India Passenger Vehicle Sales Analysis: June 2016

The country’s largest carmaker Maruti Suzuki India, which commands a near 50% share in the domestic PV market, dragged the overall industry sales in June as it reported its lowest monthly sales in two years.

Maruti Suzuki India reported 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 was estimated to have seen a production loss of 13,000 units. Given the current high demand for Maruti cars 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, Rtiz, 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.

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 on 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 the company’s LCV sales growing by 14% and its passenger cars growing by 22%.

The company posted a 22% sales growth in passenger vehicles over last year, led by strong demand for the recently launched Tiago. Tata Motors recorded a sale of 12,509 units in June 2016 compared to 10,281 units sold in June 2015. Sales of passenger cars in June 2016 was higher by 37% at 11,705 units, compared to 8,516 units in June 2015, as hatchback sales grew by over a 100% at 7,126 units in June 2016, due to strong demand for the Tiago. Cumulative sales growth of all passenger vehicles in the domestic market, for the fiscal was flat at 31,621 units. 

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 is 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 road side 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. 

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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