INDIA SALES ANALYSIS: JUNE 2016

The last month of Q1 2017 proved to be a challenging one for the PV industry as Maruti Suzuki India, which commands a near-50 percent share in the domestic market, reported its lowest monthly sales in two years.

Overall car sales during the month dipped to 154,237 units from 162,655 units a year ago. Despite a surge of over 35 percent in UV sales, overall PV sales grew by a mere 2.6 percent in June 2016.

Among individual carmakers, Maruti Suzuki India announced domestic sales of 92,133 units in June 2016, a double-digit drop of 10.2% year on year (June 2015: 102,626). This was Maruti’s worst sales performance since June 2014, when it sold 90,093 units in the domestic market.

As is known, the company was adversely impacted in early June due to a fire at its key supplier Subros’ Manesar plant, which led to the suspension of production at Maruti’s plants for close to 10 days which included a maintenance closure.

The company had advanced the regular bi-annual maintenance closure of its plants, earlier scheduled from June 27 to July 2 to June 6 to 11. Consequently, the company is estimated to have seen a production loss of 13,000 units during June. Given the current high demand for Maruti passenger vehicles and the subsequent low inventory levels, the impact was bound to hamper sales during the month. Maruti has said that it expects to recover the production loss during the course of the year.

In the reporting month, Maruti has seen a sales decline for all its segments other than UVs. While the entry level duo of the Alto and Wagon R sold a total of 27,712 units, down 19.3% (June 2015: 34,336), the compact cars – Swift, Ritz, Celerio, Baleno and Dzire – sold a total of 39,971 units, down 12.5% (June 2015: 45,701). Demand for the Ciaz was also down – 2,800 units compared to 3,700 units in June 2015 (-24.3%). Only the UVs – Gypsy, Ertiga, S-Cross, Vitara Brezza) which sold 9,708 units, were in positive territory (75.5%).

For the first quarter of FY2016-17, the company has sold a total of 322,340 units, up 5.4% (June 2015:305,694).  However, exports during the quarter were down 26.7% at 26,103 units. Meanwhile, Maruti says it is gradually stepping up production of the Baleno and Vitara Brezza to service the pending demand for these two models. Both these models command long waiting periods ranging from 6-9 months at present.

Meanwhile, Maruti says it is gradually stepping up production of the Baleno and Vitara Brezza to service the pending demand for these two models. Both these models command long waiting periods ranging from 6-9 months at present.

Hyundai Motor India has reported domestic sales of 39,806 units in June 2016, which translates into a growth of 9.7% over the same month last year when it sold 36,300 units. The carmaker's cumulative total for the reported month stood at 55,713 units, which includes exports of 15,907 units.

Commenting on the June sales Rakesh Srivastava, senior vice president (Sales and Marketing), Hyundai Motor India said, “Hyundai volumes grew by 9.7% with sales of 39,806 units with strong pull performance of volume models the Grand i10, Elite i20 & Creta and on the buildup of positive environment with good beginning of monsoons, the announcement of 7th Pay commission for Central Government Employees.”

The Rs 85,000 crore bonanza that has accrued to the 1 crore central government employees and pensioners will have positive spin-offs for car manufacturers in the automotive industry. A key beneficiary will be Hyundai Motor India that is targeting the 47 lakh central government staffers and over 50 lakh pensioners who are set to gain in terms of a big pay and pension hike ranging between 14.3% to 23.6%.

While not giving any targeted sales figure, a Hyundai spokesperson recently told Autocar Professional that a sum of Rs 7,000 would be the additional discount offered to central government staffers and pensioners under the ‘Pride of India’ scheme. This would be added to the ongoing discounts that are available on Hyundai cars.

The company currently sells 10 car models across segments – Eon, i10, Grand i10, Elite i20, Active i20, Xcent, Verna, Creta, Elantra and Santa Fe. It also exports to around 92 countries across Africa, Middle East, Latin America, Australia and the Asia Pacific. Hyundai Motor India’s sales network comprises 449 dealers and over 1,150 service points across India.

Mahindra & Mahindra’s passenger vehicles division (which includes UVs, Cars and Vans) sold 17,070 units in June 2016 (June 2015: 15,880 units), with a growth of 7% year-on-year.

Speaking of the auto sales performance for June 2016, Pravin Shah, president & chief executive (Automotive), M&M said, “With the advent of a good monsoon, which we are currently witnessing, we hope to see improved sentiments and a buoyancy in demand thereby enhancing rural prosperity. We do hope that the Honourable Supreme Court while taking a decision on diesel vehicles ban in NCR region will take cognizance of all the facts including the role that the automotive industry plays in the country’s industrial growth.”

Thanks to a surge in sales of the recently launched Innova Crysta, Toyota Kirloskar Motor (TKM), which has also been a big sufferer due to the diesel ban in Delhi-NCR, reported sales of 13,502 units in the domestic market. The company registered 29% growth in domestic sales over the corresponding period last year (June 2015: 10,464).  

Meanwhile, the Camry sedan – particularly the Camry Hybrid – also retained its popularity among buyers. In June, TKM says the Camry has clocked more than 30% growth year on year. The Etios model registered 4% growth over June 2015 sales.

Commenting on the monthly sales, N Raja, director and senior VP (Sales & Marketing), TKM said, “The Innova Crysta has received an overwhelming response from customers and it now has a waiting period of 2 to 3 months.”

Despite the ongoing diesel debate in the country, TKM has reposed its faith in the fuel and on June 23, its joint venture company Toyota Industries Engine India opened a new engine production plant in Bengaluru to manufacture high-performance Global Diesel (GD) engines – 1GD-FTV 2.8-litre and 2GD-FTV – 2.4-litre engines for fitment in the Innova Crysta.

Toyota claims these engines are more fuel efficient (+13%) and more powerful too (+47%). TKM, which is among the OEMs badly impacted by the ban on registration of vehicles with 2000cc and above diesel engines in Delhi-NCR, is looking forward to July 11 which is when the apex court is slated to debate the diesel decision. On June 29, the Supreme Court had said that it is open to lifting the ban, subject to the levy of a one-time environment cess.

Tata Motors witnessed YoY growth in certain key segments in June 2016 with its passenger cars growing by 21%.

The company sold a total of 14,973 units in June 2016 as against 12,375 units sold in the same month last year.

Renault India registered a growth of 173% with monthly domestic sales of 11,837 units, thanks to a low base in the corresponding period last year (June 2015: 4,340 units). The company continues to bank upon the Kwid as its largest volume driver, with a major chunk of sales coming from the model every month.

With improving reach in the country, the company is hopeful of posting better sales in the coming months and the seventh pay commission settlement is likely to provide a fillip to the carmaker as well.

From the current network strength of more than 210 sales points, Renault aims to increase its reach to 270 facilities by the end of 2016.

In addition to this, the company says it is also foraying into other relevant automotive business services in India. These include Renault Selection, its pre-owned car business; Renault Finance, offering customised finance solutions; Renault Assured, enabling cashless accident repairs at all Renault dealer workshops with faster claim settlement; and Renault Secure, which covers roadside assistance and extended warranty.

Honda Cars India has reported domestic sales of 11,407 units in June 2016, down 38% year on year (June 2015: 18,380). Cumulative April-June 2016 sales at 31,847 units are down 29% year on year (April-June 2015: 44,447). The model-wise sales break-up is City (3,581), BR-V (3,064), Jazz (2,593), Amaze (1,617), Brio (359), Mobilio (140) and CR-V (53).

Meanwhile, Ford India’s domestic sales in the month doubled to 9,469 vehicles (June 2015: 4,527 units), while exports nearly tripling to 10,285 vehicles compared to 3,452 units last year.

“The recent announcements of Seventh Pay Commission, along with the prediction of normal monsoon and scrappage policy are keeping the industry optimistic about future growth. At Ford, we have continued to maintain a strong growth momentum thanks to our transparent and industry first service initiatives like Service Price Promise and Parts Calculator. We are equally gratified by the customer response to our freshest product portfolio on offer and will soon strengthen it with the introduction of iconic Ford Mustang,” commented Anurag Mehrotra, executive director, Marketing, Sales and Service at Ford India. 

The road ahead

Going forward, the implementation of the recommendations of the Seventh Pay Commission and the decision by the Supreme Court on the ongoing diesel ban in Delhi-NCR will have a large bearing on the country’s PV sales in the near future. 

On June 29, the Supreme Court said that it is open to lifting the ban on the registration of diesel-engined passenger cars and SUVs of 2000cc and above in the Delhi-NCR region, subject to the levy of a one-time environment cess. 

The Sixth Pay Commission, implemented in August 2008, helped drive a 10-fold increase in Maruti’s sales to government employees from FY08 to FY12.

According to industry reports, the recommendations of the Seventh Pay Commission, instituted by the government of India, are likely to result in almost 25 percent of central government and 20 percent of state government employees becoming eligible car buyers, i.e., monthly pay of Rs 40,000 a month. This would make almost 3 million employees a target segment for entry level small and hatchback cars and utility vehicles.

Assuming a 10 percent conversion rate, it would mean sales of an extra 300,000 units per annum which in turn could translate into an extra 10 percent growth for the domestic passenger car industry. It is likely that the Seventh Pay Commission’s recommendations will be implemented from August 2016 onwards.

Similarly, if the Supreme Court decides to lift the ban on sales of diesel vehicles with engines over 2,000cc, luxury carmakers and UV manufacturers could see a fresh surge in demand and thus a boost in sales as well. The apex Court has scheduled the next hearing in the matter on July 11.

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India’s two-wheeler industry saw growing sales in June as the onset of monsoon in various parts of the country improved buyer sentiment, especially in rural and semi-urban areas, which contribute to a major chunk of two-wheeler demand. 

The big four – Hero MotoCorp, Honda Motorcycle & Scooter India (HMSI), TVS Motor Company and Bajaj Auto – who define the direction of the industry registered growth in their June 2016 sales.

The largest two-wheeler manufacturer, Hero MotoCorp registered total sales of 549,533 units last month, crawling up by 1.32 percent YoY (June 2015: 542,362 units). The company, which continues to sell the Splendor as its leading brand of commuter motorcycles, has beaten HMSI in the 125cc executive commuter motorcycle segment, thanks to the soaring sales of its Glamour model variants.

Incoming Splendor iSmart 110 to boost sales

Hero MotoCorp’s bestselling two-wheeler brand (Splendor) is soon expected to add an all-new model to its line-up – Splendor iSmart 110. This is the first motorcycle to have been fully developed by the engineers at the company. The model was first unveiled at the 2016 Auto Expo by Dr Markus Braunsperger, an ex-BMW Group veteran now working with Hero MotoCorp as the chief technology officer.

According to SIAM data, the Splendor brand alone contributes close to 40 percent of more to Hero MotoCorp’s overall two-wheeler sales. The existing Splendor iSmart, which uses company’s conventional 97.2cc, single-cylinder engine, fetches monthly sales of more than 25,000 units on an average.

The incoming iSmart model will also bring two-wheeler start-stop technology in the 110cc motorcycle segment, which is estimated to give a good boost to sales under the Splendor brand.

In the scooter segment as well, Hero’s latest models – the Duet and Maestro Edge – have received a good response from the domestic market. The Duet has been faring well, particularly in the family scooter space and has been garnering an average monthly sale in the range of 30,000-35,000 units – a healthy number given Honda’s dominance in this space.

Honda biggest gainer in growing market

Honda Motorcycle & Scooter India (HMSI), the second largest-selling two-wheeler manufacturing company in the domestic market, recorded sales of 408,141 units in June 2016. It grew 23 percent YoY for the month (June 2015: 331,797). According to the company, its automatic scooter sales, led by the Activa brand, grew by 21 percent YoY and stood at 265,439 units for June 2016. Its motorcycle sales, led by CB Shine SP, CD 110 Dream DX, Livo and CB Hornet 160R, stood at 142,702 units, up by 27 percent YoY.

In an attempt to fight back in the 125cc commuter segment, HMSI, which has been dealing with capacity constraints for its new CB Shine SP model, is now planning to boost the same at its Bangalore facility in the coming months. Speaking to Autocar Professional recently, YS Guleria, senior vice-president, sales & marketing, HMSI,said: “We had production capacity restrictions for the CB Shine models as we had to prioritise other models from our assembly lines. We are aware of our new position in the 125cc motorcycle segment and we plan to boost our capacity for the new CB Shine SP model at the Bangalore plant soon.”

It is known that Hero’s Glamour and Honda’s CB Shine models have been fiercely competing for the top spot in their segment, and lately the former outsells the latter in the domestic market.

Honda has recently started rolling out scooters on the second assembly line at its scooter-only Gujarat plant, doubling the production capacity to 1.2 million units per year at the site. According to the company management, while this is expected to bring down the order backlog of Activa scooters from an existing 25,000 units to below 20,000 units, the manufacturing capacity at the fourth plant is expected to saturate as early as September-October 2016.

“Honda’s growth in June 2016 stood at 23 percent, which is nearly three times that of the 8 percent domestic and export (2W) industry growth. What makes this more significant is that alone Honda added 78,576 new units in June 2016 and contributed an overwhelming 65 percent to total industry’s new volume addition,” quotes the company press note.

The third largest two-wheeler maker, TVS Motor Company clocked sales of 206,784 units in the domestic market for June 2016, up by 16.38 percent YoY (June 2015: 177,687 units). The sales grew on the back of surging demand for its best-selling scooter model 110cc Jupiter (family segment) and the newly launched 110cc commuter motorcycle Victor.

The Jupiter scooter, which has recently achieved landmark sales of 1 million units in 30 months of its launch, sells an average of 43,000-45,000 units per month, and is the second best-selling scooter in the industry, after the Honda Activa. The company also has been doing well in its moped sales, which is an affordable offering for workers in the rural and semi-urban markets. TVS Motor sells an average of more than 70,000 units of XL Super moped every month.

Bajaj Auto bets on sales momentum for FY2017

Bajaj Auto has reported domestic sales of 168,625 motorcycles for June 2016, up by 9.07 percent YoY (June 2015: 154,596 units). The company, which has the CT100 and Pulsar brand as its bestselling models in the domestic market, is witnessing a surge in the sales of its V15 model which is estimated to be selling an average of over 30,000 units a month. Its Avenger brand has also helped the company grow in its month-on-month sales.

Bajaj Auto has also recently reduced the price of its Pulsar 135LS to pitch the model directly against Hero MotoCorp’s and Honda’s best sellers in the 125cc motorcycle segment. While this is expected to boost the sales of its smallest Pulsar model on one side, reports suggest that the company is also working on new models in the 110cc-125cc city-commuter segment to boost sales in the coming months.

On the premium side, it plans to commercially roll out the biggest model in the Pulsar family, which is expected to be based on the KTM-derived single-cylinder, 375cc engine. The incoming model, named Pulsar CS 400 and first unveiled by the company at 2014 Auto Expo as a concept, will further enhance Bajaj Auto’s position at the premium end.

Sources aware of new decisions taken by the senior management indicate that the company may have postponed the new model launches under its KTM brand for 2017.

“On an overall market momentum front, the company is understood to be looking at banking on the monsoons and the potential of its recently launched models including the V15 and the Avengers. The big Pulsar is expected to draw crowds around the festive season, and Bajaj Auto may or may not launch a facelift / new model in the commuter category this year. The new incoming models under the KTM brand seem to be postponed for 2017 as of now. It’s a clever strategy to not open up all cards in quick succession,” revealed a source, requesting anonymity.

June a good month for Yamaha, Royal Enfield

India Yamaha Motor has reported total domestic sales of 67,203 units (including Nepal territory) for June 2016, up by a healthy 30.66 percent YoY. The company had posted sales of 51,432 units in June 2015. The growth comes on the back of persistent dealership penetration across the country along with timely roll out of new models and facelifts.

The company has recently rolled out the 110cc Saluto RX commuter motorcycle along with an all-new variant of its existing 113cc Ray scooter (Ray-ZR) and a front disc brake version of its family scooter – Alpha.

Meanwhile, its existing bestsellers – Fascino scooter and 150cc FZ series – continue to contribute to overall sales. The company has set itself a target of establishing 3,000 touch-points within the ongoing year. It has an existing pan-India network of 2,200 dealerships and sales and service centres.

Commenting on the company’s performance for June 2016, Roy Kurian, vice-president, sales & marketing, Yamaha Motor India Sales said, “In the first half of 2016, Yamaha etched a remarkable growth trend along with the introduction of new two-wheelers for urban onlookers and non-urban commuters. The new Cygnus Ray-ZR and Saluto RX along with the Fascino, FZ series and R series is ready to take on the market and Yamaha is spot on as it caters to various needs of Indian two-wheeler buyers. Yamaha will also continue to focus on customer-centric activities.”

Continuing with its strong market performance, Royal Enfield posted sales of 49,060 units during June 2016, growing by 34.05 percent YoY. It had clocked sales of 36,597 units in June last year. The company, which has recently tied up with e-commerce player, Flipkart, to boost its merchandise and riding gear sales, is understood to be ramping up the monthly production capacity of its recently launched adventure touring model, the single-cylinder, 411cc, Himalayan.

Autocar Professional estimates that Royal Enfield has sold more than 1,800 units of the Himalayan, which was launched around mid-March 2016 with a phase-wise retail strategy. Market experts say that the company has been successful in garnering early sales of this new model.

Boosting its R&D capabilities, the company has earmarked Rs 600 crore for new product development along with production capacities. In a recent press note, Siddhartha Lal, managing director and CEO, Eicher Motors, had said: “Royal Enfield has been investing in building strong foundations across all areas of its business. We will be investing Rs 600 crore towards product development, setting up of the two technical centres, in Leicestershire, UK and Chennai, India, enhancing our manufacturing capacity and market development activities across geographies.”

The two-wheeler OEMs have been able to carry forward their sales momentum and with the industry remains optimistic with the onset of monsoons and the festive season. 

India CV sales in June remain a mixed bag for OEMs

Commercial vehicle sales in June 2016 remain a mixed bag for OEMs. Of the companies which revealed their domestic sales numbers today,

Ashok Leyland, the second largest player in India, has recorded single-digit growth in the month. Mahindra & Mahindra registered growth across segments, its HCVs posting strong 29 percent albeit on a lower base. The company’s small CVs, where it typically gets larger volumes, grew in single digits. VE Commercial Vehicles continued with its double-digit growth thanks to introducing new M&HCVs.

While the overall CV sector is expected to post nearly 10-12% growth in FY2016-17, rising diesel prices and increased truck rentals remain a concern for the short-term. The market is still being driven largely by replacement demand, as also the government’s focus on infrastructure by clearing large road construction projects which has stimulated demand in heavy tippers. An increase in heavy goods transportation has also helped generate demand for heavy duty trucks and with the monsoon underway, expect an uptick in rural India in the coming months for small CVs.

Tata Motors’ total sales of 26,164 units last month were up 2%, (June 2015: 25,542 units). Its M&HCV sales were down 11% at 10,147 units (June 2015: 11,450) but its LCV sales rose 14% year on year, selling 16,017 units (June 2015: 14,092). 

Ashok Leyland’s overall sales were up 7% YoY with total sales of 11,108 units in June 2016 (June 2015: 10,429 units). Its M&HCVs posted 8% growth at 8,685 units (June 2015: 8,016 units). LCV sales were flat at 2,423 units (June 2015: 2,413 units).

Mahindra & Mahindra’s M&HCVs recorded double-digit growth of 28%, selling 517 units last month (June 2015: 404 units). While the below-3.5T GVW products saw 4% growth with sales of 11,955 units (June 2015: 11,507 units), those in the above-3.5T GVW segment posted strong 29% year-on-year growth with sales of 1,068 units (June 2015: 826 units).

VE Commercial Vehicles maintained its strong double-digit growth with 20.3% with sales of 4,256 units in the domestic market (June 2015: 3,537 units).

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