‘UV’ology – Segment back in action

SUVs & MUVs have picked up pace again and are driving the growth story for the industry this year. The segment has grown a whopping 98% YoY; whereas the overall Auto Industry grew 11%. Significant volumes were added from the offerings of two biggest OEMs of the subcontinent – Maruti (Brezza) & Hyundai (Creta). Surprising is Brezza’s volumes with only Diesel offering as of now! See how the segment has grown –

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Maruti Launched Vitara Brezza in March this year and from the Launch till now company has seen the tremendous success for its first Sub 4 meter SUV. It has become one of the most successful launches – Maruti Suzuki’s first compact SUV has been the best-selling utility vehicle in the first five months of this financial year.

Maruti Suzuki sold 41,484 units of the Vitara Brezza during the April-August duration to grab the Top position in utility vehicle segment.

Only available in diesel so far, whereas others available SUVs which are in competition has both of the Engine options. Creta comes with both engine options, despite the fact that reaching to top position with only diesel engine is really a good job, as we also have seen the shift in diesel and petrol figures due to Market sentiment and Strictness over Diesel Norms, if we analyse its goes against the Brezza, however, Maruti Suzuki is also planning to launch a petrol engine in Brezza to further strengthen its top Position. Also an AMT version is planned shortly.

With sale of 39,088 units Creta has got the 2nd Place, following Innova Crysta (the third best-seller with 35693 Nos). Mahindra sold 22,673 Boleros, this all-time best selling SUV lost numbers from rising competition in this segment and settled on 4th position this time. Let’s see how launch of Bolero power plus will bring additional Numbers to Mahindra?

However, Ford Managed to sell good number of EcoSport and sold 21, 564 units of the EcoSport during April-August 2016, and another Mahindra SUV sealed the sixth position with sales figures of 19,354 units. Statistics is as mentioned:

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Maruti’s Domination Plan

India is the biggest market for Suzuki Motor Corporation (more Suzuki cars are sold in India compared to Japan!). Indian operations remain very crucial to Suzuki’s global growth plan and the company has made some strategic changes that has sustained the dominance of the Japanese carmaker. Maruti’s plan is very simple – target and achieve 50% Market Share in the Indian Passenger Vehicle space. After the sudden entry of global biggies (say VW, Nissan, Renault, etc) it was assumed that Suzuki will have tough times and maintaining the Market Share will be the biggest challenge. However, Maruti stood the test of time and has put in awe the way several actions were taken to protect its turf. Let’s see the latest performance for reference:

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Maruti garnered a Market Share of 46.3% in August’16 and sold nearly 3 times more than the second best OEM (Hyundai)! The reasons for such dominance was:

  • Premium Positioning – NEXA helped Maruti elevate itself as a premium brand and successfully launch Baleno which later emerged as one of the best sellers in premium hatch category. The separate dealership network and focused marketing will enable Maruti launch much premium models in its portfolio.
  • Clever Technology – SHVS (Smart Hybrid Vehicle by Suzuki) / Mild Hybrid is no revolutionary technology. Rather something similar was incorporated by M&M years back in Scorpio (as Micro-Hybrid). But, the use of SHVS allowed Maruti gain tax sops and claim higher mileage as well. SHVS proved to have a dual advantage for the automaker – reduce the price of the models in which it was used and also prove itself as the best fuel efficient model. Ex: Ciaz Diesel’s mileage was 23.92 kmpl and was lower than that of segment leader City Diesel (26 kmpl). With SHVS, the mileage of Ciaz Diesel moved up to 28.09 kmpl!
  • AMT – Automated Manual Transmission went viral in past 15 months (with launch of Celerio AMT) and the acceptance was so high that it was later launched in Wagon-R, Dzire, Alto as well. The adverse traffic conditions in all major cities acted as a catalyst in the change and the intelligently priced AMT worked wonders for Suzuki.
  • Model-wise Focus – Maruti would be the only manufacturer which will have a segment-leading model in almost all segments! Currently Maruti does not have a product only in 2 segments (D-segment Sedan & Premium SUV). Maruti ensures that it studies the Consumer Sentiment very well and launch an offering that’ll be a runaway success! Lets see how well it has bifurcated its presence in various segments –

1 Also see the Top 10 selling cars of August 2016:

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6 out of Top 10 selling cars are from Maruti Suzuki! Obviously it is by design and not default.

  • Taxi Focus – Way before Mahindra’s & Tata’s could ink a deal with the Ola’s & Uber’s – Maruti identified a business opportunity and customized its offerings to suit the needs of the end consumer. A taxi-specific model was introduced in Dzire as Dzire Tour way back in 2012! Currently, Tour contributes to >20% of overall Dzire sales. Owing to the success of Tour concept in Dzire, similar variant was also launched in Ritz as well. Also note that CNG variants of Eeco, Dzire, Omni etc were also launched to tap the segment in Delhi-NCR regions.
  • Focused Market Approach – The Top 11 cities contribute to over 40% of Maruti’s sales. Hence every additional car sold in these cities help Maruti strengthen their presence overall. Market/City wise strategy helps them address the local needs much faster and enhance their sale. Look at how things have shaped up this year in the Top cities for Maruti –
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Source: TOI
  • Service & Spares Availability – It still remains one of the most important factor for the customer’s decision making process. Ease of availability of a Service Centre and low maintenance promise has helped Maruti gain confidence of the Indian Buyer.
  • Economy of Scale – Maruti’s two manufacturing facilities (Gurgaon & Manesar) have a joint production capacity of 14,50,000 units/annum! Such scale has allowed Maruti to negotiate prices with vendors and as a result price its models extremely competitively. It also allows the OEM to dynamically increase the production of the models as per the demand (say Baleno & Brezza).

While we are confident that Maruti will soon have a strong product in D-segment and SUV – we put a word of caution that Maruti needs to bounce back on Customer Satisfaction levels. The cases of poor customer experience in Nexa showrooms and the recent SSI scores are a matter of concern and needs to be addressed on priority. Indian Market is extremely dynamic and only the best will lead (not only survive)!

2016 J.D. Power India Sales Satisfaction Index –

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Analysis – Motorcycle Sales

Over 9.5 Lakh Motorcycles are sold in India every month. While Motorcycles have predominantly been the bigger volume player for Two-Wheeler OEMs; Scooters have caught the fancy of Indian Consumer really well and are giving tough fight to the Motorcycle prospects. Hero’s fortunes in the subcontinent has been laid by the tremendous performance of its Motorcycle offerings.

While we present the report for the current Financial Year, do find the categorization of the segments done for clarity:

  • Commuter / Economy Segment : Includes the entry level 100cc offerings from the respective OEMs
  • Executive / Premium Commuter Segment : Higher priced 100cc/125cc along with entry level 150cc Motorcycles have been included
  • Premium / Sports / Performance Segment : High-end 150cc and above

A look at the Top Performers Segment-wise:

Commuter Segment-

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Executive Segment-

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Premium Segment-

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Summary:

  • Executive Segment is the biggest player amongst all and Hero is the clear leader in this segment with whopping 67% Market Share. Splendor, Passion & Glamour from Hero Moto Corp stand first, second and third in the ranking table. Bajaj’s Vikrant had a promising start, but yet to catch up in terms of numbers. Shine & Dream Neo which were once strong contenders to Hero’s offerings have gradually fizzled out of the race and Honda is currently finding extremely difficult to push these brands in the market.
  • Economy Segment is dominated by 2 products – Hero’s CD Dawn & Bajaj’s CT100. The volumes speak for itself for these models. Platina did extremely well at its launch; however Bajaj wasn’t able to milk the segment to its potential (maybe due to low focus?)
  • While we have one of the highest number of models in the Premium segment – volumes aren’t as high. Though the overall numbers have increased over the years; we still feel this segment should grow to much higher levels. It is also one of the fastest (& most profitable) segment currently! Royal Enfield have scripted their growth story through the segment and the growth looks sustainable as of now. Also to be mentioned is Pulsar’s dominance in the category – and has helped Bajaj to emerge as one of the most profitable OEMs.
  • Special mention on Hero’s Performance – Hero’s offerings have dominated the list in Commuter & Executive segments; but has a shameful plight in Premium category. Though the OEM has showcased a long list of products in the category at the Auto Expo – It’ll have a lot to catch upto in coming times.