Indian Car Sales Figures – May 2017

‘I QUIT’ – these are the hardest words for anyone to utter. Generally an employee would quit an organization if he/she us not happy with the culture the company offers or if the growth opportunities are not ample or the remuneration is not adequate. Though we can cite many other reasons; these three looked suitable for the case presented here (General Motors exit from Indian market) –

Culture – While, Indian Government has promised a thriving environment with the promise of ‘Make in India’, tax-free zones, etc the policies have never been stable or OEM-friendly. Firstly acquiring land for setting up plant can have multiple hassles (or term it government approvals, land acquisition troubles, etc), policy changes have been pretty frequent as well. OEMs were taken by shock when NGT initiated Diesel-vehicle ban was temporarily imposed by Supreme Court; also sudden transition from BS3 to BS4 emission norms for all category of vehicles was threatening to 2-wheeler and commercial vehicle manufacturers. Even the home-grown Tata had gone through some of the troubles mentioned here. Recent news of jumping to BS6 norms by 2020 and all-electric vehicles by 2030 has made all OEMs wary about the amount of investments that’ll have to be made to survive in the Indian market.
Growth Opportunities – India has been an extremely competitive market where the top 4 players hold over 75% of market share. GM has struggled in its over 20 years of existence in the subcontinent. It played several bets (and with several brands) – initially with Opel, then Daewoo inspired models (say the matiz aka spark), then the Chevrolet and finally SAIC inspired models (Enjoy, Sail Twins). Also they expanded their network aggressively between 2011-15 pushed them harder to look into newer models to better the network profitability and sales volumes. However, the bets failed every single time! The reason the strategy failed – It was overly controlled by the Headquarters (Detroit). While Indian market had been extremely dynamic from beginning; GM lacked the leadership who could take progressive steps for the OEM here. They were busy doing the postmortem after every failure. The Karl Slym era was though extremely promising (during which the bestsellers touched the subcontinent – Beat & Cruze). But, even Karl left the path in between.
Remuneration – India has pre-dominantly been a hatchback market, which means lower margins for the OEMs and high initial investments (as the MNCs do not have the expertise in small cars). The amount of sales and margins the Global biggies make in the bigger markets is insane – Ex: Chevy sold 5,74,876 units of its best seller Silverado (stands No.2 in the best selling cars/trucks for US market) in 2016, which converts to 47,906 units/mth. The average price of this model is $50,385 (>Rs.32 Lakhs). When you compare this with the stats of its Indian sales, the numbers are extremely meager. Hence justifying the investment becomes all more difficult here. The same concern is troubling all other biggies (say VW, Toyota, Ford, etc). Look at the excerpt from ET –

However, we believe GM has made an unforgivable mistake. Exiting Indian market at this stage has ensured that it wont be able to re-enter the Indian market (no more bets please!) and also the brand has taken an irrevocable downfall. GM forgot that it needed only 1 good product to gain its hold in the market (like what Duster/Kwid had done to Renault, Innova to Toyota, etc). It should have also learnt from the likes of Tata Motors which had struggled during the years and is now a formidable challenger to the No.4 slot. But it is both GM’s and Indian Consumers (who had bought Chevy products over the years) loss! It is also unfortunate to see that brands such as Peugeot, Kia are entering (or re-entering Peugeot’s case) and GM is giving up on the market.

Coming to May’17 business, it was a tough month for OEMs as consumers were confused to wait for clarity on GST implications and finalize their purchase. Also dealer fraternity were wary on the effect GST would have on the cars that were shipped from OEM to their stockyards. However, the Industry stood well and posted double digit growth. Good Monsoon forecast has positively supported consumer sentiments as well. While majority of the OEMs had a positive YoY growth; the likes of VW & Toyota experienced a fall in overall sales when compared to the same period last year. Let’s look at the modelwise analysis here:

Highlights:

Nexa Channel (with S-Cross, Baleno, Ignis & Ciaz) posted a sales of 26,120 units! If we consider it as a different channel/brand than Maruti; it’ll emerge to be the No.3 player in the Indian market. Don’t be surprised to see it in the No.2 slot if the momentum continues in the coming times.
Dzire launch was also in the news – The volume cruncher is now bigger and better! Huge aspirations now on the model and we are sure that it’ll deliver.
Another important launch was VW’s Tiguan – In a segment which has always been dominated by Fortuner; it’ll be interesting to see how VW’s offering will fare. Only time’ll tell.
GM’s exit (which was announced on 18th May) has already been discussed in detail. Now we can slowly see the numbers dwindling away from the above chart in coming months.
Hyundai’s refreshed offerings – Grand i10 & Xcent did average. A mid-life makeover has ensured that the models continue their average volumes as last year and avoid degrowth. However, i20 & Creta have been the money-makers for both Hyundai and its dealer partners.
Honda has 2 models in the Top 25 chart in May’17 – City & WRV. This signifies the importance of having refreshed/new products in the portfolio. This has also been the reason behind 13.3% YoY growth posted by the Japanese automaker.

Look at Top 25 selling models of May 2017 –