PGDM MAKRETING (2018-2020)

PROJECT MANAGEMENT
Individual Assignment

TOPIC: CURRENT AUTOMOBILE SCENARIO (SUV’s)

Assignment by

Nishiket Dharmik
(201832073)

Course Instructor
Dr. Sarbjit Singh Oberoi
MARKET SCENARIO

After many years of fascinating over small passenger vehicles, automakers in one of the fastest
growing economies are now moving towards the compact sports utility vehicles and multi-
utility vehicles (MUVs). Over the past five years, their sales have blown-up, accounting for
one in every four passenger vehicles sold by India’s USD 74-billion automobile industry. In
2010, UVs and compact SUVs constituted just about 14% of the complete passenger vehicle
sales. Currently, they account for more than 25%, the recent data from industry body Society
of Indian Automobile Manufacturers (SIAM) shows. Much of the latest explosion in UV sales
has been led by compact SUVs such as the Maruti Suzuki Vitara Brezza, Toyota Fortuner, Ford
Ecosport, Renault Duster, and Tata Nexon. There are two major factors for the triumph of
utility vehicles, particularly SUVs. Sports utility vehicles, especially compact SUVs, have
become affordable for the Indian consumer. Secondly, there has been a conscious
determination from the automakers to introduce more SUV models in the Indian market. The
auto-makers are fine-tuning the cars designs and bringing innovations that are suitable for
Indian conditions. Moreover, it is expected that compact SUVs will emerge as the second-
biggest segment in the Indian market during the forecast period.

WHAT’S DRIVING THE SUV TREND IN INDIA?

Off-roading is still a nascent concept in India, with few adventurists venturing into the less-
trodden paths. SUV sales in India are not influenced by the desire to go off-roading on
weekends. Instead, it is a confluence of numerous underlying factors that has sparked a new
breed of SUV fanboys in India.

For a long time, only two SUVs dominated the Indian landscape – Mahindra & Mahindra’s
Scorpio and Tata Motors India’s Safari. These vehicles symbolised raw power and authority,
but the Indian middle class shied away from these as these heavyweights lacked that suave
sophistication that many hatchbacks and sedans offered. There were other high-end cars in the
upwards of Rs. 20,00,000 (US$ 30990); however, they were out of reach for majority of buyers.

In the absence of an attractive offering, sedans and hatchbacks remained the preferred option
for Indian car buyers. The watershed moment in the Indian SUV market (compact SUV market
to be more precise) came when Renault launched its compact SUV Duster in the Indian market.
The car was made predominantly for European markets, but due to attractive price positioning
and subtle marketing campaign, it caught the imagination of an entire nation.
Renault did not market Duster as an off-road vehicle, but positioned it as
a smarter buy than a sedan. The car saw unprecedented sales, but most importantly it spawned
a new era in the Indian auto market. The success led to the launch of a number of compact
SUVs, most notably, Ford Ecosport, Nissan Terrano, Mahindra XUV 500, Hyundai Creta, and
Maruti Suzuki Vitara Brezza.

In addition to the strong social and cultural quotient, space and durability are the other key
factors driving SUV sales in India. Unlike the west, a significant percentage of Indians live
together with their parents, a structure which is colloquially known as a ‘joint family’. For
millions of such households, a 7-seater SUV is a pragmatic option – although it has to be
mentioned that majority of compact SUVs only seat 5 people. Toyota Innova Crysta, Mahindra
XUV 500, Mahindra Scorpio, Maruti Suzuki Ertiga, and the recently launched Tata Hexa are
the favourites among this demographic.

THE FUTURE OF SUVS IN INDIA

The India SUV market is anticipated to grow at a staggering growth rates in the next decade.
As more people make the transition from an entry-level car to a compact SUV, sales are
expected to remain healthy. Further, many prospective Indian buyers are today more inclined
to buy an SUV vis-à-vis hatchback, which will also contribute to the growth of this market.

According to the Society of Indian Automobile Manufacturers, SUVs have grown from being
12.59% of India’s PV segment in 2010-11 to 25.01% in 2016-2017. It is projected that in the
next decade, SUVs may account for nearly 40% of India’s PV segment.

COMPETITIVE LANDSCAPE

The leading automakers in the India SUV market include Renault India, Maruti Suzuki,
Hyundai Motor India Limited, Toyota Kirloskar Motor, Nissan Motor India Private Limited,
Honda Cars India, Ford India Private Limited, Tata Motors, Mahindra & Mahindra, Mitsubishi
India, Mercedes-Benz India, and Audi India.

The research report presents a comprehensive assessment of the market and contains thoughtful
insights, facts, historical data, and statistically supported and industry-validated market data. It
also contains projections using a suitable set of assumptions and methodologies. The research
report provides analysis and information according to market segments such as geographies,
application, and grades.
THE INDIAN AUTOMOBILE SECTOR IS BLEEDING

Both in June 2019 and in the first quarter of the ongoing fiscal (April-June 2019), all segments
and sub-segments have found themselves in the red. The passenger vehicle segment is the one
with the maximum red ink; -17.54 percent in June and -18.42 percent in Q1 FY2020.

With poor market sentiment and the ongoing liquidity crisis, OEMs and automobile dealers are
having a difficult time in terms of sustaining businesses on the ground.

COMPARATIVE STUDY OF VARIOUS SUV’S

While there has been a massive slowdown across segments, PVs dipped 18.42 percent between
April and June 2019 with net factory despatches of 7,12,620 units (April-June 2018: 8,73,490).
Within PVs, passenger cars declined 23.32 percent to 4,47,453 units (5,83,547), vans 25.66
percent to 40,943 units (55,078) and UVs comparatively better by 4.53 percent to 2,24,224
units (234,865).

Of the 17 PV makers in the fray, only four have managed to improve their market share, while
all the others have to contend with saving their turf and ensure the red ink does not spread any
more. But that's easier said than done, given that the IC engine industry had little to gain from
Union Budget 2019.

With demand refusing to pick up, the country’s leading carmaker, Maruti Suzuki India's
volumes of 3,63,417 units in the April-June period, imply that it lost market share by 1.54 basis
points to be at 51 percent (Q1, FY2019: 4,58,967 units / +52.54 percent). A 12 percent drop in
sales of its popular models including the Celerio, Ignis, Swift, Baleno, Dzire would have
contributed to this performance. These models cumulatively garnered sales of 2,05,178 units
in Q1 FY2020, as opposed to the 2,32,667 units in the same period last year.

Hyundai Motor India, the second-largest PV maker in India – and the one with the second-
largest market share by sales volume – is singing a different tune. Even though its sales in Q1
are down by 7.7 percent year-on-year, to 1,26,514 units, the Korean carmaker was able to
improve its market share by 2 basis points to 17.75 percent (1,37,114 / 15.70 percent).
The Hyundai Creta and the newly launched global compact SUV, the Hyundai Venue,
together brought in sales of 43,687 units in the first quarter, posting a robust growth of 38.66
percent (31,505), which helped the company boost its PV share in an otherwise slowing market.

The same goes for home-grown UV player Mahindra, whose latest compact SUV –
the XUV300 – is leading the charge for the company. Launched in February, the XUV300 has
pumped some oomph into the compact UV segment and delivered 5.18 percent growth for
Mahindra’s group of sub-four-metre SUVs
(Bolero, TUV300, Quanto, Thar, KUV100 and NuvoSport) which sold 32,649 units
(31,039). Mahindra’s PV market share has grown from 6.93 percent to 8.34 percent, with flat
sales of 59,399 units, compared to 60,539 units sold in Q1 of the last fiscal.

While Honda Cars India was able to maintain its market share at 4.63 percent with sales of
33,028 units (42,609 / 4.88 percent), Tata Motors had to experience a slight hiccup in its sales
journey, with overall PV volumes of 42,034 units and a drop to 5.90 percent of the PV market
share in the quarter (April-June 2018: 58,969 / 6.75 percent).

How will the second quarter of FY2020 pan out? Things look bleak at the moment albeit due
to OEMs sharply reducing deliveries to their dealers has seen rising inventory levels come
down to more manageable proportions. But what the industry needs is a growth catalyst from
the government, even as OEMs remain focused on the upcoming shift to BS6, which now less
than nine months away.
Speaking at the June 2019 results meet on July 10, Rajan Wadhera,
president, SIAM, said, "Yes, we support the government's vision of a greener and cleaner
tomorrow, but in order to meet that, we cannot kill the present. As SIAM, we all have been
together in our demand for GST cut on PVs. Corporate tax reduction for companies having
turnover up to Rs 400 crore is a step in the right direction and will aid demand from MSMEs."

"We, as an industry, do have a responsibility towards emission reduction, energy conservation

and bringing futuristic products to the market, but the ramp down of conventional technology
and gradual ramp up of EV technology has to go hand in hand. We need time to bring well
researched, engineered and well-tested EV products to the market. The techno-commercial
feasibility has to be there and it's unimaginable how the industry will manage such amounts of
funds to now freshly infuse into EV development, before even realising profits from BS6
investments."

RECOMMENDATIONS:

1) Though there is a slowdown in the automobile sector, still SUV sector is doing well as
compared to the previous financial quarters. Therefore companies should quickly adopt
to the changing environment of the automobile sector in India and should invent more
on the SUV sector in order to maintain the bottom line.
2) Forecasting of SUV sector should be done properly so that the companies do not loss
on their market share when the demand of their product is on a leap.
3) Since there is a pile of inventory and the holding cost of vehicles is increasing the
companies should avail discounts on the same and should clear the machinery and
inventory so that the more profitable vehicles are brought in production.