New players and new models have triggered significant shifts in automobile industry dynamics, where while existing OEMs still dominate the playing field, there is more to choose from particularly in the SUV and LCV segments but also in the almost impenetrable passenger car category. In fact, with the launch of Kia Picanto, and recently Hyundai Elantra—not to mention the fairly affordable Master Motors’ Alsvin—the passenger car segment is witnessing an unlikely and unexpected diversity, though in the small engine category, Suzuki’s Alto still stands invariably alone.
Volumetric sales for the period 10MFY21 saw a marked improvement of 54 percent year on year for passenger cars, SUVs and LCVs which is in part playing up the low-base effect of last year with zero sales in April due to lockdown, restricted mobility and overall economic fatigue in the country. It is imperative to compare these numbers to FY19 when sales were going strong—in period to date, sales this year have dropped by 39 percent compared to 10MFY19. Granted, some volumes this year may have gone unrecorded because the industry’s association does not take into account sales of non-PAMA members such as Master Motors, Regal Automobiles, Al-Haj, United Motors and so on. Using estimates of Kia, the drop from FY19 is 30 percent. By and large, while the industry is once again growing, volumes are not as encouraging as they were two years ago.
But they could soon be. The most hopeful trend that has emerged is the arrival of new vehicles. Toyota’s launch of Yaris has worked in its favor and together with its flagship Corolla, the company is as usual dominating the automobile space. In 10MFY21, its combined volumes (including Hilux and Fortuner) grew 90 percent year on year. Suzuki thus far has been the slowest to recover from last year’s treachery with sales returning slowly for Cultus, Wagon-R and Alto. Suzuki ought to be doing better as many used imported cars in its direct competition (Mira, Nisan Dayz, Honda N1) have been swept out of the market due to government restrictions. Obviously, this indicates that middle class buyers have a slower response to macroeconomic improvements.
However, with cheaper financing brought on by lower interest rates, prospective buyers of small and mid-sized cars should drive Suzuki’s demand up—this also includes those drivers that have been waiting for the right time to enter the ride-sharing gig economy.
Kia and Hyundai are making between 2500-3200 vehicles together every month while a host of new players have launched passenger cars, SUVs and LCVs including Karvaan and Alsvin by Changan, Prince Pearl and Glory Pro SUV by Regal, Proton Saga by Al-Hajj. Kia may be launching Cerato which is another sedan. CBU imports of many different vehicles are being brought to test the market (HAVAL Jolian by Sazgar for instance or MG HS). Ghandhara signed on with Chery China. The Auto Policy 21 is about to wrap up in July which has caused investors to quickly sign deals with foreign partners to bring new models to the market and utilize government incentives until they bid farewell. But this race may not be as well-planned for some and supply snags, skilled labor shortages, resourcing the right inputs including CKD kits may prove to be major deterrents for any substantial expansion in the market in terms of building capacity.
Another trend, the sedan to SUV transition may have long-term impact on the industry. With the arrival of Chinese brands that want to create market space (initially taking a margin cut), the new SUVs are substantially more affordable or priced closer to sedans in the market while being equipped with the best features. If this transition occurs, Toyota and Honda will not only face competition for the BR-V and Fortuner models but also their high-end sedans.
Once more car buyers take a leap of faith and try out the new models, the acceptability in the market would grow that much faster, and production capacities can grow with the same pace. The automobile industry is up for a change-up but a major transformation or expansion may not happen as swiftly as folks have been expecting.
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