Coming out of a little longer down-cycle, 2014-15 proved a challenging fiscal for the auto industry despite some positive momentum in some select segments. Of the 18 passenger vehicle manufacturers, only five were able to register growth. Cheaper fuel and excise duty benefits for a larger part of the year provided some respite. There is now a stronger optimism on economic recovery this fiscal with the government’s commitments towards infrastructure improvements and ease of doing business. Amid this recovery phase, every segment of auto industry is undergoing a metamorphosis, driven by assorted factors ranging from competition to changing customer taste and young demographic. This report attempts to catch the trends across segments of auto industry.
First-time buyers cheer Maruti
The car industry rebounded in 2014-15 after encountering falling sales in the previous two years. And, the brand that made the most of it was Maruti.
One of the key reasons for the rebound, and one which has given the industry much enthusiasm, is the increasing presence of first-time car buyers in showrooms. Maruti, India’s top car-maker, saw an increase in the ratio of first-time buyers in its overall sales – from 37 per cent in 2013-14 to 44 per cent in 2014-15.
Only Maruti managed to tap the first-timers by creating excitement in the entry segment, which in earlier years had been badly hit by inflation, pricey fuel and high lending rates.
Besides launching new variants of entry models, it also broke a barrier with the launch of the entry-level Celerio with automatic transmission. It then did the same with Alto. Both were hugely successful with a promise of convenience with mileage. Usually, only the big cars come with auto transmission.
Others largely failed on this count. Hyundai focused on adding premium flavour in compact cars. Nissan’s Datsun, too, failed to make an impact.
Now, more players are eyeing this segment. Tata is launching the next-gen Nano, and Renault will shortly unveil its sub-Rs.4 lakh hatchback. Customers could be spoilt for choice in the entry segment. There’s lot of scope – the market for cars in India have a low base, and incomes are predicted to increase.
Truck heavyweights battle it out
The medium and heavy commercial vehicle industry came out of the down cycle during 2014-15. With the industry recovery, the battle for market share has become all the more intense.
One the one hand, there are domestic heavyweights such as Tata Motors and Ashok Leyland, No. 1 and 2 for a very long time. On the other hand, there are global leaders such as Daimler, who have entered the market only a few years back and triggered a branding war in the industry.
Tata and Ashok Leyland have strengthened their base even as the likes of Daimler and Volvo-Eicher JV are expanding aggressively to snatch volumes from domestic rivals.
Well, the incumbents remain unaffected as the latest annual numbers reveal their stable or rise in market share. But the battle is set intensify.
The market is seeing many changes, though. The two-axle trucks are giving way to multi-axle and higher tonnage trucks due to better operating economics and shortage of drivers. One may get to see more modern trucks plying on the roads, paving the way for improving efficiency of transport sector.
There is also stronger emphasis on total cost of ownership rather than the initial price. This implies that trucks are being marketed for fuel efficiency, reliability, driver comfort, safety and resale value. Still, don’t expect heavy discounts for new truck purchases to go anytime soon.
Scooters are the new star A few decades ago, India’s two-wheeler industry witnessed a shift from geared scooters to motorcycles. In recent years, it has seen a sort of reversal of that trend, with automatic scooters proving to be a huge growth opportunity.
On the back of this trend, the likes of Honda and TVS have gained. Bajaj, which doesn’t have a scooter play, has lost. Honda is No. 1 in scooters in the country.
Scooters are the in-thing now, having tipped motorcycles to emerge as the fastest growing two-wheeler segment. Their share in total sales has increased to 28 per cent in 2014-15, from about 16 per cent six years ago. This is largely driven by new launches and its positioning as a gender-neutral family vehicle.
But, motorcycles, with volumes of 10.7 million units, still make up two-thirds of Indian two-wheeler volumes. Their sales are increasingly being driven by rural markets, as they are suitable for long-distance rides, offer higher mileage and can navigate poor roads.
The dynamics are different in urban India, with young buyers looking for higher ‘cc’ bikes (150 cc and above). The latest sales numbers show double-digit growth for bikes above 150cc, even as the sub-150 cc segment has reported a decline, and that seems indicative of the future.
Small trucks await big action In the grip of a long economic down cycle, the LCV (light commercial vehicle) goods segment is still painfully in a negative growth curve. The fond hope of the industry is that the worst will soon be behind it, what with the rate of decline coming down in the past few months.
If recent data is anything to go by, one player has bucked already the trend. With improved features, Ashok Leyland has grown its small truck sales in the past few months. It has also upstaged Tata Motors in one key sub-segment: pick-ups. The Mahindras are the big leaders in pick-ups. Tatas are still the leaders in the other most important sub-segment: mini trucks.
Pick-ups and mini trucks together are primarily used for intra-city transportation of consumer goods. The market that they represent underwent a shift in buyer preference before slipping into negative growth – with the above one-tonne picks-ups outselling the sub-one-tonne mini trucks.
The growth of pick-ups is expected to continue, as buyers are increasingly likely to be attracted by higher load capacity, flexibility in covering longer distances at higher speeds as also higher power. While the heavier trucks will lug the goods along the highways, the smaller ones will pick up from there and distribute inside cities.
Genio and Bolero from Mahindra, Super Ace and Xenon from Tata and Dost from the Ashok Leyland-Nissan joint venture have already made their mark. More action is likely, as new players such as Isuzu, Maruti and Volvo-Eicher JV are preparing for a plunge.
Only Maruti managed to create some excitement in the entry segment with the launch of new variants and facelifts.
There is complete overhaul of products, services network and branding by both domestic and global truck players.
With self-start option and ease in driving, scooters fit as a perfect family vehicle – to be used by both male and female, young and old.
The need for intercity goods transportation is expected to drive strong demand for pick-ups and mini trucks in the coming years.
Balachandar.g@thehindu.co.in
