Pockets of outperformance in automobile sales

After two successive years of 26 per cent year-on-year volume growth in each, growth in the domestic auto industry has moderated in 2011-12. Thanks to high interest rates and the general economic slowdown, the industry (passenger vehicles, commercial vehicles, three- and two-wheelers put together) has grown only by 12 per cent. But few sub-segments such as utility vehicles (UVs), light commercial vehicles (LCV goods carriers) and scooters have put up a better-than-industry performance. While utility vehicle sales in the domestic market have grown by 16.5 per cent, LCV goods carriers and scooters have shown a Y-o-Y volume growth of 30 per cent and 24 per cent respectively in the April 2011-March 2012 period. What has triggered the out-performance in these segments? Diesel models drive UV growth With the gap between petrol and diesel prices widening during the year, customer preference clearly shifted to diesel vehicles. This is evident from the fact that even as demand for cars slowed considerably, diesel models, among cars, continued to do well. Hence, the availability of many diesel models among UVs could have been a contributing factor. Mahindra and Mahindra (Bolero, Scorpio, Xylo, XUV 500), the market leader in the UV segment, saw a healthy 19.5 per cent in volume growth last year. The company ‘s market share improved from 53.5 per cent in 2010-11 to 55 per cent. Another reason for healthy growth in this segment has been launches/new arrivals. Force One from Force Motors, Aria from Tata Motors, Santa Fe from Hyundai as well as the XUV 500 were launched during this period. Other models that saw good off takes include the Tavera from General Motors, Toyota Innova, Tata Sumo and the Skoda Yeti. LCVs non-cyclical Among CVs, LCV goods carriers have yet again proved to defy the cyclicality witnessed in the sales of heavier trucks (30 per cent vis-à-vis the 8.8 per cent growth ). One reason for the good show could be that, given their lower cost, these vehicles may not be as sensitive to interest rate hikes as larger trucks and the proportion of financed purchases too may be less. Also, the demand for small CVs such as the Ace, Ape, Gio, Genio , Maxximo and Dost have been strong. This stands testimony to the catching on of the ‘hub and spoke model' of transportation in India, where such small vehicles are used for last mile connectivity within the cities and towns. Scooters GET popular Although motor cycles still remain the largest sub-segment in terms of volumes among two-wheelers (consisting scooters, motorcycles, mopeds), scooters have clearly been gaining popularity in the last few years. The 2011-12 performance is a continuation of this trend. From about 79.5 per cent in 2007-08, the share of motorcycles in total two-wheeler volumes has steadily declined to 75 per cent now. On the other hand, the share of scooters has increased from 14.5 per cent to 19 per cent during this period. Expansion of product portfolio with the entry of the Mahindras ( Duro, Rodeo, Flyte, Kine) in the last few years, coupled with a deepening of footprint by Honda, has been the reason for the same.