Tata Motors (India) Sales Update: Post March'18

Back in December'17, I had reported about Tata Motors gaining it's Momentum back, based on the Sales numbers till November'17. That was just the beginning of the company's Sales recovery & strengthening of market share across segments. The last 5 months have been nothing short of stellar for the company. No doubt that the entire Industry is growing at a healthy pace, but Tata Motors is growing faster than competition in most segments, which is helping it gain back the market share it had lost in the previous couple of years.

March'18 has proved to be the best month for Tata Motors in terms of Sales, both in Passenger Vehicles as well as Commercial Vehicles, in a long long time. Tata Motors (India) Wholesales stood at 69,440 units in the Domestic market, a 35% Y-o-Y growth, and 6713 units for Export, a growth of 15% Y-o-Y. For the month of March'18, the M&HCV segment reported a growth of 20%, the LCV segment posted 48% growth, the UV segment grew 223% and only the Car segment posted a de-growth of 5%. The M&HCV number of 24,321 units and the LCV segment's number of 31,296, are probably the highest the company has ever recorded in it's long history. The Tata Nexon & Tata Hexa powered the company's UV numbers to 7,908 units, again a highest ever figure. It's only the Car segment numbers for Tata Motors, which have seen better days when the Indica & Indigo CS models were in their prime.

Tata Motors (India) ended the year FY'18 with M&HCV numbers of 190,367 units, a growth of almost 9%. Remember that this growth has been achieved despite a terrible Q1 for the company, when the SC ruling disallowed sales of BS-III vehicles across India from April'17. Tata Motors had reported 33% drop in M&HCV sales during that Quarter. This was followed by a small jerk due to GST implementation in July'17. Tata Motors' LCV sales have certainly done much better than expected. The FY'18 number has climbed to 259,072 units, a growth of over 23% Y-o-Y. This growth is mainly because of the success of new products launched about 6 months ago. Before that the company was losing market share to aggressive competition from M&M, Ashok Leyland and others. With the success of the new products in both M&HCV and LCV segments, Tata Motors has not just arrested the fall in market share, it is also clawing back some share gradually.

At the start of FY'18, Tata Motors took a conscious decision to stop pushing sales of it's older car models like the Indica, Indigo eCS and the Nano, and let them die. Together these models were generating nearly 5,000 units on a monthly basis. The chart alongside clearly shows that Tata Motors has managed to limit volume losses in the Car segment, due to the stoppage of the above models, to a very small percentage. The company managed to increase production of it's Tiago and Tigor models to around 10,000 to 11,000 units every month. But the bigger story for Tata Motors' Passenger Vehicles business is the super success of the Tata Nexon. This model is single-handedly brought a lot of excitement in the Tata Motors showrooms and also on the sales charts. The rising blue bars in the neighbouring chart is giving enough evidence of the same. The Cars + UVs business did volumes of about 1,57,300 units in FY'17. The same has now jumped to about 1,89,700 units in FY'18, a growth of about 20%. This growth has helped Tata Motors grab the No.4 position in the Indian passenger car business, jumping over Toyoto and Honda in the last 12 months. After taming the 2 Japanese giants, Tata Motors is now aiming for the No.3 spot, which is currently held by another Indian UV giant Mahindra & Mahindra. For doing so, Tata Motors might need more than just the numbers from the Nexon and the Tiago. Can Tata Motors launch another strong model in FY'19, to help it climb the ladder further? Let's wait & watch.

Car Market-shares in Q3 & Demonetisation impact

After selling a record number of cars, totalling to 7.9 lakh units, during Q2-FY'17 (i.e. July to September) and recording a healthy Y-o-Y Growth of almost 18%, most of the car makers were looking forward to a buoyant second half of the fiscal. The 14 car brands (excluding the luxury & super-luxury segments), whose sales data I have considered here for my analysis, then followed it up with another new monthly record number of car despatches in October'16 at 2.78 lakh units. Then came the 8th November announcement from our PM about demonetising the Rs.500 & Rs.1000 currency notes, a step which is expected to bring substantial positives for the country & it's citizens over the longer term, but was certainly expected to negatively impact sentiment & business dynamics in various sectors in the near term. The Passenger Car market was not going to be any exception. But the Total Volume Despatch numbers from the 14 car makers in India for the month of November'16 posted a Y-o-Y Growth of 2%, surprising most analysts. But 6 of the 14 brands had reported double-digit % Drop in Sales for November'16. The main Growth drivers were Maruti Suzuki, Volkswagen, Tata Motors & Toyota, who all posted double-digit % increase in despatches.

After a not-so-disappointing November'16, all eyes were on December'16 numbers as the month was going to face not just Demonetisation blues, but also the year-end effect too. Maruti Suzuki & Tata Motors posted a 15+% M-o-M Drop in despatches, though on a Y-o-Y basis it was just about 5% lower for Maruti Suzuki and over 30% increase for Tata Motors. But a smart M-o-M improvement in despatch numbers for manufacturers like Honda, Mahindra, Renault, Volkswagen & Toyota helped restrict the deficit created by fall in numbers from the market leader, to a relatively small number. The Total Despatch volumes for the 14 car makers was just 1.4% lower on a Y-o-Y basis and 6% lower on a M-o-M basis.

The Demonetisation announcement was expected to create near term issues for the automobile industry, not just on the demand side, but also on the supply side. The lack of currency notes in the system was expected to create issues in terms of problems in movement of Goods as well as factory workers needing time off from work to visit the bank and things like that. November & December'16 were expected to have the maximum negative impact with the impact decreasing towards the end of December. If we go by the Despatch numbers for November & December'16 together, the Car industry as a whole has managed to produce & despatch almost the same number of vehicles as it did in last 2 months of 2015. This data point tells us that things were not as bad on the ground as being made out to be by the several News Channels & Economists. Ofcourse we cannot jump to any specific conclusion so soon and we will have to keep an eye on the monthly numbers for another few months before we can arrive at some conclusion with regard to effect of demonetisation on the Car industry. But the numbers from the industry for the first 2 months have been a bit of positive surprise. Hopefully it will stay that way in the coming months too.

Coming to changes in Market shares for the Car Industry, the table alongside shows the market shares of different manufacturers for Q3-FY'16, Q2-FY'17 and Q3-FY'17 to give us an idea of how things have been moving. India's No.1 Car maker, Maruti Suzuki has seen it's market share drop by about 50 bps Q-o-Q, though it is still higher Y-o-Y. On the other hand, No.2 manufacturer Hyundai's story is exactly opposite. It's market share has shown nearly 140 bps improvement Q-o-Q, but it is still lower on Y-o-Y basis. No.3 player Mahindra has managed to hold on to it's market share Q-o-Q, but is about 110 bps lower on Y-o-Y comparison. At No.4 is Renault-Nissan Alliance, which has seen a near 60 bps Q-o-Q erosion in market share, but is still significantly higher in Y-o-Y comparison. Renault-Nissan Alliance will now be gunning for the No.3 spot in the new year. At No.5 & 6 are Tata Motors and Toyota, both seeing an improvement in market share in Q-o-Q as well as Y-o-Y comparison. But Tata Motors has clearly outperformed Toyota as it was 25 bps behind the latter in Q3-FY'16, while it is now ahead by over 50 bps this year. With 2 or 3 significant new launches lined up for 2017, Tata Motors will look to continue it's march up the market share chart. Honda continues to be the biggest loser in the pack this year with it's market share dropping another 90 bps Q-o-Q. Honda was comfortably at No.4 position in Q3 last fiscal, then dropped to No.5 position in Q2 this fiscal and is now at No.7 position in Q3 this fiscal. The latest launch of BR-V or updated versions of Brio & Amaze don't seem to have helped Honda arrest it's sales slide. It is now preparing to launch the new City model, which should certainly help gain some of the lost market share back. Just like Tata Motors & Toyota, Volkswagen Group too has seen improvement in it's market share both on Y-o-Y basis as well as Q-o-Q basis. But I don't think it will be able to overtake Ford Motor to grab the No.8 position in the near future.

As with any December, most manufacturers had threatened to hike their product prices by 1 to 3% from January'17, but they might have to postpone their price-hike decision depending on the demand for their products in the new year. Generally the manufacturers bring a few updates to their existing models while hiking prices. Let's see if the manufacturers are able to pass on the price hike to the consumers or it is nullified via increase in discounts.