Year 2018 Review – Figures in value terms (₹)

Highest revenue generating cars (Estimate)

1. Super successful Maruti Dzire, alone, roughly makes revenue equivalent to whole of Toyota in India

2. Still, Toyota is making big bucks with Innova and Fortuner, which also make up for the goof-up like Etios and Yaris

3. 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 ₹)

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

Methodology

Snippets

1. Average price tag of cars sold in India is around 7.7 Lakh ₹

2. Tata with rich product pipeline is certainly going to see improvement in coming years

3. Nissan-Renault-Datsun has slipped in lower price band which is certainly not going to help them much in the future

4. 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

5. 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)

6. Mahindra – XUV 500 and Scorpio has pulled the tag upwards of 10 lakh ₹ mark, with known future product pipeline they will remain there

7. With high value products, Toyota certainly has an edge over others

8. Skoda and Jeep’s high value products certainly give them good foothold in Indian market, even with lower volume

1. Indian buyers are certainly moving up in premium price ladder, gradually

2. 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.

1. These figures just show estimated arithmetic average at OEM level

2. 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

3. Based on volume throughput, revenue and profitability of dealership may show large variation from these figures

4. Dealership location (Urban/Semi-Urban/Rural) is key determinant of actual volume throughput

5. 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

1. Toyota dealers certainly make most money due to high value products sold in large volume

2. With rich product pipeline Tata’s dealership financial condition may improve over time

3. Despite low volume, high value of products still make financial sense for Jeep and Skoda’s dealer

4. Nissan-Renault alliance’s dealership certainly looks in big financial trouble

5. Moreover, their existing car park (cars sold earlier) is not big enough for sustenance through after sales service business

6. 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

7. To break this cycle, at some point, OEM need to infuse capital in dealership for sustenance till new competitive products comes in

8. 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

9. They certainly need to bring in next gen Micra and large SUV like XTrail or Pathfinder, quickly

10. Else they will end up like Chevrolet, with export only business in India

11. Datsun as a low cost- low priced product line strategy certainly looks like flawed one

12. Somebody at the group certainly misread the Indian market (Toyota did the same with Etios)

13. 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

14. Wondering how they could afford their new Brand ambassador Aamir Khan! (Celebrity endorsement cost is nearly 10% of Datsun’s 2018 revenue)