Abhijit looks at the numbers for 2013

Abhijit looks at the numbers for 2013, and they don’t paint a pretty picture. A change in fortunes is due – but when is anyone’s guess.

The figures for automobile sales released in January 2014 by the Society of Indian Automobile Manufacturers (SIAM) for calendar year 2013, and the first nine months of financial year 2013-14, don’t paint a pretty picture of what’s in store for the Indian auto industry in the near future. Only companies that have the mental equipment to think very differently in terms of marketing and product placement will get traction in this slippery market. This is a year that will separate the men among the marketing heads from the boys, because it would be almost impossible to do anything radical with the product portfolio – after all, it usually takes 2-3 years to bring a new product to market from the time it’s finalised. What makes the job doubly difficult is the fact that this grim situation is getting even grimmer.

Much has been made about the fact that, for the first time since 2002, sales of non-commercial passenger vehicles have dipped from their previous year’s numbers. In other words, even during the global financial crisis of 2008 the Indian market had managed to keep growing, albeit slowly. What has changed since then is that the India growth story has been undermined by mindless government policy. Even in the luxury segment, which is commonly perceived to be insulated from the travails of the rest of the industry, the growth has slowed down to around 6 percent from over 20 percent earlier. In short, the market is in a situation that’s worse than the one during the global downturn – and that’s bad news.

That things are getting tighter is evident from the fact that growth rates are slowing even further. This seems to be leading to the classic downward spiral, where companies make less because demand is falling and, therefore, fewer people are needed to make products, which leads to reduction in employment that leads to less money in the hands of buyers, which leads to a further reduction in demand and more production cuts, and so on.

The only bright spot in this atmosphere of gloom and doom in India seems to be the two-wheeler market. While motorcycles have managed to keep their heads above water with the market growing 2.48 percent in the first nine months, scooters have racked up a rocking 20 percent growth in sales. But the good fortune has not been evenly spread. Honda Motorcycle and Scooter India (HMSI) seems to be running away with the market for motorcycles up to 150cc, more or less at the cost of manufacturers such as Hero Motocorp, Bajaj Auto and TVS Motor. As for scooters, HMSI is clearly ruling with 52 percent of the market, with Hero Motocorp in a distant second. In December 2013, this market grew by a whopping 30 percent.

With the market not growing, any company that’s managing to grow is doing so at the cost of someone else. In cars, Honda’s success with the Amaze and Ford’s with the EcoSport is coming at the cost of companies such as Tata Motors and Mahindra & Mahindra, which have lost big sales numbers. Meanwhile, light commercial vehicle (LCV) sales have now taken the downhill road, following medium and heavy vehicles. In December, volumes fell by 25 percent year-on-year, which leads me to believe that there’s a slowdown in the intracity transportation demand that drives the sales of these vehicles.

The export market is not looking too bad though. Vehicle exports from India aren’t that big, but considering the lacklustre domestic sales there is some succour to be found here. Hammered in the domestic market, utility vehicles have found takers abroad, with exports showing three-fold growth in 2013. Exports of two-wheelers have also grown, although by a modest 5 percent, but numbers have crossed 2 million. The passenger three-wheeler, too, has acquitted itself well, growing exports by 12.57 percent.

Needless to say, caution is in the air in a tough new year. But then, like good times, bad times too must come to an end. And after the downturn must come the upturn. The only question is – when?