.8% over April 2013. The Buses segment too saw a year-on-year decline of 15.5% with dispatches of only 1120 units as against 1325 units in April last year. The company also saw a 46% decline in LCV / ICV sales with only 4038 dispatches in April 2014 as against 7451 units dispatched in April 2013.

However, the biggest setback in recent months has been the slowdown in the Ace micro truck sales. In April 2014, Tata dispatched only 8152 units of the small truck as against 12726 units dispatched in April 2013. The Ace’s passenger variants – Magic soft-top and Venture hardtop van – suffered similar fates in the month. Magic dispatches were down 55% to 2614 units, from 5846 units in last April. Meanwhile, 88 Venture vans were shipped, a 34% decline from 133 units dispatched in April 2013.

To its credit, Tata Motors was not the only (though it was the worst case) manufacturer suffering a sales decline in April 2014, nearly everyone did.

The Segments

Passenger Car dispatches were down 10.15% on a year-on-year basis to 135433 units against 150737 units dispatched in April last year. These numbers made the month the worst April since 2009. Sales were quite weak at the bottom end of the market as the Mini-segment witnessed a 26% decline in dispatches to 35271 units over April 2013 dispatches of 47800 units.

Utility Vehicles could maintain a slight edge over last year numbers as dispatches totaled 40680 units, a 0.27% improvement from April 2013 dispatches of 40570 units. The improvement in numbers was primarily driven by the increment from the EcoSport and Terrano.

Vehicle Sales dipped across almost all segments, leaving only UVs standing

Vehicle Sales dipped across almost all segments, leaving only UVs standing (click to enlarge)

The Vans segment suffered a 27% decline in numbers, as dispatches were down to 12428 units, from 17034 units in April 2013. The decline in Vans sales was primarily driven by a 57% fall in soft-top van sales. These Vans are primarily used as rural shared taxis and a fall in dispatches is an indicator of the weakness in the rural economy as well as operators and small entrepreneurs delaying purchases due to high interest rates and economic uncertainties. Again, the sales dispatches in the Vans segment were the worst since April 2009.

Overall, Passenger Vehicles dispatches were down 9.5% to 188541 units in April 2014, from 208341 units in April 2013. This made the dispatch numbers the worst since April 2010.

And the Sub-segments

You know things are not good when you launch a much awaited volume model at a compelling price and new, path-breaking technology, and all it does is to slowdown the fall in sales. There is no volume gain and no market share gain. This is what is happening with Maruti in the collective Mini / Micro / Compact segment. The company’s dispatched 49702 cars in the segments, a 12% fall from 56462 units dispatched in April 2013.

Maruti’s pain becomes even bitter as rival Hyundai has managed to deliver growth this month. Thanks to increased volumes from the Xcent small sedan and the Grand i10, Hyundai managed to dispatch 31449 units, a 16.3% jump from 27038 units dispatched in April 2013. Fiat and Nissan were the only other carmakers that delivered growth in the last month. Fiat sales dispatches of the Punto were up 115% to 547 units, from 255 units in April 2013, while Nissan volumes improved 916% due to the volumes of the newly launched Datsun Go.

Major fall in the Mini segment indicates all is not well at the bottom of the pyramid

Major fall in the Mini segment indicates all is not well at the bottom of the pyramid (Click to enlarge)

All the other OEMs suffered big declines in the bottom most segments of the Indian car market. The surprising of the lot was Honda which dispatched only 3933 units of the Brio / Amaze models, down 39.3% from April 2013 sales dispatches of 6480 units. Volkswagen dispatched only 1975 Polo cars; effectively the third dip April for the company in a row since the highs of 3755 units in 2010.

Similarly, Renault dispatches in the bottom of the market were 94 units, a 74% fall from April 2013. Ford Figo sales were also down 46% to 1812 units, from 3336 units in April 2013. This is the fourth April in a row (after April 2009) that Figo volumes have declined.

Problems are also increasing for Toyota as the company managed to dispatch only 1152 Livas in April 2-14, down 37% from April 2013 dispatches of 1832 units and a 47% decline from April 2012 dispatches of 2157 units.

GM too suffered a 25% decline in sales and dispatched only 2216 units in the Micro / Mini / Compact segments in April 2014.

Fiat salvaged itself a bit, continuing its mini recovery that started since its separation from Tata Motors. The company dispatched 547 Puntos in April 2014, up 115% from previous April.

In the Super Compact / Midsize segments, overall volumes were down 14.8% to 31774 units. Volumes were helped by Honda’s New City, even as other carmakers suffered declines in the segment. Maruti-Suzuki DZire has finally peaked and the company dispatched only 16008 units in April 2014, down 17.7% from previous year volumes of 19446 units.

Ford’s re-pricing of the Classic has worked and the company seems to be attracting more buyers. Dispatches in April 2014 were up 33% at 809 units, from 608 units in April 2013.

However, GM, Nissan, Renault and Skoda all suffered major fall in the segment. At 39 units dispatched in April 2014, the Renault Scala is fast losing relevance. Scala dispatches have fallen 92% since last April. The same is the fate of the badge-sister Nissan Sunny, which only had 295 units dispatched. For the Sunny, this was a 66% fall from April 2013 and a 85% fall from April 2012 dispatches of 2012 units.

Skoda, Fiat and Volkswagen save their skin, everyone else sinks

Skoda, Fiat and Volkswagen save their skin, everyone else sinks (Click to enlarge)

The segments above the Midsize segment are hardly relevant today in terms of actual numbers being sold. Looking at April 2014 dispatch volumes, Fiat is making a smart recovery with the Linea as dispatches were up 234% at 281 units, from 84 units in April last year. Skoda too registered a 16.8% increase in dispatches, owing to the new Octavia’s momentum while Volkswagen has managed to maintain its sales volumes from last year. Apart from them, every other manufacturer suffered a fall in sales as the whole segment saw a 21.4% decline in dispatch volumes.

The Premium segment sales dispatches were down 14.8% from previous year with only the Superb redeeming itself somewhat on the back of a recent facelift. Out of the 161 units of total dispatches in April 2014 in the Premium segment, the Superb accounted for 105 units.

Utility Vehicles – Maintaining Ground

The UV segment managed to maintain its numbers in April 2014 over previous year, riding on the incremental volumes of the Nissan Terrano and Ford EcoSport. Ford dispatched 4013 EcoSport small SUVs and exported a slightly higher number. EcoSport numbers seem to be stabilizing at about 4000 units as Ford is battling to balance domestic and export demand.

Renault has a lost a significant chunk of the Duster sales as dispatches were down 41% from April 2013 levels. However, Renault-Nissan group is recouping most of the lost Duster sales with its badge-mate, the Nissan Terrano.

Crash of the Micro-trucks

One of the notable data points in April 2014 was the crash in the micro-truck segment. Overall sales dispatches in the micro-truck segment (below 2T GVW, Tata Ace segment) were down 39% to 9965 units, from 16307 units in April 2013. Again, like soft-top vans, the Ace and its brethren are primarily used by small businesses. A collapse in the segment makes us squeamish about the health of the small business and rural economies.

 

 

 

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