 "Auto numbers: Swift's no hot seller, M&M loses shine, petrol cars back in vogue")
New Delhi: India’s largest selling hatchback, Maruti Swift, is no longer a hot seller. Mahindra & Mahindra, the uncrowned king of Utility Vehicles till now, is losing market share to upstarts like Renault Duster. Honda’s Amaze already accounts for more than half the company’s total sales but has not impacted Maruti Dzire as much as expected. And after months of being laggards, petrol cars are back in vogue while top selling diesel models now come for a discount. Phew!
As India’s passenger car market continues its slide, it has been turning conventional wisdom on its head. So what was true even as 2013 began barely six months back is no longer the gospel for car makers. As their fortunes nosedive, companies such as Maruti and Mahindra, Renault and Honda Siel Cars are being forced to look at the domestic market in a new light.
[caption id=“attachment_835931” align=“alignleft” width=“380”] Honda’s Amaze already accounts for more than half the company’s total sales but has not impacted Maruti Dzire as much as expected. Reuters[/caption]
Maruti: Let’s look at the ‘Swift’ decline of Maruti first. The country’s largest car maker has seen the notchback model of Swift, Dzire, outsell the hatchback for perhaps the first time in its history this May. Maruti dispatched 17,265 units of Swift Dzire but combined dispatches of Swift, Estilo and Ritz fell almost 30% or fell by a third year on year to 17,147 units against 24,290 units in May last year. Why are people not buying Swift? Primarily because the price differential has narrowed between diesel and petrol and this has made the price premium on diesel cars rather unjustified. And the largest impact is being felt on the Swift diesel which is why the sales of the entire Swift portfolio are down. Company officials deny any discounts on the Swift but dealers are slowly beginning to offer things like free accessories, insurance etc on the Swift to boost offtake.
In a note to clients, Ambit has pointed out that the price gap between diesel and petrol fuels has fallen to just 20% now against 40% eight months back and this is the single largest reason for petrol cars to come back in fashion. Ambit says proportion of diesel vehicles in Maruti’s popular models such as Swift, Ertiga and Dzire has declined to 65% from 80% earlier. In fact, this brokerage house has predicted that Maruti’s diesel car volumes in FY14 would decline by 8% against a whopping 58% growth in the last fiscal! If this is not an about turn in consumer preference, what is?
Impact Shorts
More ShortsM&M: Mahindra & Mahindra (M&M) is overwhelmingly dependent on the diesel fuel economy and has been impacted the most because of the reduction in price differential between diesel and petrol over the last eight months. To make matters worse, a lightweight competitor Renault is giving M&M sleepless nights with its successful Duster SUV. Ashish Nigam and Saksham Kaushal of Anqtiue Stock Broking said in a recent note to clients that the auto business of M&M, which was so far resilient, has made them circumspect.
“M&M is where Maruti was 3-4 years back, when heavy competition was just upon it. While Maruti proceeded to withstand competitive pressures extremely well, the stock was under pressure till it proved its mettle……..till all OEMs of reasonable repute have had their fair shot at the relatively untapped UV space, we’d remain cautious”.
It has not been evident but the Antique report also gives out shocking statistics: M&M lost 800 basis points in UV market share between FY12 and FY13 to 47.7% as Renault cornered 7.1% share from zero in FY13 and Maruti also muscled its way in with 14.3% share from negligible earlier. So the Mahindra brand does not account for even half UV market now versus over 55% in FY12. M&M sells the SUV500, Xylo, Scorpio and Bolero; Maruti sells Ertiga, Renualt sells Duster. Though Tata Motors and Toyota Kirloskar Motors also lost share in FY13, the decline in M&M’s was the sharpest.
There is another issue which could hamper M&M’s march ahead: Nigam and Saksham speak of Mahindra brand being better associated within the rural segment and being therefore well equipped to counter competition in the tier II and tier III towns. But a more brand conscious urban UV buyer may be equally if not more attracted to a UV with a foreign tag, the two analysts reasoned. Growth is faster in the urban UV space now.
And the fast paced UV chapter is still not over. Ford EcoSport could deepen UV competition for M&M, compact SUV launches are expected from Nissan which could bring in a cheaper Duster, Maruti is working on XA-Alpha and others are also marking their entries into UVs. All this while, M&M’s product pipeline is more skewed towards refreshes of existing UVs, say the Antique analysts.
Honda Siel Cars: The latest addition to Honda’s portfolio accounted for more than half its May sales and has catapulted this company ahead of even Tata Motors to the fourth position in domestic pecking order. Amaze sold 6036 units of the 11,342 total units sold Honda last month. The Ambit report quoted earlier dismisses impact of Amaze on the sale of its direct rival Maruti Dzire though. And as Times of India points out this morning, reducing price differential between diesel and petrol has further helped Honda in India since its petrol-only cars, City and Brio, are also again in demand.
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