2018 Passenger Car Market Growth Analysis

Slowdown in growth rate of 2018, has spilled over in 2019. With growth at risk, 2019 could prove to be a very challenging year for all the manufacturers, including luxury brands.

Body Style

  • Hatchbacks not only grew at the slowest pace but also ceded market share
  • In other segments, growth was driven by few products
  • MUV growth was driven by the new entrant in the market – Mahindra’a Marazzo
  • Sedan growth was driven by incremental volume of Maruti Dzire and new Honda Amaze
  • SUV growth was led by incremental volume of Tata Nexon, Hyundai Creta, Maruti Brezza and facelifted Maruti S-Cross




Vehicle Size

  • India continues to be a small car market, with 77% of cars sold are less than 4m in length
  • In over a decade (after 2006 Government’s new policy), car manufacturers definitely learnt to package the car in such small footprint
  • In medium (4m-4.5m) segment, its only Hyundai Creta and Maruti S Cross, that brought incremental volume, rest just suffered
  • In large car segment it’s the MUV segment which grew (Toyota Innova & Mahindra Marazzo), rest saw a decline



Body style deep down analysis

For this analysis, product classification is primarily based on length, which ideally should define the in cabin space available for the buyers. Further, sub classification is based on the value proposition manufacturers bring to the table, to differentiate their product.

Hatchback Segment

  • Entry level hatchbacks seems to be out of favor now
  • It seems buyers are opting for larger hatch even as first time car purchase
  • New launches too didn’t brought much excitement in small hatchback segment
  • Case is Hyundai Santro, which is averaging around 8,000 per month, since launch
  • Much lower than its premium (- relatively) cousins – Elite i20 (12,000) & Grand i10 (11,000)
  • One more reason for Santro’s low number is heavy discounts being offered on outgoing cousin Grand i10
  • Carmakers need to seriously revisit small hatchback product strategy
  • For small cars, margin is usually low and automakers thrive on volume, which is shrinking now
  • Honda has shown some prudence, in line with the growth trend by discontinuing Brio, and no plans to bring its successor in India , which is already launched in ASEAN region, thus making Jazz and Amaze as entry level product
  • With demise of Tata Nano, it seems there is less value in serving bottom of the pyramid, as Indian car buyers are moving to high value cars or sometime – ‘no car at all’ in crowded metros, by opting for Mobile App based shared mobility service



Sedan

  • Except for sub 4m sedan, every other sedan segment was in decline mode
  • Growth of sub 4m was led by incremental volumes from Maruti Dzire followed by new gen Honda Amaze launched in mid-2018




SUV

  • SUV data has been split, based on chassis, to gain better understanding of SUV growth
  • Monocoque SUV/Crossover segment has grown much faster

SUV – Monocoque body

  • It is quite apparent that new age more urbane SUV/Crossovers took the charge of leading the segment
  • Very high growth of the two premium (-relatively) segments is attributed to low base
  • Mahindra very cleverly has had positioned its SUV in a sweet spot, by offering large car for less money
  • Now its territory is being invaded by Tata’s Harrier, later in the year will be followed by MG Hector and Tata H7X

SUV – Ladder chassis

  • By splitting data, it is apparent that ‘real’ SUV are not selling so well
  • High stance surely gives them the formidable and imposing image but they aren’t quite urban jungle friendly
  • Moreover, body roll is too high, which robs the driving experience
  • Thus more and more urban buyers are opting for monocoque body construction
  • Tata Safari’s sudden growth is not a sign of revival, but it was due to its supplies to Indian Military

  • Surprisingly, Toyota’s mighty Fortuner suffered decline in sales
  • Reason could be entry of new SUVs in similar price bracket, like – Skoda Kodiaq (Monocoque chassis), Honda CRV (New diesel engine), and little bit of Mahindra Alturas




MUV-Monocoque

  • Drop in Maruti Ertiga’s volume was due to generation change which has impacted the segment growth rate
  • For Maruti, volume decline was compensated by the growth of Eeco

MUV – Ladder Chassis

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

2018 YTD Passenger Car Industry Analysis

2017 vs 2018 (January to September YTD)

With three quarters of the year behind us and two big festive season to go before the year ends, situation has become little challenging for auto manufacturers, due to rise in input costs and fuel prices. As both these factors are impacting the consumer sentiments at large. Let us see how passenger car market has performed so far in 2018 compared to same period (January-September) in 2017.

  • Industry grew by 6.9% so far over 2017
  • Maruti is growing much faster than the industry and yet doesn’t seems to be complacent in any way with product and technology onslaught
  • Hyundai has to wait for Santro’s launch to match industry’s growth rate by the year end
  • Tata has come very close to secure 3rd position, ceded to Mahindra in 2012
  • Despite good numbers from Amaze, Honda is yet reach last year’s numbers, largely due to City and Jazz’s numbers, feeling intense competition in respective segments
  • Ford’s growth is propped by Ecosport, no surprise why Ford in India is called one product wonder company
  • Similarly, Toyota’s growth is coming from mighty MUV ‘Innova’, rest of the story is not so hunky-dory
  • Despite facelift Kwid available in market, Renault is deep in red



Car Size

Car Size

  • Small cars (<4m) are major growth driver of the industry in the current year largely attributed to Maruti’s products
  • Mid-sized segment growth is pulled down by shrinking sedan segment
  • Large car growth is led by Toyota Innova, rest all are stagnant or declining



Body Type

  • India too caught the global SUV fever and growth of SUV/Crossover is no surprise
  • Sluggish growth rate of hatchback is largely attributed to shrinking base of small hatchbacks like Alto or Kwid
  • Large hatchbacks are doing pretty well
  • Mahindra Marazzo and upcoming Maruti Ertiga may bring MUV category back in black till year end



Sedan Segment

Though sedan segment appears to be growing, there is more than meets the eye. So we tried to peel the layers of onion to see how market demand shift towards SUV has impacted sedan segment’s growth.

Except for sub 4m sedan, every other sedan segment is in decline mode. Growth of sub 4m is led by only Maruti Dzire followed by recently launched Honda Amaze. Decline in premium sedan segment has been covered in one of our earlier article. The latest victim of compact SUV onslaught is mid-size sedan segment.

Since segment is de-growing YoY by 5.4%, 3rd generation Hyundai Verna launched in late 2017 has eaten into the Honda City and Maruti Ciaz’s pie. Despite the latter’s inherent strength, they were left with no choice other than to cede market share. Right now only relief for them is suicidal pricing of Toyota Yaris.

Toyota’s highly ambitious and miscalculated step has backfired badly. Four months since launch sales tapered down, so, Toyota has started offering discounts, that too in festive season. Moreover, Yaris doesn’t feel any special or premium over segment benchmark for two decades – Honda City, and at that price point Hyundai Creta looks far more lucrative too.

For manufactures, choice is simple now – start investing money, time and effort in SUV, where future market demand lies, instead of sedan! It seems, Ford’s global strategy to kill sedan by 2022, a more prudent decision, because at the end of the day, marketer’s job is to meet the needs of buyers, functional and emotional.

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