Mid-SUV Segment is the most sought after segment in 2019!

Yes! While 2 products have already been launched in the segment in 2019; many more cars are scheduled to be launched. The cars which have launched in the segment since Jan’19 are –

  • Tata Harrier : Launched on 23rd Jan’19
  • Nissan Kicks : Launched on 22nd Jan’19

Both Harrier & Kicks have been eagerly awaited since the announcement was done by their respective OEMs. Both the models had a vital role to play for ensuring their OEMs growth in this year. Unfortunately as per our assessment both the models had a slow start and we were expecting much better sales. Although Harrier has sold consistently more numbers than its counterparts XUV500 & Compass; the sales should have been >3k units to realize the hype it had created. We anticipate that Tata should slowly build on the model and increase the sales in coming months. On Nissan’s front; it should be disappointing that Kicks couldn’t even cross 1k units/month while the segment best seller is easily crossing 10k units/mth. Kicks in particular isn’t a bad car (neither is Captur); but Nissan’s lowering brand equity and diminishing dealer network has played the spoilsport for the model.



MG, Kia & Citroen are all now eyeing the segment. Creta volumes has been a benchmark and all would attempt to create a formidable option in the segment. Who will succeed and how; only time shall tell.

Indian Passenger Vehicle Export Analysis FY19

Dispatch of overall passenger vehicles to foreign shores from India witnessed a degrowth of -9.9% in financial year 2019 (Apr’18-Mar’19). 6,73,630 passenger vehicles were sent off India between Apr 2018 to Mar 2019. That is lesser by 9.9 per cent compared to 7,47,826 passenger vehicle exported during FY18.

The top five passenger vehicle exporters (Ford, Hyundai, Maruti Suzuki, General Motors & Volkswagen India), contributed near to 85 per cent of the total passenger vehicle exports from India in FY19. While the top three PV exporters contributed over 64 per cent to the total exports.

  • Ford retained its top spot by a thin margin from Hyundai. The overall exports for Ford fell a hefty -11.3% and 1,62,801 units were exported.
  • Hyundai saw a healthy growth in exports of 5.3% in FY19 and was just marginally short of becoming No.1 exporter.
  • GM overtook VW to become the No.4 exporter in FY19! With only 1 model in exports (Beat); GM is doing a fairly good job.
  • VW & Nissan which were efficiently utilizing their plant capacities; seems to be offtrack as of now. Both registered a double digit degrowth of -30.5% & -15% respectively.




Modelwise Export Volumes – 

Passenger Vehicles Production Statistics – FY19

We have been getting continuous requests on the Production Statistics for the Passenger Vehicle Industry. We are happy to share the same in this report.

India has seen a tremendous influx of automotive manufacturing facilities since 2000 and has also made it a significant production hub for the global automakers. The cost competitiveness has enabled India to encourage OEMs to set up their plants to not only cater to the domestic market; but even exports as well. The option is so lucrative that General Motors even though has exited the Indian Market; still continues to export the Beat from the Talegaon plant in Maharashtra.

The investment trend still continues and OEMs are expected to invest over $8-10 billion (Rs 51,600-64,500 crore) in India over the next three-four years to set up factories in the sub-continent. It shall expand production base in a market that is set to become the third-largest for passenger vehicles by the end of the decade!

Source: ET

FY20 shall probably see 3 new OEMs stepping into the Indian market and set up their manufacturing units (Kia, MG & Citroen).



The passenger vehicles industry currently has a production capacity of more than 55 Lakh, according to industry sources. Near to 40 Lakh units of Passenger Vehicles were manufactured in the previous financial year (FY19). The OEM-wise production statistics is as shown –

Owing to the dip in the domestic sales; the overall production too saw a decline and degrew -0.2% in FY19 v/s FY18. However; the biggest gainers were Tata & Honda who registered a double digit growth in FY19.



We also have tried to collate the model-wise production statistics for clarity –

Luxury Car Market Potential in India

Background:

Global performance of Luxury Car has been on a high in 2018, but in India last year was a challenging one. The Retail Volumes of the major luxury car manufacturers for the year 2018 is as shown (Source: Autocar) –

Developed Markets: Luxury Cars, Volumes & Contribution into Total Vehicle Sales:  

In developed markets, Luxury vehicles typically account for around 5-6 percent of the overall market.

For eg: In USA, True Blue Luxury Brands (Mercedes, BMW, Tesla, Volvo, Land rover, Porsche, Mini, Jaguar) – 11.13 lakh cars sold out of the Total Vehicle Sales 1.72 crores – 6.37%. Even the premium cars from Ford, Subaru, Honda, Toyota & Kia stable included in the overall calculation – the approximate penetration should be looked at 8%.

India & its potential:

True Blue Luxury vehicle Sales in India in 2018 stood at 40,688 nos.; while the Total Vehicle Sales should be approximately at 34.5 lakh units (yet to be declared by SIAM). i.e, a Luxury vehicle penetration of 1.2%. Even today the macroeconomic forces, Elections is playing on Customers Minds is slowing down demand. We are hopeful that the Overall Market alongside with the Luxury Car grows atleast 15% post elections.



Feedbacks from CEO’s – Luxury car Market:

“We are satisfied with our sales performance in 2018 despite facing strong macroeconomic headwinds in H2 (second half), resulting in low consumer sentiment that posed significant sales challenges. We, however, made a strong comeback in the Q4 period (October-December) and were able to achieve a year-on-year growth,” said Martin Schwenk, MD and CEO, Mercedes-Benz India.

“2018 was surely a challenging one for the auto industry in India, especially in the second half of the year. The luxury segment was under pressure owing to financial market development, changing customer sentiment and changes in tax policies. We faced some unforeseen business challenges during the year, which led to reduced deliveries for 2018,” said Rahil Ansari, Head, Audi India.

“The auto industry faced strong headwinds in 2018, especially in the second half with tight liquidity conditions, increased upfront insurance costs and increased lending rates. Despite that, the growth of Jaguar Land Rover in India has been very encouraging,” said Rohit Suri, president and MD, JLR India.

OUTLOOK FOR 2019:

Cautiously Optimistic is the Word for 2019…

Year 2018 Review – Figures in value terms (₹)

Highest revenue generating cars (Estimate)

  • Super successful Maruti Dzire, alone, roughly makes revenue equivalent to whole of Toyota in India
  • Still, Toyota is making big bucks with Innova and Fortuner, which also make up for the goof-up like Etios and Yaris
  • Looking at Ford Ecosport and Tata Nexon vs Honda City and Maruti Ciaz – it certainly makes more sense to put product development money behind crossover/SUV, rather than full size sedan




Estimated revenue generated by each product (Crore ₹)





2018 Average Price Tag (Estimate) – Signifies the positioning of OEM in Indian market

**Average Ex-Showroom price takes variation of fuel and variant mix into account

Methodology

Snippets

  • Average price tag of cars sold in India is around 7.7 Lakh ₹
  • Tata with rich product pipeline is certainly going to see improvement in coming years
  • Nissan-Renault-Datsun has slipped in lower price band which is certainly not going to help them much in the future
  • Honda once had premium brand image in India, has now significantly lost much of its sheen because of high volume-low price driven growth strategy and over usage of Brio platform extension
  • One product wonder company – Ford, was helped by Ecosport and Endeavour to earn better overall price tag, ironically, also due to non-performance of cars with lesser price tag (Figo & Aspire)
  • Mahindra – XUV 500 and Scorpio has pulled the tag upwards of 10 lakh ₹ mark, with known future product pipeline they will remain there
  • With high value products, Toyota certainly has an edge over others
  • Skoda and Jeep’s high value products certainly give them good foothold in Indian market, even with lower volume




  • Indian buyers are certainly moving up in premium price ladder, gradually
  • Investment in future products to serve bottom of pyramid may prove to be futile (best example Tata Nano), especially considering tightening emission and safety norms in the country




Dealer Value Throughput from New Car Sales (Crore ₹ – Based on average ex-showroom price)

Methodology

We tried here to understand sustainability of current OEM dealerships based on value throughput. These figures just illustrate a very high level view. Interpretation of these figures needs some understanding as below.

  • These figures just show estimated arithmetic average at OEM level
  • Actual dealership revenue will be in range of 2%-7% of these figures, based on margin offered by the OEM on different product(s), and type of retail format
  • Based on volume throughput, revenue and profitability of dealership may show large variation from these figures
  • Dealership location (Urban/Semi-Urban/Rural) is key determinant of actual volume throughput
  • Dealership located in high economic activity zone will have higher throughput despite the tier rating of the city/town or political status (Capital of State), for illustration, towns in Punjab like – Amritsar, Ludhiana etc will have higher consumption than the capital cities like Ranchi, Bhubaneswar etc.




Snippets

  • Toyota dealers certainly make most money due to high value products sold in large volume
  • With rich product pipeline Tata’s dealership financial condition may improve over time
  • Despite low volume, high value of products still make financial sense for Jeep and Skoda’s dealer
  • Nissan-Renault alliance’s dealership certainly looks in big financial trouble
  • Moreover, their existing car park (cars sold earlier) is not big enough for sustenance through after sales service business
  • And it is a vicious circle : Low realization at dealership >  Poor service quality > Unhappy customers >  Bad word of mouth > Reluctant new buyers > Low sales > Repeat
  • To break this cycle, at some point, OEM need to infuse capital in dealership for sustenance till new competitive products comes in
  • Though it is too early to judge Kicks market performance, but given its price and competitors it faces, it is certainly not going to bring much respite for the dealers
  • They certainly need to bring in next gen Micra and large SUV like XTrail or Pathfinder, quickly
  • Else they will end up like Chevrolet, with export only business in India
  • Datsun as a low cost- low priced product line strategy certainly looks like flawed one
  • Somebody at the group certainly misread the Indian market (Toyota did the same with Etios)
  • With Indian customer moving up the premium price ladder gradually, that is apparent in the second graph from the beginning of article, so, Datsun brand as a whole may just meet the fate of Tata Nano
  • Wondering how they could afford their new Brand ambassador Aamir Khan! (Celebrity endorsement cost is nearly 10% of Datsun’s 2018 revenue)

(The article is written by Rohan Rishi. You can connect with him at emailrohanrishi@gmail.com)