How multinational carmakers are being squeezed out of Indian market

There has been a steady decline in the market share of global carmakers in the past three years
Multinational carmakers except Maruti Suzuki and Hyundai are being squeezed out of the Indian car market. There has been a steady decline in the market share of global carmakers in the past three years, reversing the trend of their market share gains between FY10 and FY17.

The combined market share of these multinationals (MNCs) declined to 21.3 per cent in FY20 from a record high of 28.1 per cent in FY17. In comparison these MNCs, including Honda, Toyota, Ford, Volkswagen, Renault, and Nissan, had more than doubled their market share between FY10 and FY17.

These MNCs together sold 667,000 units in FY20 from a peak of 1.017 million units in FY17, translating into a decline of 36 per cent during the period, according to the data from Society of Indian Automobile Manufacturers.

There is a similar trend in the revenues of their Indian subsidiaries. Toyota Kirloskar’s revenues went down 13.4 per cent between FY17 and FY19, while those for Volkswagen Group were down 30 per cent during the period. Nissan India’s revenues nearly halved in the period.

Other carmakers, including Maruti Suzuki, Hyundai, Tata Motors, and Mahindra & Mahindra, reported a 7.2 per decline in sales volumes.

In comparison, the car market was down 15 per cent during the period from 3.7 million units in FY17 to 3.13 million units in FY20. While the market in India peaked in FY17 – the year of demonetisation – the sales volumes of MNCs peaked in FY16.

For example, Volkswagen India’s sales volumes are down 40 per cent in the last four years from 136,000 units in FY16 to around 80,000 units in FY20. Toyota Kirloskar’s sales peaked in FY17 at 155,000 units and have since declined to around 100,000 in FY20.

Ford India’s sales peaked in FY17 at 274,000 units, declining to 198,000 units in FY20. Honda Cars, on the other hand, had its best year in FY15, with sales of 197,000 units, declining to around 95,000 units in FY20.

The sales volumes of Nissan Motor India and Renault India peaked in FY17 and are down 42 per cent and 34 per cent, respectively, since then. In contrast, Maruti Suzuki, which has the largest range of entry-level small cars in country, was least affected by the slowdown in the industry. It continued to grow until FY19 and reported an 18 per cent decline in volumes in FY19.

Analysts attribute the relatively poor showing of the MNCs to down-trading by car buyers.

“The sales break-up of auto makers suggests down-trading by customers in the past 4 years, leading to higher offtake of cheaper and smaller cars. It co-coincided with demonetisation in November 2016 and the rollout of goods and services tax in July 2017, hitting economic activities and income growth,” said Dhananjay Sinha, head (research) Systematix Institutional Equity.

For example, a typical Honda Car cost around Rs 7.5 lakh in FY19, almost 85 per cent higher than Maruti Suzuki’s around Rs 4 lakh and almost 50 per cent higher than Hyundai’s Rs 4.9 lakh in the same year.

Others attribute this to customer preference for compact SUVs.

“More and more people are now buying compact SUVs. This has hit the volumes of companies which failed to enter that segment at the right time,” said Suman Choudhury of Acuite Ratings and Research.

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