The fiscal 2015-16 once again underlined that most foreign car makers like Toyota, Nissan, Renault, Ford and Volkswagen have largely failed to make an impact in the domestic market in terms of sales despite several years of presence in India. Around 75-80% of the market is dominated by four players in the passenger vehicle segment — Maruti Suzuki, Hyundai Motor, Mahindra and Mahindra and Honda Cars. This clearly brings out the fact that while foreign players like Suzuki, Hyundai and Honda who made an early entry into the domestic market are dominating, the later entrants continue to struggle.
The ban on sale of diesel vehicles with engine capacity of two litre and above in the national capital region has only compounded the problem for the struggling foreign auto majors, as all of them have a significant proportion of diesel cars in their portfolios.
Japanese car manufacturer Toyota had a tough time in the second half of the last fiscal as volumes of its most-sold vehicle Innova took a big hit after the Supreme Court banned registration of diesel vehicles with a two-litre engine in the NCR.
The volumes in the April to February period fell by 7.80% y-o-y to 52,437 units. Volumes of hatchback Liva also declined by 12.97% y-o-y to 19,204 units. Volumes of premium sedan Corolla Altis and utility vehicle Fortuner also decreased by 28.74% and 18.78% y-o-y to 5,922 units 12,980 units, respectively. Volumes of Etios sedan — a preferred vehicle of cab aggregators — increased by 21.35% y-o-y to 29,088 units.
“If a foreign manufacturer has to succeed in India, it has to introduce a variety of products, especially in the small car segment. Most of them don’t have good product strategy in India and have to focus mostly on exports,” says Abdul Majeed, Partner, PWC.
During the same period, Japanese carmaker Nissan also failed to make its mark in the market with its products. Volumes of small cars — Datsun GO and Micra — dipped by 30.73% and 10.71% y-o-y to 8,570 units and 6,855 units, respectively. Volumes of Sunny (sedan) and Terrano (compact SUV) also reduced to half during the last fiscal. The only comforting fact was the performance of the Datsun Go plus, which increased 408.47% y-o-y to 9,295 units during the same time.
Companies like Volkswagen also continued to struggle as volumes of popular models like the Polo (premium hatchback) fell by 10.13%, while sales of Vento (a midsize sedan) remained flat at 11,408 units during the 11 months of last financial year.
Sales of premium sedan Jetta also failed to pick up after the company was found violating emission rules.
“Most OEMs have good products, but somehow they could not justify the proposition to the customers. Most products do not have any resale value, which makes the customer more wary of buying these products. In contrast, the top players understand the customer psyche very well,” says Puneet Gupta of IHS.
Last week, Volkswagen recalled 3,877 units of Vento with diesel engines over concerns of violating the emission norms.
Renault, which took the India market by surprise by launching compact SUV Duster, also struggled to make its mark as Duster volumes halved and volumes of multi-purpose vehicles Lodgy also did not rise as expected.
The French carmaker, however, managed to enter the small car market with reasonable success with the introduction of the Kwid, which clocked volumes to the tune of 31,461 units since October. Models like Pulse and Scala also did not perform well.
In March, Renault registered a growth of 160% with monthly domestic sales of 12,424units against 4,782 units in the corresponding month last year on the back of good demand for Kwid.
American vehicle manufacturer Ford did manage to get some volumes after the launch of the new Figo (hatchback) and Figo
Aspire (compact sedan). Volumes of these two vehicles also are far behind that of Swift and Dzire, which are the market leaders in these segments.
“Companies need to focus on after-sales service and once that is taken care of, success will definitely come in the long term,” adds Majeed.
Companies like Nissan, Volkswagen, Ford are focused on mostly on exports as they look to tap cheap human labour available in India. Most of the products introduced by these companies are already available in other geographies.