India Auto Inc off to a good start in FY2019 but rising fuel prices a concern

by Mayank Dhingra, Kiran Bajad & Amit Panday 02 May 2018


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For every athlete, it’s a good feeling when he/she makes a good start off the starting block but what’s also important is how he/she maintains speed throughout the race. It’s a similar outlook for the Indian automobile industry.

In FY2019, with domestic market sales of nearly 25 million units (24,972,788), the industry notched 14.22 percent year-on-year growth. And exports added another 4 million units (4,041,777), up 16.12% YoY. Made-in-India production also hit a high of 29 million units, up 14.78 percent YoY.

With some OEMs across the PV, CV and two-wheeler segments announcing their sales numbers for April 2018, it’s apparent that overall sales last month will be robust. So, while the start of the fiscal year 2019 will be good, what’s important is that the momentum be carried across throughout the next 11 months of the fiscal.   

At the outset, things still look good, what with consumer sentiment up, forecast of a normal monsoon, uptick in rural India demand and return of buoyancy to the important CV market. But the sales speedbreaker could be the already high and rising fuel prices. Petrol at Rs 82.48 a litre and diesel at Rs 70.20 a litre (Mumbai prices) as of May 2 are burning a hole in motorists’ wallets.

For India, which is the world’s third largest oil importer, the sharp spike in global crude oil prices over the past fortnight will adversely impact the automobile industry, albeit not immediately. For the PV segment, urban citizens’ growing preference for shared mobility is already having an impact on sales as most metros have reported YoY declines in sales. OEMs though hope to make up the difference and more from new sales in Tier 3 and 4 cities.

HOW THE PASSENGER VEHICLE SEGMENT FARED IN APRIL
Maruti Suzuki India: 
The country’s leading carmaker registered cumulative sales of 163,434 units in April 2018, its best performance ever in a month, posting notable growth of 13.4 percent (april 2017: 144,492). The significant volumes imply that the bellwether of the Indian passenger vehicle segment sold an average of 5,447 every day.

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The growth, however, could primarily be attributed to surging sales of its range of compact cars, which include the Swift, Ignis, Celerio, Baleno and the Dzire. The collective sales of these models stood at 83,834 units, a substantial jump of 31.8 percent over the year-ago sales of 63,584 units.

The recently introduced new Swift hatchback is the one leading the charge, having received a strong market response and selling 17,291 units in its maiden month in February (February 2017: 12,328 / +40%). Its compact sedan sibling, the Dzire, which was launched in May 2017, is also one of the major growth drivers in the compact segment for the company.

Hyundai Motor India: The No 2 player by sales volumes, Hyundai Motor India sold 46,735 units in April, growing 4.41 percent (April 2017: 44,758). The Korean carmaker has been seeing consistent demand for its two hatchbacks – the Grand i10 and the i20 – and also for the Hyundai Creta SUV, all of which have been making their way into the Top 10 best-selling PVs’ list month on month over the last fiscal. While the Creta has surpassed sales of 250,000 units in the domestic market since its launch in March 2015, the company recently introduced the updated avatar of the i20, giving it a slew of cosmetic tweaks, and a new CVT option in its petrol avatar.

Honda Cars India: Honda Cars India started off the new fiscal with an average performance, selling 9,143 units, down a substantial 37 percent (April 2017: 14,480). The primary reason for the significant drop in sales is zero dealer dispatches of its Amaze compact sedan last month. The car is due for a generational change and the second-generation model is to be launched on May 16.

According to Rajesh Goel, SVP and director, Sales & Marketing, Honda Cars India, “Honda Cars India’s sales in April are as per plan. We are preparing for the launch of the all-new Amaze this month and did not have stocks of the outgoing Amaze. Besides, the City and WR-V which were launched last year had witnessed new model sales spurt around this time. Both these reasons are reflected in lower wholesales in April this year as compared to last year. It’s a temporary phenomenon. There is a very strong interest from the market for the all-new Amaze and we are confident that overall sales will be robust after the introduction of the new model.”

While the City sedan was the best-seller for Honda last month with 3,366 units, the Jazz-based WR-V crossover went home to 2,949 buyers, with the Jazz itself selling 1,747 units in the month. What would be interesting to see in the coming months is the performance of the City as arch rival Toyota Kirloskar Motor has just introduced its competent Yaris sedan, pitched directly against Honda's segment best-seller.

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Tata Motors: The homegrown carmaker sold 17,235 units last month, a substantial increment of 34 percent over year-ago sales of 12,827 units. While it saw continued demand for the Tiago hatchback, Tata Motors also witnessed a three-fold growth in its UV sales based on the strong performance of the Nexon compact SUV. In FY2018, barely within seven months of its launch, the snazzy Nexon has sold a total of 27,747 units, comprising for 53.47 percent of Tata Motors' total UV sales of 51,891 units. The company is now set to introduce AMT variants in both the petrol and diesel versions of the crossover.

Mahindra & Mahindra: UV specialist Mahindra & Mahindra (M&M) recorded good growth with its PV sales notching 21,927 units, up 13 percent (April 2017: 19,325).

According to Rajan Wadhera, president, Automotive Sector, M&M, "After a good FY2018, we have had a strong start to FY2019, having registered a good overall growth of 22 percent for April 2018. We have also seen an encouraging response to our recent launch of the plush new XUV500.”

Ford India: The American carmaker has reported domestic market sales of 7,428 units, remaining consistent in performance to April 2017, when it had sold 7,618 vehicles.

According to Anurag Mehrotra, president and managing director, Ford India, “Increasing inflation trajectory which might weigh on customer’s access and cost to credit, coupled with increasing crude prices, could lead to passenger vehicle industry growing at low single digits so far this year.”

Toyota Kirloskar Motor: The Bangalore-based carmaker’s FY2019 has begun with sales of 13,037 units, which marks flat growth (April 2017: 12,964). While the Innova Crysta MPV and the Fortuner SUV have been its top grossers month-on-month, the company, for the first time ventured into the C-segment space in India, introducing its new Yaris sedan.

According to N Raja, deputy managing director, Toyota Kirloskar Motor, “Last month was quite eventful for us with the bookings opening for the Toyota Yaris. The Yaris is loaded with first-in- segment features and offers a great value proposition in terms of best-in-segment quality, comfort safety and performance.”
Clearly, the PV segment is riding high on the novelty and charm of some of the new models being introduced in the market, which are keeping the sales charts ticking for their manufacturers. However, with fuel prices burning a hole in the wallet, fuel efficiency is certainly going to be one of the key parameters while narrowing down on a new car purchase in these times of inflation, where there seems to be no cap whatsoever. Also, FY2018 could be the year where safety takes a paramount spot in buyers’ consideration, given that manufacturers are also gearing up for the upcoming crash norms, which are set to encompass all new models by October 2019.

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COMMERCIAL VEHICLE SALES STAY IN FAST LANE
Like the PV segment, the commercial vehicle (CV) industry is firing on all cylinders on the sales front. OEM-reported numbers for April indicate handsome growth albeit on a low year-ago base of April 2017 when BS IV emission norms kicked in. All the major OEMs, including Tata Motors, Ashok Leyland, VE Commercial Vehicles and Mahindra & Mahindra have doubled their M&HCV sales last month. 

As is known, April 2017 saw CV sales plunge to a new low due to pre-buying in March and customer delaying their buying decisions, expecting price increases for BS IV trucks. Also, fleet operators were awaiting further clarity on GST in expectation of prices moderating.  

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In April 2018, the government has mopped up a record Rs 100,000-plus crore of revenue from GST, the highest since the landmark tax reform was introduced in July 2017. One of the reasons for the higher collection is the successful introduction of the e-way bill for transporters which has helped  drive efficiency, better compliance and speedier shipments of goods. 

Tata Motors overall CV sales 36,276 units, an increase of 126 percent (April 2017: 16,017). The startling rise is due to the lower base of last year owing to the BS III to BS IV transition when sales were affected as there was huge pre-buying in March 2017.

According to Tata Motors, “The growth in April 2018 was on the back of various macroeconomic factors like investment in infrastructure development, improved industrial activities, and robust demand in private consumption-led sectors. Factors like lower interest rates, inflation under control are boosting the economy thereby leading to continuing demand.”

For Tata, its M&HCV trucks continued to see growth momentum with sales of 14,028 units, a YoY increase by 317 percent. This is on the back of the government’s focus on infrastructure development, road construction, building of irrigation facilities and housing projects across the country. Additionally, the restrictions on overloading in Utter Pradesh, Rajasthan and Delhi continue to bolster the demand for higher-tonnage vehicles. Various sectors like auto carriers, 3PL players, cement, steel, and oil tankers are also driving growth. 

Sales of intermediate LCV trucks was at 3,229 units up by 94 percent over  last April on the back of new product launches, growth in the e-commerce segment and increasing rural consumption due to farm loan waivers, rising rural wages and increased minimum support price (MSP) for crops.

Tata Motors’ SCV cargo carriers and pickups segment sold a total of 14,620 units, up by 84 percent over last year. With the hub-and-spoke model developing, small vehicles are in demand for last-mile connectivity across both the rural and urban markets. The need for inter-city and intra-city trips, narrow village roads and long highway hauls carrying small loads is driving demand for SCVs.

Meanwhile, on the buses front, Tata sold 4,399 units, a 46 percent increase over last April.  This was led by the robust demand for school buses with the onset of the annual school season.

Ashok Leyland sales zoomed to 12,677, which is 79 percent growth (April 2017: 7,090).  Its M&HCV numbers almost doubled to 8,968 units, up 98 percent (April 2017: 4,532) while LCV sales grew by a strong 45 percent YoY with 3,709 units sold (April 2017: 2,558).

For Mahindra & Mahindra, overall CV sale was up by 26 percent to 18,963 units in the month (April 2017: 15,060). M&HCV sales are up by 225 percent with sales of 904 units (April 2017: 278). The below-3.5T GVW segment has grown by 22 percent YoY, selling 17,495 units (April 2017: 14,360), while those in the above-3.5T GVW segment registered growth of 34 percent with sales of 564 units (April 2017: 422). 

VE Commercial Vehicles continues its strong growth with sales of 3389 units up by 31.5 percent. (April 2017: 2,578 units).

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TWO-WHEELER OEMS OFF TO AN IMPRESSIVE START
April 2018 appears to be a good month for two-wheeler manufacturers. The sales performance, as reported by Hero MotoCorp, Honda Motorcycle & Scooter India, TVS Motor Company, Bajaj Auto, Royal Enfield and Suzuki Motorcycle India, indicates that the industry is off to an impressive start to the new financial year.

Off to a good start in the new fiscal, Hero MotoCorp has reported total sales of 694,022 units (including exports) in April, thereby recording a YoY growth of 16.5 percent (April 2017: 595,706).

The company, which claims to maintain its dealership inventory for about four-six weeks currently, had recently introduced three new motorcycle models in the mass commuter segment – 125cc Super Splendor and the 110cc Passion XPro and Passion Pro. The updated models are aimed at boosting monthly sales, and the impact can be seen in the sales of its Passion brand, which recorded some revival in March 2018.

The company plans to launch four new products – two motorcycles in the 200cc class (XPulse and Xtreme 200R) and two scooters in the 125cc category (under Maestro and Duet monikers) – later in FY2019.

Hero MotoCorp’s management expects the growth momentum to continue in the wake of good demand from the rural markets. “The senior officials expect that the two-wheeler industry will go on to record doublep-digit growth in FY2019 too. Hero MotoCorp forecasts its own growth aligned with that of the industry’s in the ongoing fiscal,” analysts told Autocar Professional.

Honda Motorcycle & Scooter India (HMSI), India’s second largest two-wheeler company, has reported sales of 635,811 units in April 2018, its highest ever run in the domestic market for a single month. Notably, Honda has also breached the 600,000 unit mark in its monthly sales for the first time (domestic sales). The company has registered a YoY growth of 15 percent over its April 2017’s performance when it had sold 551,732 units in the domestic market.

Backing overall sales for the company, Honda’s scooters as well as motorcycle portfolios appear to have performed well in April. According to the company, its scooter sales as well as its motorcycle sales breached the 400,000 unit mark and 200,000 unit mark respectively in its monthly sales for the first time. Its scooter sales stood at 423,527 units, up 15 percent YoY, while its motorcycle sales recorded 212,284 units, up 16 percent YoY.

Speaking on his company’s performance in April 2018, Yadvinder Singh Guleria, senior VP (Sales and Marketing), HMSI said, “Honda 2Wheelers India has made a cracker of a start of FY2019 with record breaking sales in April. Last April (2017), Honda crossed the 500,000 units mark for the first time and now, just one year later, we have breached 600,000 units. With accelerating scooterisation of India, Honda has for the first time surpassed the 400,000 units milestone in a single month of scooter sales while motorcycle sale too have crossed the 200,000 units threshold. Exports demand too is stronger than ever before.”

Autocar Professional estimates that Honda’s domestic sales now stand rather close to that of Hero MotoCorp’s for April 2018. Although Hero MotoCorp has not revealed the split in its domestic and export sales at the moment, sources point out that the industry leader leads Honda with only a close margin of about 15,000 units for the last month. If true, this would clearly bother the senior management at Hero MotoCorp to take immediate steps for quick consolidation in the market. On the other hand, Honda is not leaving any stone unturned in closing the gap with Hero MotoCorp. This fight gets interesting with every passing month.

TVS Motor Company, India’s third largest two-wheeler manufacturer, has reported total domestic sales of 241,604 units for April 2018, recording a YoY growth of 17.6 percent. The company’s domestic two-wheeler sales stood at 205,522 units in April 2017.

The company’s motorcycle sales have performed notably well with monthly sales of 131,704 units, up 31.8 percent YoY (April 2017: 99,890 units). It can be understood that this performance is powered by the latest motorcycle launches by the company, particularly the Apache RTR 160 4V, the entry-level model for the Apache brand, which is now seeing lot many activities under its umbrella than ever in its history.

On the other hand, the scooter sales continued to grow with a decent 9.6 percent YoY rate. TVS Motor has recorded total scooter sales of 89,245 units in April 2018 (April 2017: 81,443 units).

Pune-based Bajaj Auto, India’s fourth largest two-wheeler maker, has reported domestic motorcycle sales of 200,742 units in April 2018, up 24 percent YoY. The company had sold 161,930 units in April 2017. Pumping new life in its Pulsar range, the company had silently introduced an updated Pulsar 150, which was once the top selling model in the entire Pulsar range, around the end of March 2018. The updated Pulsar 150 now comes equipped with a bigger front disc brake and a disc brake on the rear wheel too. The company had also recently (in February 2018) added the Avenger 180 to its cruiser bike portfolio with an aim of boosting sales.

Continuing to grow with a healthy double-digit rate, Royal Enfield has reported sales of 74,627 units in April 2018 as against 58,564 units sold in April last year. The company has posted YoY growth of 27 percent.

The company had recently announced capital expenditure of Rs 800 crore for FY2018-19. The capex will majorly cover the expansion of production capacity under phase II at its Vallam Vadagal plant near Chennai along with the focus on the completion of its upcoming technology center in Chennai and development of new products to meet the upcoming regulatory norms. The company says that its annual production capacity in FY2018-19 will be about 950,000 units per annum. It is known that Royal Enfield’s Vallam Vadagal plant is already brimming with full capacity utilization under phase I. The company is also working on further optimizing its productivity at its Oragadam plant.

Suzuki Motorcycle India has reported domestic sales of 52,237 units in April 2018, up a remarkable 43.8 percent YoY. The company had sold 36,307 units in April last year.

Commenting on the performance of his company, Sajeev Rajasekharan, EVP, Suzuki Motorcycle India said, “After recording our most-successful financial year ever in FY 2017-18, it was extremely important for us to sustain this momentum into the new-year as well. We have made a record-breaking start to FY 2018-19 with 43.8 percent growth in April. Buoyed by this positive start, our outlook remains optimistic in pursuit of 7 lakh unit sales domestically, in this financial year. Standing true to our commitment of launching new products every year, we have already launched the ‘Apex Predator – GSX-S750’ in India as a CKD unit, to a fantastic initial response. The upcoming financial year promises to be bigger and better for Suzuki Motorcycle India.”

To cater to the growing demand for its products, the company has increased its all-India footprint to 1057 dealer points, including 512 dealerships. 

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