The Indian automobile sector is bleeding – and how. Both in June 2019 and in the first quarter of the ongoing fiscal (April-June 2019), all segments and sub-segments have found themselves in the red. The passenger vehicle segment is the one with the maximum red ink; -17.54 percent in June and -18.42 percent in Q1 FY2020.
With poor market sentiment and the ongoing liquidity crisis, OEMs and automobile dealers are having a difficult time in terms of sustaining businesses on the ground.
While there has been a massive slowdown across segments, PVs dipped 18.42 percent between April and June 2019 with net factory despatches of 7,12,620 units (April-June 2018: 8,73,490). Within PVs, passenger cars declined 23.32 percent to 4,47,453 units (5,83,547), vans 25.66 percent to 40,943 units (55,078) and UVs comparatively better by 4.53 percent to 2,24,224 units (234,865).
Of the 17 PV makers in the fray, only four have managed to improve their market share, while all the others have to contend with saving their turf and ensure the red ink does not spread any more. But that's easier said than done, given that the IC engine industry had little to gain from Union Budget 2019.
With demand refusing to pick up, the country’s leading carmaker, Maruti Suzuki India's volumes of 3,63,417 units in the April-June period, imply that it lost market share by 1.54 basis points to be at 51 percent (Q1, FY2019: 4,58,967 units / +52.54 percent). A 12 percent drop in sales of its popular models including the Celerio, Ignis, Swift, Baleno, Dzire and the Wagon R would have contributed to this performance. These models cumulatively garnered sales of 2,05,178 units in Q1 FY2020, as opposed to the 2,32,667 units in the same period last year.
Hyundai Motor India, the second-largest PV maker in India – and the one with the second-largest market share by sales volume – is singing a different tune. Even though its sales in Q1 are down by 7.7 percent year-on-year, to 1,26,514 units, the Korean carmaker was able to improve its market share by 2 basis points to 17.75 percent (1,37,114 / 15.70 percent).
Compared to Maruti, while Hyundai’s drop in sales of its popular arsenal of hatchbacks and compact sedans – including the Grand i10, Elite i20, Xcent and the new Santro – is pegged at 6.04 percent to 74,537 units (79,335), the company’s UV models led the charge in these trying times.
The Hyundai Creta and the newly launched global compact SUV, the Hyundai Venue, together brought in sales of 43,687 units in the first quarter, posting a robust growth of 38.66 percent (31,505), which helped the company boost its PV share in an otherwise slowing market.
The same goes for home-grown UV player Mahindra, whose latest compact SUV – the XUV300 – is leading the charge for the company. Launched in February, the XUV300 has pumped some oomph into the compact UV segment and delivered 5.18 percent growth for Mahindra’s group of sub-four-metre SUVs (Bolero, TUV300, Quanto, Thar, KUV100 and NuvoSport) which sold 32,649 units (31,039). Mahindra’s PV market share has grown from 6.93 percent to 8.34 percent, with flat sales of 59,399 units, compared to 60,539 units sold in Q1 of the last fiscal.
While Honda Cars India was able to maintain its market share at 4.63 percent with sales of 33,028 units (42,609 / 4.88 percent), Tata Motors had to experience a slight hiccup in its sales journey, with overall PV volumes of 42,034 units and a drop to 5.90 percent of the PV market share in the quarter (April-June 2018: 58,969 / 6.75 percent).
How will the second quarter of FY2020 pan out? Things look bleak at the moment albeit due to OEMs sharply reducing deliveries to their dealers has seen rising inventory levels come down to more manageable proportions. But what the industry needs is a growth catalyst from the government, even as OEMs remain focused on the upcoming shift to BS6, which now less than nine months away.
Speaking at the June 2019 results meet on July 10, Rajan Wadhera, president, SIAM, said, "Yes, we support the government's vision of a greener and cleaner tomorrow, but in order to meet that, we cannot kill the present. As SIAM, we all have been together in our demand for GST cut on PVs. Corporate tax reduction for companies having turnover up to Rs 400 crore is a step in the right direction and will aid demand from MSMEs."
"We, as an industry, do have a responsibility towards emission reduction, energy conservation and bringing futuristic products to the market, but the ramp down of conventional technology and gradual ramp up of EV technology has to go hand in hand. We need time to bring well researched, engineered and well-tested EV products to the market. The techno-commercial feasibility has to be there and it's unimaginable how the industry will manage such amounts of funds to now freshly infuse into EV development, before even realising profits from BS6 investments."