Wednesday, November 21, 2012

A look at the 4-wheeler auto segment – a guest post

Despite the double whammy of a slowdown in the Indian economy and high interest rates, sales growth of passenger cars, MPVs and SUVs show little signs of abating. This is perhaps an indication of the aspirations and increase in income of the Indian middle-class, since growth in 4-wheeler sales have outstripped that of 2-wheelers.

In this month’s guest post, Nishit takes a look at the top three listed players in the 4-wheeler segment of the auto sector.

----------------------------------------------------------------------------------------------------------------------------------------

Auto Sales are a very important part of the economy. They serve as a barometer to show the health of the economy. Auto Sales form a part of discretionary expenditure - which can be deferred or lowered by buying a second-hand vehicle.

Auto Sales include Two-Wheeler, Three-wheeler and Four-wheeler sales. Let us focus on Four-wheelers for the moment as they constitute a higher expenditure. As India grows and the purchasing power of the people increases, it will be reflected in Auto Sales. Let us try and explore the Indian Car Market.

In India the major players are Maruti (No. 1, with 40%+ market share), Hyundai at No. 2, M&M at No. 3 and Tata Motors at No. 4. Then we have fringe players like Volkswagen, Toyota, Honda, Ford. Fringe players do not interest us for two reasons: they are not listed in India, and their sales volumes are too small.

clip_image002

(PVs* – Passenger Vehicles; CVs** – Commercial Vehicles)

The three main players of interest for us are Maruti, M&M and Tata Motors. Let us explore each of them.

Maruti (CMP: 1492)

It is best placed amongst all the companies. They have best selling models at various price points. At below Rs. 3 lakh price point are the Alto and EECO; next are Zen/Wagon R/Ritz at the Rs. 3-5 lakh range; followed by Swift and Dzire at the Rs. 5–7 lakh price points, and Ertiga at the Rs. 8-10 lakh price range.

They have the best service network amongst all auto companies. The downside is the lack of a proper diesel range of vehicles. The key point to observe is the pricing of the stock.

M&M (CMP: 943)

M&M has 2 best selling SUVs in their kitty: XUV500 and Quanto. The older Bolero and Scorpio models continue to sell very well. The sub-4 meter Logan has a presence in the passenger vehicle segment. The takeover of Ssangyong, Korea has resulted in new technology being available to the M&M stable. M&M has demonstrated an ability to introduce new models and this resulted in them overtaking Tata Motors to capture the No. 3 slot in India.

M&M is also the largest manufacturer of tractors in India. Any slowdown in the 4-wheeler segment may be offset by tractor sales.

Tata Motors (CMP: 265)

Tata Motors had 2 best sellers in the past: Indica and the Indigo. They have not been able to refresh their product line. The new launch of Nano has not done as well. The Diesel Nano may turn up their fortunes. They are coming up with Manza CS, a sub-4 metre sedan in 2013. The domestic woes are balanced by a strong global sales outlook from Jaguar and Land Rover.

Tata Motors is also the leader in the commercial vehicles segment, with vehicles based on their mini-truck ‘ACE’ platform doing particularly well.

In a nutshell, Maruti is the current leader in the 4-wheeler auto segment with a good product line, pursued by M&M and Tata Motors. The other 4-wheeler manufacturers either have a very fledgling product pipeline or are yet to come out with future plans. Maruti is well positioned with plans for more new launches in 2013.

Two-wheeler sales are showing signs of deceleration, as the economic slowdown hits the common man. Auto sales numbers can be tracked to buy the listed auto companies, or wait for signs of improvement in the economy and lower interest rates to enter.

----------------------------------------------------------------------------------------------------------------------------------------

(Nishit Vadhavkar is a Quality Manager working at an IT MNC. Deciphering economics, equity markets and piercing the jargon to make it understandable to all is his passion. "We work hard for our money, our money should work even harder for us" is his motto.

Nishit blogs at Money Manthan).

No comments: