India Passenger Vehicle Sales Analysis: May 2016

Improving economic indicators leading to a better investment environment has augured well for the passenger vehicle industry as according to the sales numbers announced by the country’s top automakers today, the industry clocked yet another month of double-digit growth in May 2016.

The top three automakers – Maruti Suzuki, Hyundai Motor and Mahindra & Mahindra – all posted a near- 10% rise in PV sales during the month, and carried the momentum from a strong start to the fiscal in April.

India’s economy advanced to 7.9% in the March quarter from 7.2% in the December 2015 quarter, thus indicating a clear improvement in economic sentiment. This, along with a barrage of new model launches by manufacturers, recently seems to have provided a fillip to passenger vehicle sales in the country.

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% growth on year. Growth was led by the UV segment, whose sales have jumped 144.2% to 13,596 units (May 2015: 5,567). No prizes for guessing who the big contributor is. Clearly, the Vitara Brezza 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. The Vitara Brezza, which sold 5,563 units in March 2016 and 7,832 units in April, is expected to have sold higher units in May.

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% (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% 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% (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%.

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 by 10.4 percent with sales of 41,351 units continuing 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%.

Out of these, the company’s mainstay UV segment sold a total of 18,648 vehicles with a YoY growth of 10%.

Commenting on the auto sales performance for May 2016, Pravin Shah, President & Chief Executive (Automotive), M&M, said, “We are happy to have achieved  an overall growth (PV+CV) of 11% during May 2016, in the midst of regulatory uncertainties. 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. The continuing growth in our MHCV and export volumes is also encouraging. Further the upcoming e-Verito launch, on June 2, will add a new and innovative product to our EV range.” 

Shah further 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%. While the sales of passenger cars in May 2016 was lower by 15% at 7,787 units, compared to 9,176 nos., in May 2015, Tata Motors’ hatchback sales grew by 7% at 5,643 units. Meanwhile, UV sales declined by 58% 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% increase in sales to 12,200 units in May 2016, after several months of consecutive decline.

According to the company, the Innova Crysta, 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.

In terms of exports, the Japanese carmaker shipped a total of 990 units of the Etios sedan in May 2016, which took the total sales in the month to 13,190 units. The company had sold 11,511 units in the domestic market and exported 1,448 units of the Etios series in May 2015. Consequently, it registered a 2% overall growth in sales in May 2016 when compared to the corresponding period last year.

Among other models, the Etios and the Liva registered 6% and 9% growth respectively in May 2016 when compared to the same period last year. According to the company, the premium class Camry also continued its growth run, of which 90% was contributed by the Camry Hybrid. The Camry’s sales grew 63% when compared to the corresponding period last year.

Commenting on the monthly sales, N Raja, director and senior vice-president, Sales & Marketing - Toyota Kirloskar Motor, said, "We launched the Innova Crysta this month and have received an overwhelming response from our customers. The Innova Crysta has already received close to 20,000 booking orders within a month of its launch. However, 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 did 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.

In sync with the past few months, the Kwid is likely to be the growth driver for the company in May as well. However, due to the lack of individual sales figures, it is difficult to gauge the contribution of the other models like the recently launched refreshed Duster.

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% (May 2015: 4,726), while exports grew to 11,499 vehicles compared to 6,988 units as in the same month last year.

“This is a proof point of our relentless focus on transforming the Ford brand in India with transparency and attentiveness at its core. Besides our fresh and dynamic product portfolio, Ford is focused on enriching value of ownership for Indian customers through transparent initiatives like Service Price Promise and Parts Pricing Calculator which are now available on our website,” said  Anurag Mehrotra, executive director, Marketing, Sales, and Service at Ford India.

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% of Central government and 20% 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 entry level hatchback segment.  

“This would make almost three million employees a target segment for Maruti. Assuming a 10% conversion rate, it would mean sales of an extra Rs 300,000 per annum translating into extra 10% growth for the industry,” the agency estimates.

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.