INDIA SALES ANALYSIS: MAY 2016

Even as the country’s top PV manufacturers – Maruti Suzuki, Hyundai Motor and Mahindra & Mahindra – all posted a near-10 percent rise in sales during May, the overall industry grew in single digits as the shift in demand from entry level hatchbacks towards more premium UVs and a slowing rural economy kept a check on growth. 

SIAM data for May 2016 reveals a lacklustre performance by the passenger car and vans segment, which is down by 0.86 percent (158,996 units) and 3.44 percent (13,851 units) respectively. Like April, the UV segment continued to outperform and posted a growth of 35.88 percent (58,793 units) in May. Total passenger vehicle sales rose by 6.26 per cent to 231,640 units as against 217,984 units in the year-ago period.

According to SIAM’s Director General, Vishnu Mathur, this is not a matter of concern as the dip is marginal. Moreover, the car and utility vehicle segments have almost merged together and many of the car sales are getting clubbed under the UV category. So differentiating of sales has become difficult.

However, the continuing decline in the rural markets remains an area of concern. As per the official data, motorcycle sales (which are heavily reliant on rural demand) have shown a decline – 3.34 percent in May 2016 (985,158 units) from a growth of 16.24 percent in April 2016 (1,024,926 units), thus capping the overall auto sales growth in the month to 9.89 percent (1,850,764 units).

Mathur is optimistic that the uptick in rural India will commence from August-September 2016 along with the onset of the monsoon season. The Met department has forecast a good monsoon and that is expected to stave off some of the worries of the rural markets in the second half of the year.

Passenger Vehicle sales

Maruti Suzuki India, the largest carmaker in the country, sold a total of 113,162 units in the domestic market, which is a 10.6 percent growth on year. Growth was led by the UV segment, whose sales have jumped 144.2 percent to 13,596 units (May 2015: 5,567). No prizes for guessing who the big contributor is. Clearly, the VitaraBrezza is making its presence felt here and is proving to be a buffer in the face of slowing sales for the company’s entry-level cars.

The compact SUV – Maruti’s first such product – is seeing massive demand and currently has a waiting period of 7-9 months, depending on the variant.

Meanwhile, sales of the entry level duo of the Alto and Wagon R have been under pressure for some time now. In May, they sold a total of 33,105 units, down 5.6 percent (May 2015: 35,062). It’s also thanks to the Baleno – the other much-in-demand Maruti with a long waiting period – that sales of the five Maruti compact cars (Swift, Ritz, Celerio, Baleno and Dzire) rose 11 percent last month to 46,554 (May 2015: 41,926). The premium Ciaz sedan also continues to see demand with sales of 5,188 units, up 3.5 percent (May 2015: 5,012). The Maruti vans – Omni and the Eeco – also contributed to the incremental volumes with sales of 12,164 units (May 2015: 11,602).

Hyundai Motor India also saw sales climb for yet another month, with steady demand for models like the Creta, Elite i20 and Grand i10. The carmaker sold a total of 41,351 units during the month representing a growth of 10.4 percent.

Commenting on the carmaker’s May 2016 sales, Rakesh Srivastava, senior vice-president (Sales and Marketing), Hyundai Motor India, said, “In a market seeing challenges of stressed rural demand and uncertainty on diesel vehicles, Hyundai volumes grew to continue the build up of positive growth momentum on the strengths of strong performance of the Creta, Elite i20 and Grand i10, with heightened expectations of increase in demand on the predictions of good monsoon.”

Mahindra & Mahindra’s passenger vehicles segment (which includes UVs, cars and vans) sold 19,635 units in May 2016 as against 18,135 units during May 2015, representing a growth of 8 percent.Out of these, the company’s mainstay UV segment sold a total of 18,648 vehicles with a YoY growth of 10 percent.

Commenting on the sales performance and future outlook, Pravin Shah, president & chief executive (Automotive), M&M, said, “The favourable monsoon projections will definitely lead to improved buyer sentiment that would likely bring buoyancy in overall demand across all segments of the automotive industry. Going forward, we expect that our wider product portfolio will drive our growth.”

Shah added, “We hope that regulatory interventions will settle at the earliest to enable the auto industry to operate in a stable regime and contribute to the planned growth of India’s GDP.”

Tata Motors posted yet another decline in passenger vehicle sales despite witnessing growth in the hatchback segment, as the sharp fall in its UV sales continued.

The company sold 8,617 PVs in the month, registering a fall of 23 percent. While the sales of passenger cars in May 2016 was lower by 15 percent at 7,787 units, compared to 9,176 nos., in May 2015, Tata Motors’ hatchback sales grew by 7 percent at 5,643 units. Meanwhile, UV sales declined by 58 percent at 830 units, compared to 1,962 units sold in last year.

The fall in UV sales for the company is largely on the back of an ageing product portfolio, but with new vehicles like the Nexon compact SUV and the Hexa SUV due for launch this fiscal, it would hope for a turnaround in the segment.

Meanwhile, the initial response to the Tiago has been better-than-expected and the company has received over 20,000 bookings and 140,000 enquiries. Given the rising demand, Tata Motors is planning to ramp up production of the car at its Sanand plant soon, by introducing a second shift.

Thanks to an overwhelming response to the recently launched Innova Crysta, Toyota Kirloskar Motor (TKM) reported its first month of growth in domestic sales in 2016, as the company registered a 6 percent increase in despatches to 12,200 units in May 2016, after several months of consecutive decline.

According to the company, the InnovaCrysta, which was launched in May, has already received close to 20,000 bookings and currently commands a waiting period of 2-4 months across India.

Commenting on the performance and outlook for the company, N Raja, director and senior vice-president, Sales & Marketing - Toyota Kirloskar Motor, said, "We keenly look forward to a favourable decision on the ban of registration of diesel vehicles above 2000cc in NCR which has been affecting the legitimate interests of TKM and its dealers in NCR. We along with a couple of other industry players are the only ones affected. This has been affecting our sales over the last six months and we are hopeful that the Supreme Court will consider our pleadings and lift the ban."

Honda Cars India, on the other hand, saw yet another month of decline and registered domestic sales of 9,954 units in May 2016 against 13,431 units in the corresponding month last year. The company’s City sedan and Jazz hatchback were the bestsellers with sales of 3,305 and 2,473 units respectively. The recently launched BR-V started off on a strong note with 2,344 units, but could not manage to script a turnaround for the company given the underwhelming performance of the Amaze (1,409 units) and the Brio (228 units). The Mobilio (126 units) and the CR-V (69 units) made up the rest of the numbers.

Renault India registered yet another month of strong year-on-year growth, albeit on a smaller base, with monthly domestic sales of 8,343 units in May 2016 (May 2015: 3,601). However, the company seems to have lost some momentum from the previous month when it recorded its best-ever sales of 12,426 units in the country. A reason for lower month-on-month sales could be the week-long maintenance shutdown at the company’s production facility in May.

The company is on track for its expansion plans and aims to increase its sales outlets to 240 by the end of 2016, from 210 at present. It also recently forayed into the pre-owned car business with the launch of Renault Selection to provide a platform for customers interested in buying, selling and exchanging certified pre-owned cars of all brands.

Ford India’s domestic sales in May 2016 grew to 5,780 vehicles, up 22 percent (May 2015: 4,726), while exports grew to 11,499 vehicles compared to 6,988 units as in the same month last year.

The road ahead

With positives like growing spending power, easy availability of finances and more or less benign fuel prices, the PV industry seems to have a near conducive growth environment. However, the uncertainties surrounding the use of diesel engines and the looming judicial axe in the form of bans has led to automakers go back to the drawing board.

Manufacturers like Toyota, Mahindra & Mahindra and Tata Motors are re-looking at their investments and reinventing their product portfolios for the country. Sudden regulatory changes could prove to be dissuasive and would result in capping the short-term growth potential of the industry.

Meanwhile, the implementation of the Seventh Pay Commission could prove to be something to cheer for the industry in the near term. According to Swiss investment banking firm Credit Suisse, “The 7th Pay Commission recommendations would result in almost 25 percent of Central government and 20 percent of State government employees falling in the category of eligible car buyers, i.e., with a monthly pay of Rs 40,000.”

The agency believes that among the biggest beneficiaries of this would be market leader Maruti Suzuki and Hyundai Motor India, which specialise in the entry level hatchback segment.

In other words, the full implementation of the Seventh Pay Commission could lead to a spurt in demand for the ailing small car segment, which has been under-performing for the last few months. However, it has to be noted that this stimulus could only be short-term, considering the general trend of Indian buyers now moving towards more feature-laden crossovers and compact cars.

Also read: India auto sales in May in slow growth mode, rural markets likely to pick up by August

Two-Wheeler Sales

Last month, all the major two-wheeler OEMs posted sound increases in their sales numbers, but tepid motorcycle sales weighed on overall growth.

Royal Enfield, India Yamaha, TVS Motor Company and Honda Motorcycle & Scooter India (HMSI) were the biggest gainers and registered double-digit growth.

India’s largest two-wheeler manufacturer in terms of volumes, Hero MotoCorp, sold 583,117 units, 2.32 percent up year on year (May 2015: 569,876). However, despite the positive trend, the company’s sales were subdued when compared to April 2016 numbers.

The company cites “suppressed market demand, heavy retail offtake in April on account of the marriage season and regional festivals in different parts of the country,” as the key reasons for its lukewarm performance in May.

“However, a good monsoon after two consecutive years of sub-normal rains could lead to a change in sentiments in the rural markets, which may lead to a positive turn-around in the industry in the second half of this fiscal,” said Hero MotoCorp in an official statement.

Meanwhile, HMSI, the second largest two-wheeler player in the domestic market, was one of the biggest gainers In May with a year-on-year sales increase of 17.69 percent. The company sold 415,902 units in May 2016 (May 2015: 353,381), which is its highest since the festive season sales in October 2015. The soaring figures were powered by the company’s flagship product, the Activa. The company’s automatic scooter sales for the month grew 25 percent to 268,423 units, while motorcycle sales amounted to 147,479 units. Scooters now contribute close to 65 percent of the HMSI’s domestic sales. In May, the two-wheeler manufacturer introduced refreshed versions of its Dio and Activa-i models. It also inaugurated five new dealerships in Varanasi, Ghaziabad, Bareilly, Karimnagar and Nandyal, taking the total number of Best Deal outlets in India to 89.

Further, Bajaj Auto has recorded total sales (including exports) of 307,344 units during May 2016 as against 301,862 units sold in May last year, up by 1.82 percent YoY.

TVS Motor Company was another big gainer in May 2016 as its domestic sales rose 17.9 percent, increasing from 175,533 units in May 2015 to 206,886 units in May 2016. Scooter sales grew by 20.2 percent increasing from 54,426 units in May 2015 to 65,434 units in May 2016, while its motorcycle sales were up by 5.6 percent, rising from 91,344 units in May 2015 to 96,485 units in May 2016.

With Rs 400 crore earmarked for capacity expansion in FY2017, the company is expected to continue registering upbeat sales.

India Yamaha Motor recorded a 36 percent growth in domestic sales (including exports to Nepal) in May 2016 selling 62,748 units as against 46,084 units sold last May. The addition of the Saluto RX commuter bike and the Cygnus Ray-ZR scooter is the key driver of sales for the month. The company believes its focus on expansion in Tier 2 and 3 cities has also been instrumental in boosting sales.

Commenting on the company’s sales, Roy Kurian, vice-president – Sales & Marketing, Yamaha Motor India Sales, said, “Yamaha’s consistent sales of FZ series bikes are ensuring a reasonable presence in the deluxe segment. Now with the launch of the Saluto RX, Yamaha has managed to make inroads in the commuter segment with cost benefits. With the Fascino riding a high wave in the market, the Cygnus Ray-ZR will strengthen the overall volume of scooter sales for Yamaha. We are very optimistic about our customer-centric activities to propel sales growth in the coming months.”

Royal Enfield maintained its consistent YoY sales growth with sales of 47,232 units in May 2016, 36.45 percent more than the 34,615 units it sold in May last year. Market analysts closely tracking the company say that the management is looking at producing around 60,000 units by the exiting months of the ongoing fiscal. This means that the company’s monthly production could touch or even grow beyond the 60,000-unit mark by February – March 2017. Royal Enfield’s single-cylinder, 346cc models such as Classic 350, Bullet 350 Twinspark and Bullet Electra Twinspark are the top sellers in the domestic market.

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Commercial Vehicle sales

The commercial vehicle sector is slowly but surely reaping the gains of the improving Indian economy and is recording month on month growth. Both the medium and heavy commercial vehicle (M&HCV) and light commercial vehicle segments have recorded positive sales albeit the growth rate of M&HCVs have slowed down.  

Thanks to replacement demand, pre-buying and improving the viability of fleet operators, the CV sector will continue to see double-digit growth in FY16-17. Following the strong recovery in the M&HCV segment last year, growth has now started filtering down to the LCV market, which is likely to post 10-12% growth this fiscal. Driving this growth will be the higher demand for LCV trucks. Similarly, with overall recovery and new orders placed by SRTUs (under the JNNURM programme), the bus segment is expected to register growth of 10-12% during FY 2017.  

How the OEMs fared

Tata Motors’ total sales of 27,026 units last month were up 14% year on year (May 2015: at 23,680 units). While its M&HCV sales grew 23% at 13,312 units (May 2015: 10,788), its LCV numbers rose 6% with sales of 13,714 units (May 2015: 12,892). 

Ashok Leyland’s overall sales were up 6% YoY with total sales of 9,875 units in May 2016 (May 2015: 9,290 units). After recording consistent double-digit growth, its M&HCV numbers have slowed down and posted 8% growth at 7,469 units (May 2015: 6,888 units). LCV sales were flat at 2,406 units. (May 2015: 2,402 units).

Mahindra & Mahindra’s M&HCVs registered strong growth up by 46%, selling 501 units last month (May 2015: 343 units). While the below-3.5T GVW products recorded 15% growth with sales of 11,852 units (May 2015: 10,349 units), those in the above-3.5T GVW segment saw 6% year-on-year growth with sales of 756 units (May 2015: 715 units).

VE Commercial Vehicles maintained its strong performance by growing 30.1% with sales of 4,704 units in the domestic market (May 2015: 3,617 units).