2019 Passenger Vehicles Market Analysis – YTD & Q3

Prolonged recession in passenger vehicle industry, started in later half of 2018 due to several headwinds, like, fuel price hike, interest rate hike, insurance price hike, election results uncertainty, has now turned for the worse, due to financial sector crisis and overall demand-consumption slowdown.

2019 by far, has been worst year for PV industry.

Compare to Q1 & Q2, Q3 usually remains a lean season owing to monsoon. But due to financial and lending sector crisis, Q3 2019 has been in terrible shape.

All the progress made by the industry since 2014 has been completely reversed, for now.





Manufacturers

Every other manufacturer is suffering due to downturn, including luxury car makers. Some have to undergo little less pain, due to new product launches lined up for launch in 2019.

Body style

  • MUV : has shown some growth in otherwise struggling market condition
  • SUV : off- late it is also struggling
  • Hatchback : worse than industry
  • Sedan : unarguably in worse situation

MUV Segment is still growing

Volume change over 2018

  • Bigger, next-gen Eritga, with more powerful engine, has a very strong value proposition
  • What is also helping Ertiga and XL6, is clever price positioning in sedan’s territory





Is BS6 anxiety leading to slow down?

BS6 emission norms will come into effect from 1st April 2020, post that manufacturers cannot produce or sell BS4 compliant cars in India.

This also led to anxiety among the potential buyers, as what will happen if they buy BS4 cars now, and, Government or Judicial body, through another regulation may ban the usage in, say, next 10 or 15 years. This might have led them to defer their purchase decision.

Though some also consider this as a major factor of slowdown.

However, reality looks little different though. New entrant – MG, still has BS4 cars on sale in India as per media report.

Source : Autocar 4th Jul 2019 12:50 pm

https://www.autocarindia.com/car-news/bs6-compliant-mg-hector-to-be-introduced-in-january-2020-413320

Despite having BS4 engine, every month, MG is able to sell more Hectors. It is largely due to very aggressive pricing, making it a great value for money offering. So new entrant instead of expanding the segment size, has eaten into competitor’s pie.

Moreover, post BS6 implementation, every manufacturer will raise the price due to additional hardware, software and development cost of BS6 engine. Due to price elasticity of demand, it will adversely impact the growth, further.



Real reason

Indian economy is largely struggling with overall consumption-demand slowdown. This is clearly reflecting in quarterly GDP growth rate, which has nosedived since Q2 2018. Below illustration shows how PV growth rate follows the cues from GDP growth rate.

Amidst a slowdown in economy, consumers are spending on need-based purchase and are mostly holding back on discretionary spending. New car purchase (depreciating-asset) being a discretionary spend, is suffering too. In challenging economy, need-based car buyers may also head to used-car market, for right bargain.

Given the current state of manufacturing sector, Q3 GDP growth data will not be that good either. Recent Corporate tax rate cut may help companies to grow their bottom-line (profit) but may not help much with top-line (revenue).

Excess profitability may not restart investment cycle because there is less demand. Fiscal stimulus on supply side may not revitalize demand cycle.

What is more worrying, is India losing its status of fast growing major economy. Global factors and trade-war has impacted many other global economies, but Indian economy is facing worse, than one can imagine.

Data Source: https://tradingeconomics.com/ (04.09.2019)

India growth story was, and has always been about the growing middle class and the consumption. To put it in right perspective, it is always about reaching to China’s per capita income level, as India and China have similar population size.

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

H1 Market Share Analysis – Indian Auto Industry



  • H1 FY20 (Apr’19-Sep’19) v/s H1 FY19 (Apr’18-Sep’18) is considered in the aforementioned table for analysis
  • The Indian Auto Industry degrew by -23% and was led by the fall in sales of the market leader Maruti Suzuki. Maruti’s volumes fell by -27% in H1 FY20 v/s H1 FY19. Maruti also registered the highest Market Share drop! Maruti’s Market Share fell by -2.6%!
  • Maruti’s loss was Hyundai’s gain. Currently Hyundai is experiencing a all time high Market Share and a big share of the success is attributed to its biggest launch of the year ‘Venue’. Venue has sold 42,681 since launch and has contributed to 21% of Hyundai’s volume in past 5 months. Hyundai was able to reduce the degrowth and grew its market share by 2.6%.
  • Mahindra too took help of the new launch XUV300 to fight the adverse market situation and grew its Market Share by 1% in H1 FY20. It also established itself as a clear No.3 OEM by having a huge margin with the 4th ranked Toyota.
  • Toyota was able to place itself in the fourth spot clearly due to Glanza. Maruti sourced Glanza has sold 11,320 units in past 6 months and has contributed nearly to 18% of Toyota India’s volumes in H1 FY20.
  • Tata is now pushed to 5th rank in the OEM ranking table. Tata’s focus towards to retails and reducing dealer inventory has led to loss of volumes and Market Share. Tata has the second highest fall in Market Share (post Maruti) and almost 1.5% of its market share was eroded in H1Fy20.
  • Kia has made a strong entry and was able to gain market share of 1.1% with only 2 month volumes taken into consideration!

Statewise Car Sales India – FY19

Sales Statistics of the States, Zone-wise:

  • 17,41,234 cars have been sold in the first six months of FY19; and 16,30,997 were sold in last six months of FY19! Usually the sales in last 6 months is higher; but owing to lower consumer sentiments Kerala floods led to the downward trend. Even the festive season couldn’t better the decelerating trend.
  • West Zone has emerged as the Top Zone and is significantly ahead than the North & South Zone which have been placed No.2 & No.3 respectively. Do note that South Zone was pushed to No.3 while it was placed in second position in H1 FY19 (Source).
  • The Zonewise Toppers are as mentioned: Maharashtra tops West Zone; Kerala for South; Uttar Pradesh for North & West Bengal for East.




Top Selling States Ranking:

  • Top 5 states contribute to 42.1% of national sales and Top 10 states contribute 69%!

Recession in Indian Passenger Car Industry

Recession is defined as negative economic growth for two consecutive quarters. Most unfortunately, Indian passenger car industry is now going through a prolonged recession. Such recession has had happened in past as well. All recessions were due to poor consumer sentiments, arising due to few common factors :

  • All were triggered by rise in global crude oil price (2008, 2011, 2013 & 2018) & subsequent retail fuel price hike
  • Mostly in General Election run-up phase (linked to incumbent Government’s Performance)
  • Economic (GDP) growth slowdown either due to global or internal financial shock

But in most situations, they were contained by government’s fiscal and/or central bank’s monetary action, except 2013 one, which got corrected post formation of new Government in 2014.  On a side note, if you look at the line graphs carefully, international crude oil price movement has some sort of inverse relation with India’s GDP growth rate.



This time, despite formation of new government, recession continued, with double digit drop in last three months, much higher than earlier, ever, pointing to far grave situation. Central Bank’s (RBI) monetary easing (reduction in Repo Rate) has not helped much either, as banks saddled with NPA, are passively reluctant to reduce interest rate.

Upcoming festive season was the only hope left for any revival in 2019. For now, hike in tax on petrol and diesel in the budget presented on 5th July 2019, has left the industry highly vulnerable to any global crude price shock, as crude oil price is still in volatile phase.

With slowing economy (GDP growth of 5.8% in latest quarter & unemployment rate at 6.1%, highest in last four decades), clubbed with credit squeeze due to NBFC financial troubles, green shoots looks far too distant in 2019.

And in 2020, post BS6 emission norm implementation (1st April 2020), prices of all cars will go up, thus no hope of double digit growth till 2021. Or is it statistically possible, due to low base effect of 2019?



2019 H1 Analysis

Worse H1 performance since 2013.

Manufacturer-wise Analysis

Some companies still have posted better growth figures than the industry average.

But that is squarely due to the new launches, post H1 2018. Exception is of course – Fiat, and we don’t know how Fiat did this miracle!

If we remove the volume of new launches, result would have been similar to that of other players.

Every product in the market has had taken a hit, with different level of severity. However, there are some products which bucked the trend, and most notable is Tata Nexon.





Body style

  • Sedan : Segment is in free fall
  • Hatchback : Largely in line with industry trend
  • MUV : New Generation Maruti Ertiga and Mahindra Marazzo has fueled the growth
  • SUV : Though SUV seems least vulnerable, but it is not true. If we ignore new launches (XUV 300, Venue &  Harrier), since H2 2018, segment would have slumped by 17%, even worse than hatchback

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

FY19 Petrol v/s Diesel Sales

1. Entry Hatchback Segment:

2. Compact Hatchback Segment:

3. Premium Hatchback Segment:





4. Compact Sedan Segment:

5. Executive Sedan Segment:

6. Premium Sedan Segment:

7. Luxury Sedan Segment:





8. Compact SUV Segment:

9. Mid-SUV Segment:

10. Premium SUV Segment:





11. Lifestyle Offroader Segment:

12. MUV Segment: