The Indian car market is one of the fast-growing and largest automobile markets in the world. It has been witnessing massive multi-pronged disruptions in the last few years and there are multi-fold changes taking place in the sector. Here’s a comprehensive analysis of the Indian car market.
The past 18 months have been highly tumultuous with the Covid-19 pandemic negatively affecting all spheres of life. The automobile industry which went through the pains of a transition from BS-IV to BS-VI pollution standards in 2020 then had to undergo the pain of the major lockdowns imposed due to the pandemic.
Last April was a complete 100% washout for the entire industry but then the bounce-back was unreal. Just when it seemed that the bad times were over, we had a serious second wave in April 2021 that dampened the moods for another couple of months. Right now it looks like life is back to normal and demand for cars has picked up once again.
What do we see in the first half-year of 2021 for the car industry? Some of the trends that we have seen in the past are only showing accelerated movement.
1. The SUV/Crossover juggernaut
One of the greatest stories that is unfolding today in the Indian car market is the rise of the SUV. With a 5-year volume CAGR (Cumulative Average Growth Rate) over 2015 to 2020 (last full year of sales) of 24%, the SUVs are driving the Indian car demand across different sizes, the most popular of them being the 4-meter SUVs, comprising of the likes of the Maruti Brezza, Hyundai Venue and Tata Nexon, that is growing at a whopping 51% CAGR in volumes.
The 4-meter SUVs are so popular that they comprise 1 in 5 cars sold in India across body types and form factors today. The ubiquitous and popular hatches that comprised over 60% of the market a decade ago, will in all probability be overtaken by the SUVs this year (at an overall volumes level at the end of the year, though in 2 of the last 6 months the SUVs have beaten the hatches in market share).
The effect of this transition is global in nature and SUVs are closing on virtually the 50% mark in many countries like China and the USA. In the chart below we can see how the two graphs of the once predominant hatches are falling and the SUV/Crossovers is rising and this year in all probability the two should cross each other leaving the SUVs as the desired form factor for Indian car consumers.
Body styles market share over the decade 2011-2021 (Mid-year)
SUV share over the decade 2011-2021 (Mid-year)
It is no surprise at all that of the 19 cars released (new as well as refreshes) in the last 18 months, an overwhelming 16 of them were SUVs and of these 6 were 4-meter SUVs. The other SUV segments that are attracting a growing interest are the mid-sized SUVs comprising of the likes of Creta, Seltos, etc. and have grown at a CAGR of 18% (2015-2020), and the Large SUV segment that is growing at a CAGR of 7% (2015-2020) and comprises of the likes of the newly released Tata Safari, the XUV5OO (slated for a complete refresh), the Harrier, Hector, Compass and Tucson.
There are 10 cars in the 4-meter SUV segment, competing for a share of a pie that is growing in volume terms at a CAGR of 50% + in the last 3 years.
Number of active models across different segments
The above charts clearly tell us the market segments that are the key focus of the various players in the Indian car market today. With 39 of the total 79 active models or almost 50% of all the models in India getting categorized in the SUVs/Crossovers segments, the numbers are very telling.
A decade long story of the 4 meter SUV segment (Market Shares of various models)
The above chart contains the share of both Maruti and Toyota for the Vitara Brezza/Urban Cruiser model.
This segment was introduced to the Indian market by Ford Ecosport which ruled the roost for the first 3 years of 2013 – 2015 and has had a continuous downfall ever since Maruti entered this segment with the Vitara Brezza and was later joined in by the now very successful Tata Nexon and later on by the others.
Honda is the ONLY manufacturer NOT doing well in this segment and has seen its share dwindling very badly due to a lack of competing engines and gearboxes. It is the ONLY player in this segment that does not have an automatic gearbox as an option. The other dominant aspect of this segment is the now very ubiquitous turbocharged petrol engines.
Surprisingly apart from the Honda WRV, the only other model that does not bring in turbocharged petrol is the Maruti Brezza. It is also disadvantaged by the fact that being a 1.5 litre naturally aspirated petrol engine, it gets disqualified from being categorized as a small car leading to serious tax disadvantages to the tune of 16% with respect to the other players. Though the Ford too sports 1.5-litre turbo petrol, it also has the 1.5-litre diesel (which gets categorized as a small car) to supplement this disadvantage.
2. The amazing growth of the Tatas in the two top-ranking segments (4-meter SUVs and 4-meter hatchbacks)
The second phenomenon worthy of noting is the amazing rise of the Tatas. See below the ranking of the Tatas in the Indian car market over the last 7 years. From a terrible 9th rank in 2015 to 3rd ranking in 2020, it has come a very long way with sincere efforts in bringing in new SUVs like the Hexa, the Harrier, the Safari and the Nexon, apart from the brilliant 4-meter hatch, the Altroz.
Despite lacking class-leading powertrains in the lower end of the market, they have worked with partners such as FCA and Hyundai to plug-in technology gaps and bringing in their engines and auto boxes in the Harrier and Safari in the previous year and this is yielding them good dividends. With the reported introduction of a Dual Clutch transmission this year, their share of the market is only bound to go northward.
Their market share numbers are kissing the 10% mark and though beating Hyundai will not be easy, their single-minded focus on the high growth segments of SUVs, 4-meter hatches and the sunrise Electric Vehicle segments have the potential to make that leap in the coming 3 years.
Market share rankings over the last 7 years
Market shares over the last 7 years
Absolute numbers sold over the last 7 years
The above contains numbers for 2021 till June. Tata has sold more cars this first 6 months than they did in the full year of 2019. This is reflected in their average monthly sales in numbers. Tata’s rank No 1 in the growth in average sales numbers per month. It’s an astounding 41% (6 Year CAGR).
Average monthly sales
Much of what Tata sells today are SUVs and Hatches (First 6 months of 2021)
3. The precipitous fall of sedans across the size classifications
The fall of the sedan market is deeply disturbing, to say the least. Especially companies like Honda that have given their whole and soul to this segment are in the danger of packing their bags ala GM/Chevrolet. No good news AT ALL for Honda (Average Monthly Sales across models). In the sedan segment especially the CITY what this translates to, is that Honda will sell 3 cities next year for every 4 cities they are selling this year. Even the story on their most successful car the Amaze is a sad one with average monthly sales showing a degrowth of 17% YoY.
Average monthly sales across all models (Honda)
Honda is mostly a sedan company with sedans comprising 80% of all that they sell.
Volumes CAGR from 2015-2020 (last full year of sales). The decline of the Sedans in sheer volumes is so clear. The below chart is for the entire industry including ALL companies.
Even the all desirable 4-meter segment is not spared of the disdain that customers are showing to the sedans.
4. The steady decline of Maruti!
This is going to come as a shocker to many viewers. Maruti which successfully held over half the markets for this last decade is going to suffer from the massive reliance in numbers in the stagnant hatch market where it rules with 65%of market share.
You can see below that the hatch numbers are seeing a small decline in numbers over the last 5 years (2015-2020). The only segment that is showing a lot of promise for Maruti too is the SUV segment. Though the SUV segment lead by the Vitara Brezza is booming despite the lack of a diesel, its bread-and-butter segment of hatches is showing a steady volume decline
Looking at the most promising 4-meter SUV segment perspective, though Maruti is still leading here, you can see the steady decline in its market share. This decline in market share in the most promising segment is causing an overall decline in market share. We do hope to see recovery here if the release of the 4-meter SUV, the Jimny in its 5 door avatar is well managed with a good turbo petrol engine, the revived 1.5-litre diesel engine developed in house by Maruti but discontinued post BS4 last year, and some decent if not class-leading tech in auto gearboxes.
Maruti’s portfolio breakup by body shapes
Maruti is essentially a hatch company! The true stars in its portfolio today are the Brezza, the Eeco and the Ertiga all of which are doing a stellar job of keeping their market share at some respectable level. Though in all the other segments they are leaders, those segments themselves are showing degrowth or stagnation.
Maruti’s portfolio actually looks disturbing from a CAGR viewpoint and someone needs to wake up in the company to understand exactly why their share in the 10-15 lakh and 15-20 lakhs segments that are growing the maximum seem to be a tough battleground for them.
Share of the different players in 2021 across different price brackets. Maruti leads in the sub-10 lakh bracket, but declines in the 10-15 lakh bracket and has NO presence in the 15-20 lakh bracket which is showing maximum growth. Here it is the Korean twins of Hyundai and Kia that are dominating.
It is so clear below as to which price brackets in the market are showing growth.
Volumes across segments over the last 6 years
(Niranjan N Prabhu is an auto industry analyst with vast experience in BI and data analytics for over 22 years.)
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