Tata Motors (India) Ltd.: Quarterly Sales Progress

In my earlier reports on Sales Updates of Tata Motors (India) business, I have been sharing the progress the company has been making on a Trailing-Twelve-Months basis. In this report I will be sharing the Segment-wise Quarterly Numbers of the company.

Here are the links to the earlier reports:
7th Dec'17: Tata Motors Ltd. - Gaining it's momentum back!!

6th Jan'18: Tata Motors Ltd. - December'17 Sales update.

6th Apr'18: Tata Motors (India) Sales Update: Post March'18

As we all know, the entire Automotive Industry in India suffered a setback around the end of March'17 when the SC declared that BS-III vehicles cannot be sold in the country from 1st April'2017. Not all vehicle manufacturers were ready with BS-IV compliant engines for their entire model range. The Commercial Vehicles division of Tata Motors was amongst the worst sufferers due to this event. The sales figures collapsed nearly 50% for Tata Motors CVs in April'17 and then started ramping up over the next few months. Still Tata Motors had reported a 33% drop in sales of M&HCVs during Q1-FY'18. The drop was less than 7% for LCVs, whereas the Cars & UVs segment had reported a modest growth of about 9% in Q1-FY'18.

Tata Motors had done a stellar recovery in sales from all three segments over the following 3 quarters of FY'18. With the company continuing to grow with good momentum during the initial months of FY'19, the Y-o-Y sales growth has been just spectacular. Have a look at the following table:

	Q1			Q2			Q3			Q4
	M&H CVs	LCVs	Cars & UVs	M&H CVs	LCVs	Cars & UVs	M&H CVs	LCVs	Cars & UVs	M&H CVs	LCVs	Cars & UVs
FY'2016-17	40788	50656	32285	39345	52835	42689	40995	50698	40964	54134	55578	41358
FY'2017-18	27149	47371	35171	44780	61469	47072	54980	68111	48417	63458	82121	58959
% Change Y-o-Y	-33.4	-6.5	8.9	13.8	16.3	10.3	34.1	34.3	18.2	17.2	47.8	42.6
FY'2018-19	53292	69923	53319
% Change Y-o-Y	96.3	47.6	51.6

In the M&HCVs segment, Tata Motors has posted a stupendous growth of 96% in Q1-FY'19 compared to Q1-FY'18. Part of this growth figure is due to the abnormally low figures of Q1 in last fiscal. But still the figures for Q1 of this fiscal are higher by about 30% when compared to Q1 of FY'17 too. Hence the sales of M&HCVs have been really good for Tata Motors, thanks to the new models launched by the company in the previous fiscal and the strong growth in Infrastructure sector of the country. Coming to LCVs, the segment recorded a growth of over 47%, selling almost 70,000 units during the quarter. This is inline with the strong sales recorded during the previous 3 quarters, with continued strong response to the new upgraded models launched by the company over the previous couple of quarters and strong growth in e-Commerce segment alongwith development of the hub-and-spoke model in various regions.

The Cars & UVs segment too has done extremely well, riding primarily on the success of the Tiago and the Nexon models, supported to some extent by the Tigor and the Hexa. Tata Motors has completely phased out the Nano, Indica & Indigo eCS models. Even the sales of Zest & Bolt are on the decline. The company is focusing on producing more of the new generation models and is now readying to upgrade it's Showrooms & Sales experience before the introduction of it's first model on the latest Modular platform. Just this week, Tata Motors has announced the name of the new SUV to be based on this new platform, which has been developed in association with Land Rover, as the Tata Harrier. During Q1-FY'19, Tata Motors reported a growth of over 51% in sales of Cars & UVs.

Over the next few quarters, I am expecting the growth rates for Tata Motors to taper down to around 20% levels as it will face high-base effect of strong numbers during Q2-Q4 of last fiscal. Even this growth will be considered to be healthy and will help the company improve it's profitability significantly during the current fiscal.

Tata Motors: Jaguar-Land Rover (JLR) progress for FY'2018

FY'2017 was a stupendous year for Jaguar-Land Rover (JLR), the luxury automobile brands owned by Tata Motors. JLR had managed to post strong double-digit growth in it's sales figures on the back of strong sales in US, China and other emerging markets, despite zero growth in it's primary markets of UK & Europe. It was always going to be a challenge to post healthy growth again in the following year, i.e. FY'2018. But the numbers posted by JLR are fairly encouraging. JLR witnessed over 9% decline in sales in UK & Europe during FY'2018, on the back of lower demand for Diesel vehicles and the UK-Brexit issue. The contribution of UK & Europe in JLR's total sales dropped from 44% in FY'17 to 39% in FY'18, thanks to decent growth posted in other geographies.

JLR reported nearly 20% growth in China during FY'2018 and this region has now become the largest market for the company with nearly 25% contribution to overall sales. US is now the 3rd largest market for JLR contributing about 21% to overall sales, on the back of 5% growth during FY'2018. The recently announced Jaguar I-Pace Luxury Electric Vehicle is expected to garner strong numbers from the US region. It's sales are expected to begin before the end of the current quarter. JLR posted a 3% growth in sales across other Emerging markets and it now contributes just over 15% to the company's global sales.

JLR's Trailing-Twelve-Months Sales performance

Overall for the year JLR managed to post 5.4% growth in it's Wholesales during FY'18 to cross the 633,000 units mark, compared to little over 600,000 units done in FY'17. Between the two luxury brands, Jaguar reported 1.4% decline in sales, whereas Land Rover managed to post 8.4% growth in sales. Hopefully Jaguar's decline will get reversed with the launch of the I-Pace model across different geographies. This particular model has got good reviews from various Auto experts and has also got an order for 20,000 units from Google's Autonomous Car division, Waymo, which is expected to be executed over a 2 years period. (Click here for full report).

JLR has also announced that they will be launching Electric versions of all their popular models over the next 2-3 years. Going by the reviews received by their first Electric model, it could mean exciting times ahead for JLR. The only pain point for JLR will be it's home markets of UK & Europe. Hopefully the sales decline in these markets will slow down soon and we could see reversal into positive growth during the second half of current fiscal.

For a few years till FY'2017, JLR was the main growth engine for Tata Motors, while it's India business was struggling to grow or even hold on to volumes & market shares. During FY'2018, the roles have got more balanced. JLR's growth has slowed down to mid-single digit, while Tata Motors' India business has posted strong double-digit growth in volumes, across segments. Between FY'17 and FY'18, JLR's numbers grew from 600,000 units to 633,000 units, whereas Tata Motors India business volumes jumped from 542,000 units to 639,000 units. The latter has posted a growth of almost 18% compared to just over 5% growth posted by the former. Going by the momentum generated over the last few months, Tata Motors' India business is expected to grow at 10% to 15% again in FY'2019. What this means is that, even if JLR continues to post about 5% growth in sales for FY'2019, the overall growth for Tata Motors topline will be decent, whereas the bottomline should fare better thanks to better economies of scale.

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.

Tata Motors Ltd. - December'17 Sales update.

About a month ago, I wrote a report on Tata Motors Ltd., saying it's gaining it's momentum back. (Click here for that report). And the company has managed to post a stellar set of Despatch numbers for the last month of the 2017 calendar, which is normally a slow month for vehicle sales as buyers prefer to purchase a new-year model. Tata Motors despatched a total of 60,820 units during December'17, commercial vehicles & passenger vehicles combined, both Domestic & Exports put together. This is probably the first time the company has crossed the 60,000 units mark in the last few years!! The 12-months average number till November'17 was 47,135.

The star performing segments for Tata Motors are Commercial Vehicles (both M&HCV and LCV) and the Utility Vehicles segment, all recording numbers even higher than March'16 & March'17 numbers. The Cars segment was the only one showing the year-end fatigue, reporting a 16% de-growth Y-o-Y. But Tata Motors will be more than happy with the other 3 key segments firing on all cylinders. Another positive is that even the Export numbers have perked up after a long time. The 12-months average Export number for Tata Motors till November'17 was 4185 units per month. The company exported 6293 units during December'17, which is the highest number since October'16. A pickup is Export numbers, if sustained over the coming few months, will give even more support to the company turnaround efforts.

Coming to the Trailing-Twelve-Months Sales numbers for the different segments, please have a look at the following charts:

The 12-months M&HCV sales number is now just over 1,81,000 units, which is the highest level achieved during this year and is about 3.3% higher than the number at January'17. The 12-months LCV sales number of 2,32,529 is also the highest for the year and is about 9.3% higher than the number at January'17. A good momentum of sales from these segments reflects not just good times for the company's business turnover & profits, but also for the country's economy in general. The Q4 of any fiscal is generally the strongest for CV sales. Hence it will be important to see how the numbers progress for Tata Motors during the next 3 months, especially after a stellar last couple of months.

The sales of Tata Motors' passenger cars reported some de-growth during December'17. Hence we can see the 12-months number dip slightly M-o-M. But have a look at the strong jump in 12-months UV sales numbers, powered by strong demand for both Nexon & Hexa. The number, which is currently at 39,149, should cross the 60,000 mark over the next 4 to 5 months. Remember that the Average Selling Price for a UV is higher than that for a Car. Hence a small dip in Car numbers, coupled with strong growth in UV numbers, will result in stronger position for Tata Motors' Passenger Vehicles division. The combined 12-months volumes for Passenger Vehicles division in January'17 was just under 1,50,000 units. It has now risen to 1,72,000 units and should cross the 2,00,000 units mark in the next 6 to 8 months time. The passenger vehicles division of Tata Motors has been loss making for the company for the last few years, mainly due to dismal capacity utilisation. As the volumes increase, the capacity utilisation improves and will help the company achieve operating break-even soon.

Tata Motors Ltd. - Gaining it's momentum back!!

Tata Motors Ltd has been primarily dependent on it's JLR division for a bulk of it's turnover and almost it's entire Profits since the last few years. The Domestic business of Tata Motors, which was mainly dependent on it's Commercial Vehicles division, had seen a slowdown or slump for a couple of years. The company put in place a new management team and made some significant changes to it's hierarchy and then started working on a new strategy. Development of new products gained momentum, both for the Commercial Vehicles division as well as Passenger Car business. The company saw it's sales momentum turning around during the year 2016. Just as things were improving, we saw the Demonetisation take place in November'16, which disturbed the momentum for a month or two. Things started getting back to normal in January to March'17 and then we saw the Supreme Court ruling come in where sales of BS-III vehicles was banned across the country. This had a much bigger impact for Tata Motors as the production of BS-IV engines for M&HCV segment wasn't enough to cater to the volumes. The vendors weren't ready for larger volumes and it took a few months to get the volumes to decent levels. Then we had the GST kicking in from July'17, which had some temporary effect as manufacturers & dealers wanted the keep the pre-GST stock low.

Post July'17, Tata Motors has seen it's M&HCV as well as LCV segment volumes getting back on the growth path very

strongly, which is clearly reflected in the Trailing-Twelve-Months Sales chart alongside. The M&HCV segment, which is the biggest turnover contributor for Tata Motors' Domestic business, saw it's 12-months volumes fall from 1.76 lakh units in Feb'17 to under 1.62 lakh units in June-July'17. Now it is back to over 1.73 lakh units and is expected to go higher in the coming few months. The production constraints for BS-IV engines is now history and the company has seen strong demand for it's new technology products. This itself is a very big positive development for Tata Motors as strong recovery of volumes for it's M&HCV products will translate into strong turnover and profits for the company.

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Tata Motors' LCV segment saw a much smaller impact on volumes due to the BS-III ban from April'17 as there were no major production constraints for most of it's products. It's 12-months volumes did dip from peaks of over 2.12 lakh units in Jan'17 to around 2.07 lakh units during April to July'17 period. But the LCV segment volumes have seen a strong recovery to over 2.23 lakh units over the last 4 months, especially with strong demand for it's newer products like XL range of ACE SCVs and Yodha range of pickups. With decent growth momentum in the country's economy, we could see continued positive growth in sales of all commercial vehicles for Tata Motors in the coming months.

One look at the Trailing-Twelve-Months Sales chart for Passenger Cars of Tata Motors and it will give an impression of a dull

segment. But there is a reasonably-exciting story building up there, especially when combined with the UV segment. If we look at the 12-months sales numbers for Cars alone, it started the year with volumes of about 1.3 lakh units in Jan'17, then peaked at about 1.41 lakh units in May'17 and then gradually come down to about 1.34 lakh units by Nov'17. But during this period there has been a substantial change in the contributions of the different products in it's portfolio. Until about May-June'17, Tata Motors was selling it's Indica-Indigo range of cars from all it's car showrooms. These models, alongwith the Nano, were contributing about 4,000 units monthly, i.e. over 30% of the volumes. From the middle of 2017, Tata Motors decided to give all it's showroom space only to the new-age products like the Tiago, Tigor, Hexa and now the Nexon, and some space to the Zest and the Safari Storme. Hence the company has stopped sales of most of the older products, mainly the Indica, Indigo-eCS and the Nano. The small dip in 12-months sales numbers over the recent few months is because the Tiago+Tigor combine was able to substantially fill the deficit of the numbers created by near-Zero sales of the older models. The Tiago+Tigor combine is already clocking sales of about 9,000 units monthly and keeping the company's Sanand plant fairly busy. The company has started offering the Zest & the Bolt for the Cab-operators.

The UV segment is the only one for Tata Motors which has seen a consistent positive M-o-M increase in the 12-months sales figures. Upto August'17, all the credit for the positive progress went to the Hexa, which has seen decent demand since it's launch. But the recent launch of the Nexon is pushing Tata Motors' UV sales number into a different trajectory. Within just 3 months of Nexon's launch, the 12-months sales number of UVs has reached a level nearly 80% higher than what it was at the start of the year. We can see the 12-months number, which is currently at about 34,000 units, reach about 60,000 units mark in another 6 to 8 months time.

In November'17, Tata Motors has managed to grab the No.3 rank in terms of sales of Passenger Cars & UVs, closely beating Mahindra & Mahindra. It will be very interesting to see these two Indian manufacturers push each other in their fight for the No.3 spot. Until a few months ago, Tata Motors was fighting for the No.5 spot with Toyota, but that seems to be history now. Even Honda has seen it's monthly sales number being very volatile in the recent months and has kind of given up on the race of the No.3 position. Renault & Nissan combine too has seen their Kwid-Redigo sales momentum lose steam in the recent months. If Tata Motors manages to carry on with it's sales momentum, it should be the un-disputed No.3 in the Indian passenger car market in a few months time, behind Maruti Suzuki and Hyundai.

Market-shares of Car makers - How things have changed over last 1 year.

There quite a few positives for Automobile manufacturers in the current period. Firstly the Rainfall has been good this year, which has infused optimism in the overall economic atmosphere in the country. Secondly, the Govt. has announced 7th Pay Commission for it's employees & people are again set to get healthy arrears. Even Ex-servicemen are getting their OROP arrears this year. Add to all this, the prime festive period of Navaratri to Diwali has arrived a couple of weeks early this year, compared to last year.

Most of the leading 2-wheeler makers have been reporting over 20% Y-o-Y Growth in dispatches since the last few months. The Car makers too have seen Total Sales increase by nearly 18% Y-o-Y in the recently-ended Q2 of current fiscal, after reporting single-digit growth in Q1. In order to understand who all have Gained & who all have Lost in the race for Market-share over the last 1 year, I have arranged the Quarterly

Market-share Data of all Car Makers in India (Excluding the Luxury Car Makers). There have been quite a few Surprises & changes in market-share Rankings over the last 1 year. The most prominent one being the rise of Renault-Nissan Alliance moving up from No.9 position in Q2 of last fiscal to No.4 position in Q2 of current fiscal. The primary reason for this rise has been the stupendous success of Renault's small car KWID, which was launched around the end of September'2015. The KWID helped increase Renault-Nissan's market share from under 2% in Q2-FY'16 to around 4.70% in the following quarter. And the market-share has kept improving with every passing quarter till now. Renault's KWID got some assistance from Datsun's Redigo in the recent few months. It will be interesting to see if Renault-Nissan Alliance is able to build on this 12-months of success and progress towards being a strong No.3 player in the Indian Car Market.

The next big surprise is Maruti-Suzuki's Sales resilience. Despite all the incremental competition from Renault-Nissan or Ford or Hyundai or Tata or others, Maruti Suzuki has seen it's market-share remain steady around the 47-48% range. It's Q2-FY'17 market-share being slightly higher than Q2-FY'16 suggests that Maruti-Suzuki managed to grow it's Sales during the period slightly faster than Industry growth. Yes, it's ALTO model did take some hit from KWID, but the drop in volumes was just about 10% or so. This was more than compensated by success achieved by Maruti Suzuki's new launches of the BALENO and the VITARA BREZZA and also the CIAZ. All these three models are near the upper-end of Maruti-Suzuki's model portfolio and hence their success means a lot more to the company than the small drop in sales of it's ALTO model. Both the BALENO and the BREZZA are currently commanding a waiting period of almost 3 to 5 months, which is making the company even more desperate to see Suzuki's Gujarat plant being commissioned, which is expected to happen sometime in 2017.

The next surprise is Honda's struggle for Volumes, which started in November'2015. Since then the company has been saying that it has slowed down dispatches of Diesel versions of it's Car models as there has been an inventory pile-up at dealer level due to slower demand for the same. But it's been nearly 11 months since then and Honda's volumes are still nowhere near normal, though there has been slight recovery in numbers due to BRV launch a few months ago. Honda reported a 28% Y-o-Y drop in volumes during Q1 of this fiscal, which was followed by about 18% Y-o-Y drop in volumes in Q2. This massive under-performance resulted in Honda's quarterly market-share dropping by nearly 250 bps in Q2 of this fiscal, compared to a year-ago period. Honda lost it's No.3 position during this period and is now at No.5, which too is under threat from a resurging Tata Motors.

The next point is Mahindra & Mahindra's lacklustre show despite several new potentially volume-generating launches over the last 12 months. M&M's market-share improved from 7.2% in Q2-FY'16 to 9.45% in Q4-FY'16, primarily on the back of 2 new launches in the Compact SUV space: the TUV300 and the KUV100. But both these models have failed to hold volumes beyond the initial couple of months, despite good marketing & promotional support. The NuvoSport, which was introduced later, was an even bigger dud in terms of volumes. M&M will again be pinning it's hopes on the refreshed & slightly-shorter version of the BOLERO to bring increased volumes for the company. Since the BOLERO now confirms to the Compact segment restrictions, it is cheaper by nearly Rs.1 lakh compared to the previous model. Hence it is now even better value-for-money than before and hence has good chances of being successful. M&M has managed to grab & hold the No.3 position since Q3-FY'16, but it needs to do better to continue holding the rank.

Coming to rest of the car makers, the No.2 Rank holder Hyundai has done a fine job through most of the year, but posted slower growth in latest quarter, resulting in slight erosion in market-share. Seems like Hyundai's ELITE i20 and the CRETA models are losing some steam in the face of increased competition. Tata Motors too has finally found success with it's TIAGO model, which is currently commanding a waiting-period of 2 to 3 months. The company is ramping up production at a measured pace and hence we haven't seen it's volumes shoot up suddenly. At the same time Tata Motors has another 2 to 3 new models lined up for launch, spread over the next 12 months, which should boost the company's image as well as market position in the coming quarters. Toyota continues to remain dependent on it's INNOVA model for volumes & market-share, which has remained more or less steady, even after the launch of the new generation INNOVA. The company has also refreshed the ETIOS siblings with a hope of finding more volumes.

Ford and Volkswagen have also gone nowhere in terms of market-share over the year. Ford did launch it's brand new Compact Sedan the ASPIRE and the new generation FIGO late last year. Everyone expected Ford to improve it's market-share with these new models. But it's been a big surprise to see both these capable models to do lacklustre volumes, while Ford's ECOSPORT continues to generate decent monthly volumes, despite increased competition in the Compact SUV space. Volkswagen group has only recently got slightly ambitious for increased domestic volumes.Volkswagen worked on it's POLO/VENTO platform and has introduced the AMEO compact sedan recently, which it hopes will help boost it's volumes to some extent. The result for the same is yet to be seen.

Compact Cars - Sales Analysis.

About 14 different Car/SUV manufacturers (or Brands), producing close to a 100 different models, sold about 2.8 million units over the last 12 months. Out of them 13 Brands offers about 41 different models in the Compact Category, which comprises of vehicles under 4000 mm in length and powered by a Petrol engine of < 1200 cc or a Diesel engine of < 1500 cc. This Category was specially created by the Indian Govt. about a decade ago by offering substantial Tax-concessions to vehicles meeting the above mentioned specifications. The year when this concession was announced, only the Hatchback cars or Small Cars belonged to this Category. Tata Motors was the first to launch a Compact Sedan in the form of an Indigo CS, with a shortened boot. The tremendous success of this model pushed even Maruti Suzuki and a few other manufacturers to trim the rear end of their popular Mid-size Sedans in the following years. This trend continues even today when we see Volkswagen recently announcing the launch of it's Ameo compact sedan, which is a shortened Vento!!

Over the last few years we have seen Car manufacturers come up with models specially designed to meet the regulations of the Compact Category and we now have 41 different models involving Hatchbacks, Compact Sedans and even a few Compact SUVs. It was not just about the vehicle's length. Some manufacturers even had to develop new engines to meet the 1200 cc Petrol / 1500 cc Diesel restrictions. Mahindra & Mahindra too, which was primarily into full size SUV & MUV space, created a downsized 1500 cc diesel engine to power it's downsized Xylo (called the Quanto) for it's maiden entry into the Compact Category. This model did not do much for the company. But M&M still launched a brand new Compact SUV, a micro-SUV and a re-designed Quanto last year to increase it's market share in the Compact Category.

The products in the Compact Category now span a price range of Rs.2 lakhs to Rs.10 lakhs, with the Nano, RediGo & Kwid near the lower-end

of the range and cars & SUVs like Polo GT, EcoSport, i20, etc. at the higher-end of the range. It goes without saying that Maruti Suzuki is a dominant player in this Category. This company has a total of 10 different models competing in the Compact Category, with Total Average Quarterly sales of just under 3,00,000 units. The two most popular models in Maruti Suzuki's portfolio are the Alto and the Swift Dzire, which together sell more than India's No.2 manufacturer Hyundai's Total sales in the Compact Category. That is the kind of domination Maruti Suzuki has in the Compact Category. It's market share has comfortably remained over 55% in each of the last 4 quarters, with the highest level achieved being 59.4% in Q3 of last Calendar Year.

Hyundai's Total Average Quarterly sales over the last 4 quarters stood at just under 1,00,000 units, with it's market share in this category hovering around the 18-19% level, the highest level achieved being 20.5% in Q4-CY'15, which included the festive season. The two most popular models from Hyundai's portfolio here are Grand i10 and the i20, which contribute over 70% of the company's Total sales in this Category.

The fastest growing manufacturer in the Compact Category is the Renault-Nissan Alliance, which also includes the Datsun brand. The stupendous growth of this Alliance started with the launch of the Renault Kwid just before the start of the

festive season last year. This model single-handedly brought the Renault-Nissan Alliance from a No.7 position in Q3-CY'15 to a comfortable No.3 position in Q2-CY'16. From sales of about 6700 units in Q3-CY'15 for Renault-Nissan Alliance, it has multiplied over 5 times to reach around 35,500 units in Q2-CY'16, with the Kwid alone contributing close to 25,000 units in the latest quarter. During this period, the market share of the Renault-Nissan Alliance jumped from a meagre 1.4% to a respectable 6.9%. In June'16, the Alliance has launched another potential volume boosting model, the Datsun RediGo. It's impact will be noticeable in the coming quarters.

Tata Motors has seen mixed fortunes during the last 4 quarters. It started with No.4 position & 5.8% market share. Then saw it's sales & market share dip for the next 2 quarters and even lost one position during Q1-CY'16, but has seen a sales & market share bounce back in latest quarter and now Tata Motors is now back to No.4 position in the Compact Category. The recovery in sales in Q2-CY'16 is completely attributable to the Tiago, which was launched in April this year. With 2 more new model launches lined up for the Compact Category from Tata Motors over the next 2-3 quarters, it will be interesting to see how the company manages to build on this sales momentum.

The No.5 position continues to be held by the American auto giant, Ford Motor. This company did not see much change in fortune despite the launch of brand new compact sedan the Figo Aspire in August last year, which was followed by it's hatchback variant Figo in September. The sales of both these models dropped to disappointing levels after the initial couple of months of launch. The company was mainly relying on it's compact SUV model EcoSport to bring in some decent numbers every month. Ford has launched a completely new marketing push for it's models in the month of May this year. The result was immediately visible with a substantial jump in dispatch numbers during June'16. This last-month jump helped Ford to recapture the No.5 position in Q2-CY'16, which it had lost briefly during the previous quarter.

The next in line is India's own SUV maker, M&M. It was virtually non-existent in this category until the launch of the newly developed TUV300 in October'15. It brought in respectable volumes in the initial few months & then the company followed it up with the launch of the micro-SUV model, the KUV100 in January this year. With KUV100 in the picture, the sales of the TUV300 started losing steam. M&M did manage to grab a peak market share of 4.5% and the No.5 position during Q1-CY'16, but is already showing some signs of weakness in sales with market share dropping to 3.8% in the latest quarter. M&M too needs to push it's marketing team to come up with a new aggressive campaign to rekindle the customer interest in it's relatively new models.

Honda has had exactly opposite fortune to that of Renault-Nissan Alliance over the last 4 quarters. From being a comfortable No.3 player with 6.9% market share in Q3-CY'15, Honda has seen its sales & market share drop substantially over the last 3 quarters. The biggest drop coming in the latest quarter, when Honda's market share has fallen to just 2.4% in the Compact Category. One really wonders as to how come a company with a brand name as strong as Honda and equipped with a decent product portfolio, is suffering so badly in the recent months. The company is saying that it has deliberately curtailed dispatches to allow the dealer-level inventory (mainly of Diesel cars) to be cleared first. That means the dispatch numbers in the previous quarters were piling up at the dealer level. Honda has reached this fate despite having launched a brand new Jazz and an updated Amaze last year.

Apart from these 7 manufacturers, Volkswagen, Toyota, Chevrolet & Fiat are also present in this category with 1 or 2 models each. But their combined market share is less than 3% currently. Volkswagen has recently launched the Ameo compact sedan, while Chevrolet too is planning to bring an updated Beat and it's compact sedan version too. Let's see if these new launches help their respective manufacturers to improve their market share to levels worth mentioning in the coming quarters.

Maruti Suzuki - Competition has started biting!!

I had discussed about super-expensive valuations of Maruti Suzuki Ltd's stock at current prices of over Rs.3600/- per share in my previous article. In this article I won't be getting into that part again. Here I will be focusing on the Sales performance of Maruti Suzuki in two crucial segments: Premium Hatchbacks and Compact Sedans.

In total, Maruti sells about 1 lakh cars every month. 38-40% of these are from the Alto & Wagon-R category. Another 35-38% comes from the Ritz/Swift/Dzire category. 10-11% comes from Omni/Eeco category. 5-6% from Ertiga/Gypsy category. And the rest is comprised by it's recent launches, i.e. Celerio and Ciaz, which is about 8-10% of total sales.

The Ritz/Swift/Dzire category brings in the maximum in terms of turnover & profits for Maruti Suzuki Ltd. And this is where the company is facing lots of competition from other manufacturers. Hyundai is particularly strong in the Premium hatchback segments with it's i10 Grand and i20 Elite models with the latter generating volumes that are getting closer & closer to Swift's monthly volumes, despite being larger and more expensive. Even the Grand i10 is doing pretty healthy volumes for Hyundai at over 8000 units every month. On the other hand, Maruti's Ritz is a dying product with the volumes having come down to less than 2000 units per month in the last couple of months. Hyundai & Maruti together control about 75% of the Premium Hatchback market with a tough fight for the No.1 spot. Tata Motors with it's Indica/Vista & the Bolt models is the distant third, but has seen it's market share improve from less than 6% in October'14 to about 9% in March'15.

In the following chart I have considered monthly market shares of Hyundai India, Maruti Suzuki & Tata Motors only, which together command around 85% of the total market.

Maruti Suzuki's market share has dipped sharply to under 34% in March'15 from levels of around 42% in Dec'14 & Jan'15. On the other hand Hyundai's market share has approached the 40% mark, beating Maruti Suzuki for the 2nd time in the last 6 months. In October, Maruti's Swift sales had seen a sharp dip mainly because the company was clearing older stock & introducing newer upgraded model in that month. But there was no such issue in March'15. Part of the reason is fall in sales of Ritz model and even Swift has seen a dip of around 15% M-o-M. Apart from Hyundai, even Tata Motors is gaining some strength, though the numbers are far lower. And the reason is not the newly launched Tata Bolt model, but the older Indica/Vista models. After sales dipping to less than 2000 units in Jan'15, the Indica/Vista models have seen a revival in sales to over 3700 units in Mar'15. Bolt has been a disappointment for the company in the first few months. We will have to wait & see if it is because of supply constraints or lack of demand for the model, in the coming months. It seems as if the advertising being done for Zest & Bolt models is pulling customers into the showrooms, but they are getting more impressed with the value-for-money offerings in Indica/Vista and the Indigo CS models.

Coming to Compact Sedans segment, Maruti's Swift-Dzire is the clear market leader with a huge lead. In fact, many a times, the Dzire does monthly volumes higher than even the Swift and this is even more profitable for Maruti Suzuki, which commands over 45% market share in this segment. The 2nd biggest player in this segment is Honda with it's Amaze, which has seen a smart revival in sales in the last 4 months, but still does less than half the volumes of the Dzire. Honda captured a little over 20% market share in March'15. Tata Motors came third with just under 15% market share with it's two models: Indigo eCS and the newbie Zest. Here too the older model is selling more than the newer one.

From the chart we can see that Maruti Suzuki's market share in the Compact Sedans segment has come down from over 50% level to about 45% in the last 3-4 months. But it's not due to fall in Dzire's sales. It's monthly numbers are quite steady. But the market is expanding due to increased volumes from other players. Look at Honda, which has doubled it's market share in the last 4 months. Tata Motors too is more or less steady near the 14-15% mark. Hyundai's Xcent too is doing steady numbers and it's market share too is hovering around the 10% mark. But there is something all these manufacturers need to worry about and that is the upcoming launch of the Ford Figo Aspire, which is a brand new Compact Sedan Ford has developed and will be manufactured at it's brand new facility at Sanand, Gujarat. Ford is aiming for healthy volumes from this model and the car also seems to be competent enough to do it. It's expected to be launched sometime in June'15.

Tata Motors too is said to be developing a new Compact Sedan on the 'Kite' platform, which could replace the existing Indigo eCS or add to the product portfolio. But it's launch is atleast a year away. But Tata Motors is on it's revival path and is looking at expanding it's dealer network, which had shrunk sharply over the last 3-4 years. And this time the company is serious about it's domestic car business.

In short, Maruti Suzuki has lot's to worry about the two segments which give it the maximum turnover and profits. And in such a situation, commanding such premium valuations for too long might not be possible. Many institutional brokerages have a Buy rating on Maruti Suzuki with target prices in the range of Rs.4000 to 4500. But I beg to differ. If the sales blip in March is anything to go by, Maruti could be struggling to post the 15+% growth that it needs to post to make the current valuations sound a bit sensible. And it's premium offering Ciaz needs to continue doing well.

( Click here for Maruti Suzuki's Results Summary Page. )