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UBS Investment Research
9th UBS Auto Dealer Survey
Sales likely to slow
Dealers expect a slowdown post festive season and year-end discounts
Our UBS Composite Auto Index at 54 indicates that the demand environment has
improved since our last survey due to strong footfalls and improving finance
availability despite rising interest rates and a weak dealer sales outlook. However,
sales are likely to slow due to seasonal factors and a lack of meaningful decline in
inventory levels post the festive season. 55% of the dealers expect the sales to
decline 5%-15% in the next two months. However, 75% of Mahindra & Mahindra
(M&M) dealers expect sales to improve 5-15% in the next two months. Our
preferred picks in the sector are M&M, Hero Honda and Tata Motors.
Finance availability continues to improve, fuel price impact limited
29% of the dealers think finance availability has improved in the past two months,
while only 2% felt it has deteriorated. 73% reported an increase in the financing
rate in the past two months. 73% of the dealers think there will be no negative
impact on sales due to the fuel price hike, while 27% believed there will be
moderate negative impact.
Higher discounts, higher footfalls; inventory levels stay high
71% of the dealers reported that the discounts have increased in the past two
months. 78% noticed an increase in footfalls and first-time buyers in the same
period. More than 50% reported inventory levels of more than four weeks.
UBS India Auto Dealer Survey provides on-the-ground feedback
This is the ninth edition of the UBS India Auto Dealer Survey based on responses
of 45 auto dealers based in 14 states across India. This product provides a detailed
analysis of the Indian Auto market based on a proprietary primary survey
Executive Summary
Slowdown expected
Dealers expect slowdown; Increase in financing rates
Based on responses received from 45 auto dealers across the country and across
companies in Jan ’11, we expect the car sales to slow down in the next two
months. 55% of the dealers expect sales of new cars to decrease by 5%-15% or
more, while 32% of the dealers expect the used car sales to decline by 5%-15%
or more. 73% of the dealers noticed an increase in financing rates by 1% or
more. 69% of dealers believe that the finance availability to buy new cars is
returning to normal level.
Higher discounts; higher footfalls; increase in first-time customers
71% of the dealers reported that the discounts have increased in the last 2
months. This coincides with the month of December when the manufacturers are
known to roll out huge discounts. 78% of the dealers noticed an increase in
footfalls in the last 2 months which is considerably higher than 58% dealers
reported in the last survey in Sep’10. 78% dealers noticed an increase in first
time customers which is considerably higher than 56% dealers reported during
the last survey in Sep ’10.
Increase in inventory levels; minimal impact of higher fuel prices
Dealers continue to maintain high inventory levels. 51% of dealers reported
more than 4 weeks of inventory (80% of Tata Motors, 75% of Hyundai and 14%
of other dealers had more than 4 weeks of inventory). 73% of the dealers think
there will be no impact on sales due to increase in fuel prices, while other 27%
think the impact would be moderate leading to decline in sales by 0-10%. All of
Tata Motors and Mahindra and 76% of Maruti dealers think there will be no
impact on sales due to hike in fuel price.
UBS Composite Auto Index
Our UBS Composite Auto Index is a proprietary index designed to measure the
aggregate value of the responses to our bimonthly survey questions. We have
incorporated six components in constructing our index and weighted each of
them based on our perception of its overall importance in determining the
environment of auto market in India.
Our index measures the change in our respondents’ view from our previous
survey and is not meant to be an absolute measure of business conditions. Our
index value has a scale of 0-100, with 0-49 implying incrementally weakening
market environment, 50 incrementally stable market environment, and 51-100
incrementally improving market environment.
Our Jan Index came in at 54, a decrease of 20% from Sep survey Index value of
68. This decline was driven by decline in score for four of our index components
–Financing availability, financing rates, Outlook for used car sales and Outlook
for new car sales. We observe that the score for Outlook for new car sales and
outlook for used car sales have seen a considerable decline since last survey.
The decline in the finance availability is a decline since last survey but it is still
well above 50 indicating there is improvement finance availability in the last 2
months. The change in interest rate further weakens and remains way below 50
implying weakening of the factor. There has been a considerable increase in
value footfalls and new customers since last survey in Sep’10.
Overall, our Index value of 54 is the lowest index value in our 9 surveys and
indicates that market improvement is stabilizing
Investment View
Mahindra & Mahindra (Buy, Rs 910 PT)
We believe M&M is a strong play on the rural growth story due to its leading
tractor franchise and UV sales which also has significant exposure to rural areas.
We also expect the Ssangyong acquisition to be significantly accretive for
M&M.
Increase in investment in rural infrastructure and government’s proposal to link
MGNREGA wages with inflation that is likely to put upward pressure on rural
labor cost to fuel the demand for tractors.
We value M&M on a sum-of-the-parts basis. We value the stand-alone business
at Rs 660/share based on 8x FY12-13(avg.) EV/EBITDA and subsidiaries at Rs
190/share; and the 70% stake in Ssangyong at Rs60/share to arrive at Rs 910.
Maruti Suzuki (Buy, Rs 1,700 PT)
We believe the potential headwinds with regards to slowing growth, near-term
pressure on margins and higher competition are now largely priced in. We
believe the margins are bottoming out and valuations are attractive.
We remain structurally positive on car growth in India over the medium term
and expect Maruti to benefit from it. We believe Maruti’s strong distribution
network is likely to help it tap strong rural growth.
We derive our 12-mth price target on DCF-based methodology and explicitly
forecast long-term valuation drivers with UBS’s VCAM tool with WACC of
11.3%.
Tata Motors (Buy, PT Rs 1500)
We remain positive on Tata Motors as we expect JLR margins to improve
further in Q3FY11 due to improving product mix, reduction in incentives and
operating leverage to negate our concerns on currency effect and potential
higher RM cost. We expect a modest in growth environment in FY12/13 for the
domestic business.
We value Tata Motors on a sum-of-the-parts basis. We value domestic business
and subs on 9x 12 month forward adj. EBITDA and JLR at 5x 12 month fwd
EBITDA to derive our PT. We adjust our EBITDA for the R&D capitalization.
Company-wise summary of findings
Maruti: Dealers expect a slowdown
82% of Maruti dealers noticed an increase in footfalls in the last 2 months.
Similar percentage of dealers noticed an increase in the first time customers and
noticed higher discounts being offered in the last 2 months. Maruti dealers
expect a slow down in the next 2 months with only 12% dealers indicating they
expect a growth in sales. 59% dealers believe that the finance availability for
buying new cars has returned to normal level, while 24% of the dealers thought
that finance availability for buying new cars became liberal in last 2 months.
71% of the dealers reported that financing rates have increased in past 2 months.
42% of the dealers indicated that cash sales contribute more than 30% of total
sales. Maruti dealers have seen some inventory built up as 47% of the dealers
indicated that they have inventory of more than 4 weeks.
M&M: Dealers expect steady growth on improving financing conditions
75% of the dealers think that sales will improve 5%-15% in the next 2 months,
which is much higher than 24% of overall dealers expecting sales to improve.
All the dealers have noticed an increase in foot falls in last 2 months, while 75%
dealers noticed an increase in 1st time customers in last 2 months. 75% of the
dealers reported increase in discounts. The inventory continues to be a concern
for the Mahindra dealers with only 25% of them having an inventory level of
more than 4 weeks, while 25% of the dealers reported inventory levels of less
than 2 weeks. All the dealers believe that financing rates have returned to
normal levels, while 75% of the dealers noticed an increase in financing rates.
Tata Motors: Improving financing conditions and increasing footfalls
All Tata Motors dealers expect sales to slow down by 5%-15% or more in the
next 2 months. All the dealers noticed an increase in footfalls and increase in 1st
time customers in the previous 2 months. 80% of the dealers noticed an increase
in discounts. 40% of Tata Motors dealers believe that financing environment is
still stringent. 40% of the dealers indicated that the availability of finance for
new cars became liberal in past 2 months. 80% of the dealers are carrying
inventory of more than 4 weeks
Appendix
UBS Auto dealer survey
In Jan’11 we conducted a survey of Auto dealers across the country. The
following results are based on the survey responses which we received from 45
dealers across the country
Question 1: Compared to the last 2 months, what has
been the trend in footfalls?
We assigned a numeric value to each response, with “down >15%” assigned a
value of 0, “down 5-15%” assigned a value of 25, “flat” assigned a value of 50,
“up 5-15%” assigned a value of 75, and “up >15%” assigned a value of 100.
We then computed the average response to the question using the values
assigned to each response. This survey’s average response of 76 implies
sequential increase in footfalls.
Overall, 78% of dealers have seen an increase in footfalls. All of Tata Motors
and Mahindra dealers have noticed an increase in footfalls in last 2 months. 82%
of Maruti dealers have seen an increase in footfalls in the last 2 months and 71%
of other dealers have seen an increase in footfalls in the last 2 months.
Question 2: Have you seen a change in no. of first time
customers?
We assigned a numeric value to each response, with “decreased” assigned a
value of 0, “unchanged” assigned a value of 50, and “increased” assigned a
value of 100. We then computed the average response to the question using the
values assigned to each response. This survey’s average response of 83
implies a sequential increase in new customers.
78% dealers reported an increase in new customers. 100% of Tata Motors, 82%
of Maruti and 75% of Mahindra & Mahindra dealers noticed an increase in the
number of first time customers. 71% of other dealers and 67% of Hyundai
dealers also noticed an increase in 1st time customers. 25% of the Mahindra and
18% of Maruti dealers noticed decrease in first time customers
Question 3: What percentage of total sales is on cash
basis?
We assigned a numeric value to each response, with “0-10%” assigned a value
of 5%, “10-20%” assigned a value of 15%, “20-30%” assigned a value of 25%,
“30-40%” assigned a value of 35%, and “>40%” assigned a value of 50%. We
then computed the average response to the question using the values assigned to
each response. This survey’s average response of 27% implies the level of
overall cash sales for our sample.
38% of dealers reported cash sales of more than 30%. 43% of other dealers and
41% of Maruti dealers reported more than 30% of sales in cash. 50% of M&M
dealers reported cash sales of less than 10%.
Question 4a: How has the finance availability for new
cars changed over the last 2 months?
We assigned a numeric value to each response, with “restrained” assigned a
value of 0, “unchanged” assigned a value of 50, and “more liberal” assigned a
value of 100. We then computed the average response to the question using the
values assigned to each response. Average response of 63 implies finance
availability have become liberal in the previous 2 months.
29% of the dealers reported liberal financing in the last 2 months, while only 2%
reported restrained financing environment in the last 2 months. 42% of Hyundai
dealers, 40% of Tata Motors dealers, 25% of Mahindra dealers, and 24% of
Maruti dealers reported improvement in financing environment in the last 2
months.
Question 4b: How is the finance availability for new
cars?
69% of the dealers think the finance availability is returning to normal level,
while 27% dealers thought that the finance availability was still stringent. Only
4% of respondents reported that availability was liberal than normal. 100% of
Mahindra and Mahindra dealers and 86% of other dealers responded that the
finance availability to buy new cars is normal
Question 5: How have the average financing rates to
customers buying new cars changed in last 2 months?
73% of the dealers responded that financing rates for buying new cars have
increased in the last 2 month. 92% of Hyundai dealers and 80% of Tata Motors
dealers noticed an increased in financing rate in the last 2 months. 75% of
Mahindra dealers and 71% of Maruti dealers noticed increase in financing rates.
57% of other dealers did not notice any change in the financing rates.
customers changed in last 2 months?
71% of the dealers responded that discounts increased in the previous 2 months,
indicating that there were good offers and schemes available in last 2 months.
82% of the Maruti dealers, 80% Tata Motors dealers and 75% of Mahindra and
Mahindra noticed an increase discounts in the last 2 months. 17% of Hyundai
dealers reported a decrease in the discounts in the last 2 months.
Question 7: How much inventory does your dealership
carry?
Dealers continue to build up inventory levels, with 51% of the dealers having an
inventory of 4 weeks or more. 80% of Tata motor dealers carried inventory of 4
weeks or more, while 75% of Hyundai dealers had similar level of inventory.
Continuing the trend of last few surveys, M&M dealers have the lowest
inventory with 50% of the dealers reporting inventory of less than 3 weeks.
Question 8: What is your outlook for car sales over the
next 2 months?
We assigned a numeric value to each response, with “down >15%” assigned a
value of 0, “down 5-15%” assigned a value of 25, “flat” assigned a value of 50,
“up 5-15%” assigned a value of 75, and “up >15%” assigned a value of 100.
We then computed the average response to the question using the values
assigned to each response. This survey’s average response of 36 implies a
very sharp sequential decline in car sales. This is partly on the back of
robust sales during the festival and during the time when various discounts
and schemes were offered.
55% dealers expect the sales to decline in the next 2 months, and out of these
about 31% dealers expect the sales to decrease by more than 15%. All the Tata
Motors dealers expect the sales to decline in the next 2 months, with 80% of
them expecting it to decline by >15%. 58% of Hyundai and 53% of Maruti,
dealers expect the sales to decline. 75% of Mahindra dealers expect the sales to
improve in the next 2 months by 5%-15%.
Question 9: What is your outlook for used car sales over
the next 2 months?
Dealers expect the used cars sales also to slow down with 32% of them expect
used car sales to decline by 5%-15% or greater. 75% of Tata Motors dealers and
50% dealers Maruti, expect the sales of used cars to decline by 5%-15% or more
in the next 2 months.
Question 10: Do you think that higher fuel prices will
impact car sales?
73% of the dealers think that there will be no impact on sales on account of
higher fuel prices. All of Tata Motors and Mahindra dealers think that there will
not be any impact on sales on account of higher fuel prices. 76% of Maruti
dealers and 71% of other dealers think the same.
Dealers comments on current Industry
environment
Maruti Suzuki
Increase in fuel price hike will not have much impact as CNG option is
available these days. The sales of cars will be good for next few years. The
numbers of people having car per 1000 is one of the lowest in India thus
there is lot of opportunity.
Competition is getting stronger. This year should be good. Expecting a
bumper march and reasonable Jan-Feb.
Expect the market to become better in the coming months. Sales are
generally high in the month of March.
The fuel price hike would have a momentary impact and the customers
purchase will get postponed by 15-20 days.
The market conditions are good but there would be general slow down in the
month of Jan-Feb as the past trends indicate.
As many public sector banks have started giving loans in the sector the
consumer has benefited with loan becoming more easily than before.
Expect the sales to grow at the rate of 25-30% this year. The sales in the
month of Jan-Feb will also be impacted by delay in the supply of vehicles as
the vehicles produced in 2011 will reach the dealership only by 3rd week of
Jan 2011.
The months of August-September are the peak in Kerala as there is Onam
festival. They walk in reduce post that. Will see a slow down in the month
of Jan-Feb. Have not yet noticed any impact of petrol price hike.
Sales of diesel and CNG model have gone up since the petrol price hike.
Mahindra & Mahindra
Upbeat environment, but cautious outlook.
With cotton, ground nut & specially onion price the farmers are very happy,
which has resulted in to cash buying at our dealership. We are holding more
bookings than festive season. But again supply shall be a problem. No looks
back till March at least.
Strong growth momentum shall continue further. Expanded manufacturer's
capacity coming online over the next few months will ultimately overtake
demand - leading to sudden pressure on dealer/ manufacturer margins.
Hyundai Motors
Very Competitive as new manufacturers entering the market with new
generation models.
The following points would impact the sales : - New models being launched
by competitors and new entrant - Price increase of the car - No discounts will
be offered in the new models - Increase in fuel prices The first time buyers
will consider these points before making a decision
December months have lots of offers and expect a slow down of 20-25% in
the months of Jan and Feb.
Tata Motors
The increase in petrol prices will not impact the sales as increase in
expenditure will be compensated by increase in income level.
December sales were really good but the coming months will be a bit slow.
Others
Ratio of LPG sales going up gradually
Competition in all segments likely to get pretty intense this year.
Industry is becoming very competitive. With more and more players coming
in, the pressure on value for money will increase and customer tolerance will
decline.
We would like to thank Tarun Malpani, an employee of Cognizant Group, for his
assistance in preparing this research report. Cognizant staff provides
research support services to UBS.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
9th UBS Auto Dealer Survey
Sales likely to slow
Dealers expect a slowdown post festive season and year-end discounts
Our UBS Composite Auto Index at 54 indicates that the demand environment has
improved since our last survey due to strong footfalls and improving finance
availability despite rising interest rates and a weak dealer sales outlook. However,
sales are likely to slow due to seasonal factors and a lack of meaningful decline in
inventory levels post the festive season. 55% of the dealers expect the sales to
decline 5%-15% in the next two months. However, 75% of Mahindra & Mahindra
(M&M) dealers expect sales to improve 5-15% in the next two months. Our
preferred picks in the sector are M&M, Hero Honda and Tata Motors.
Finance availability continues to improve, fuel price impact limited
29% of the dealers think finance availability has improved in the past two months,
while only 2% felt it has deteriorated. 73% reported an increase in the financing
rate in the past two months. 73% of the dealers think there will be no negative
impact on sales due to the fuel price hike, while 27% believed there will be
moderate negative impact.
Higher discounts, higher footfalls; inventory levels stay high
71% of the dealers reported that the discounts have increased in the past two
months. 78% noticed an increase in footfalls and first-time buyers in the same
period. More than 50% reported inventory levels of more than four weeks.
UBS India Auto Dealer Survey provides on-the-ground feedback
This is the ninth edition of the UBS India Auto Dealer Survey based on responses
of 45 auto dealers based in 14 states across India. This product provides a detailed
analysis of the Indian Auto market based on a proprietary primary survey
Executive Summary
Slowdown expected
Dealers expect slowdown; Increase in financing rates
Based on responses received from 45 auto dealers across the country and across
companies in Jan ’11, we expect the car sales to slow down in the next two
months. 55% of the dealers expect sales of new cars to decrease by 5%-15% or
more, while 32% of the dealers expect the used car sales to decline by 5%-15%
or more. 73% of the dealers noticed an increase in financing rates by 1% or
more. 69% of dealers believe that the finance availability to buy new cars is
returning to normal level.
Higher discounts; higher footfalls; increase in first-time customers
71% of the dealers reported that the discounts have increased in the last 2
months. This coincides with the month of December when the manufacturers are
known to roll out huge discounts. 78% of the dealers noticed an increase in
footfalls in the last 2 months which is considerably higher than 58% dealers
reported in the last survey in Sep’10. 78% dealers noticed an increase in first
time customers which is considerably higher than 56% dealers reported during
the last survey in Sep ’10.
Increase in inventory levels; minimal impact of higher fuel prices
Dealers continue to maintain high inventory levels. 51% of dealers reported
more than 4 weeks of inventory (80% of Tata Motors, 75% of Hyundai and 14%
of other dealers had more than 4 weeks of inventory). 73% of the dealers think
there will be no impact on sales due to increase in fuel prices, while other 27%
think the impact would be moderate leading to decline in sales by 0-10%. All of
Tata Motors and Mahindra and 76% of Maruti dealers think there will be no
impact on sales due to hike in fuel price.
UBS Composite Auto Index
Our UBS Composite Auto Index is a proprietary index designed to measure the
aggregate value of the responses to our bimonthly survey questions. We have
incorporated six components in constructing our index and weighted each of
them based on our perception of its overall importance in determining the
environment of auto market in India.
Our index measures the change in our respondents’ view from our previous
survey and is not meant to be an absolute measure of business conditions. Our
index value has a scale of 0-100, with 0-49 implying incrementally weakening
market environment, 50 incrementally stable market environment, and 51-100
incrementally improving market environment.
Our Jan Index came in at 54, a decrease of 20% from Sep survey Index value of
68. This decline was driven by decline in score for four of our index components
–Financing availability, financing rates, Outlook for used car sales and Outlook
for new car sales. We observe that the score for Outlook for new car sales and
outlook for used car sales have seen a considerable decline since last survey.
The decline in the finance availability is a decline since last survey but it is still
well above 50 indicating there is improvement finance availability in the last 2
months. The change in interest rate further weakens and remains way below 50
implying weakening of the factor. There has been a considerable increase in
value footfalls and new customers since last survey in Sep’10.
Overall, our Index value of 54 is the lowest index value in our 9 surveys and
indicates that market improvement is stabilizing
Investment View
Mahindra & Mahindra (Buy, Rs 910 PT)
We believe M&M is a strong play on the rural growth story due to its leading
tractor franchise and UV sales which also has significant exposure to rural areas.
We also expect the Ssangyong acquisition to be significantly accretive for
M&M.
Increase in investment in rural infrastructure and government’s proposal to link
MGNREGA wages with inflation that is likely to put upward pressure on rural
labor cost to fuel the demand for tractors.
We value M&M on a sum-of-the-parts basis. We value the stand-alone business
at Rs 660/share based on 8x FY12-13(avg.) EV/EBITDA and subsidiaries at Rs
190/share; and the 70% stake in Ssangyong at Rs60/share to arrive at Rs 910.
Maruti Suzuki (Buy, Rs 1,700 PT)
We believe the potential headwinds with regards to slowing growth, near-term
pressure on margins and higher competition are now largely priced in. We
believe the margins are bottoming out and valuations are attractive.
We remain structurally positive on car growth in India over the medium term
and expect Maruti to benefit from it. We believe Maruti’s strong distribution
network is likely to help it tap strong rural growth.
We derive our 12-mth price target on DCF-based methodology and explicitly
forecast long-term valuation drivers with UBS’s VCAM tool with WACC of
11.3%.
Tata Motors (Buy, PT Rs 1500)
We remain positive on Tata Motors as we expect JLR margins to improve
further in Q3FY11 due to improving product mix, reduction in incentives and
operating leverage to negate our concerns on currency effect and potential
higher RM cost. We expect a modest in growth environment in FY12/13 for the
domestic business.
We value Tata Motors on a sum-of-the-parts basis. We value domestic business
and subs on 9x 12 month forward adj. EBITDA and JLR at 5x 12 month fwd
EBITDA to derive our PT. We adjust our EBITDA for the R&D capitalization.
Company-wise summary of findings
Maruti: Dealers expect a slowdown
82% of Maruti dealers noticed an increase in footfalls in the last 2 months.
Similar percentage of dealers noticed an increase in the first time customers and
noticed higher discounts being offered in the last 2 months. Maruti dealers
expect a slow down in the next 2 months with only 12% dealers indicating they
expect a growth in sales. 59% dealers believe that the finance availability for
buying new cars has returned to normal level, while 24% of the dealers thought
that finance availability for buying new cars became liberal in last 2 months.
71% of the dealers reported that financing rates have increased in past 2 months.
42% of the dealers indicated that cash sales contribute more than 30% of total
sales. Maruti dealers have seen some inventory built up as 47% of the dealers
indicated that they have inventory of more than 4 weeks.
M&M: Dealers expect steady growth on improving financing conditions
75% of the dealers think that sales will improve 5%-15% in the next 2 months,
which is much higher than 24% of overall dealers expecting sales to improve.
All the dealers have noticed an increase in foot falls in last 2 months, while 75%
dealers noticed an increase in 1st time customers in last 2 months. 75% of the
dealers reported increase in discounts. The inventory continues to be a concern
for the Mahindra dealers with only 25% of them having an inventory level of
more than 4 weeks, while 25% of the dealers reported inventory levels of less
than 2 weeks. All the dealers believe that financing rates have returned to
normal levels, while 75% of the dealers noticed an increase in financing rates.
Tata Motors: Improving financing conditions and increasing footfalls
All Tata Motors dealers expect sales to slow down by 5%-15% or more in the
next 2 months. All the dealers noticed an increase in footfalls and increase in 1st
time customers in the previous 2 months. 80% of the dealers noticed an increase
in discounts. 40% of Tata Motors dealers believe that financing environment is
still stringent. 40% of the dealers indicated that the availability of finance for
new cars became liberal in past 2 months. 80% of the dealers are carrying
inventory of more than 4 weeks
Appendix
UBS Auto dealer survey
In Jan’11 we conducted a survey of Auto dealers across the country. The
following results are based on the survey responses which we received from 45
dealers across the country
Question 1: Compared to the last 2 months, what has
been the trend in footfalls?
We assigned a numeric value to each response, with “down >15%” assigned a
value of 0, “down 5-15%” assigned a value of 25, “flat” assigned a value of 50,
“up 5-15%” assigned a value of 75, and “up >15%” assigned a value of 100.
We then computed the average response to the question using the values
assigned to each response. This survey’s average response of 76 implies
sequential increase in footfalls.
Overall, 78% of dealers have seen an increase in footfalls. All of Tata Motors
and Mahindra dealers have noticed an increase in footfalls in last 2 months. 82%
of Maruti dealers have seen an increase in footfalls in the last 2 months and 71%
of other dealers have seen an increase in footfalls in the last 2 months.
Question 2: Have you seen a change in no. of first time
customers?
We assigned a numeric value to each response, with “decreased” assigned a
value of 0, “unchanged” assigned a value of 50, and “increased” assigned a
value of 100. We then computed the average response to the question using the
values assigned to each response. This survey’s average response of 83
implies a sequential increase in new customers.
78% dealers reported an increase in new customers. 100% of Tata Motors, 82%
of Maruti and 75% of Mahindra & Mahindra dealers noticed an increase in the
number of first time customers. 71% of other dealers and 67% of Hyundai
dealers also noticed an increase in 1st time customers. 25% of the Mahindra and
18% of Maruti dealers noticed decrease in first time customers
Question 3: What percentage of total sales is on cash
basis?
We assigned a numeric value to each response, with “0-10%” assigned a value
of 5%, “10-20%” assigned a value of 15%, “20-30%” assigned a value of 25%,
“30-40%” assigned a value of 35%, and “>40%” assigned a value of 50%. We
then computed the average response to the question using the values assigned to
each response. This survey’s average response of 27% implies the level of
overall cash sales for our sample.
38% of dealers reported cash sales of more than 30%. 43% of other dealers and
41% of Maruti dealers reported more than 30% of sales in cash. 50% of M&M
dealers reported cash sales of less than 10%.
Question 4a: How has the finance availability for new
cars changed over the last 2 months?
We assigned a numeric value to each response, with “restrained” assigned a
value of 0, “unchanged” assigned a value of 50, and “more liberal” assigned a
value of 100. We then computed the average response to the question using the
values assigned to each response. Average response of 63 implies finance
availability have become liberal in the previous 2 months.
29% of the dealers reported liberal financing in the last 2 months, while only 2%
reported restrained financing environment in the last 2 months. 42% of Hyundai
dealers, 40% of Tata Motors dealers, 25% of Mahindra dealers, and 24% of
Maruti dealers reported improvement in financing environment in the last 2
months.
Question 4b: How is the finance availability for new
cars?
69% of the dealers think the finance availability is returning to normal level,
while 27% dealers thought that the finance availability was still stringent. Only
4% of respondents reported that availability was liberal than normal. 100% of
Mahindra and Mahindra dealers and 86% of other dealers responded that the
finance availability to buy new cars is normal
Question 5: How have the average financing rates to
customers buying new cars changed in last 2 months?
73% of the dealers responded that financing rates for buying new cars have
increased in the last 2 month. 92% of Hyundai dealers and 80% of Tata Motors
dealers noticed an increased in financing rate in the last 2 months. 75% of
Mahindra dealers and 71% of Maruti dealers noticed increase in financing rates.
57% of other dealers did not notice any change in the financing rates.
customers changed in last 2 months?
71% of the dealers responded that discounts increased in the previous 2 months,
indicating that there were good offers and schemes available in last 2 months.
82% of the Maruti dealers, 80% Tata Motors dealers and 75% of Mahindra and
Mahindra noticed an increase discounts in the last 2 months. 17% of Hyundai
dealers reported a decrease in the discounts in the last 2 months.
Question 7: How much inventory does your dealership
carry?
Dealers continue to build up inventory levels, with 51% of the dealers having an
inventory of 4 weeks or more. 80% of Tata motor dealers carried inventory of 4
weeks or more, while 75% of Hyundai dealers had similar level of inventory.
Continuing the trend of last few surveys, M&M dealers have the lowest
inventory with 50% of the dealers reporting inventory of less than 3 weeks.
Question 8: What is your outlook for car sales over the
next 2 months?
We assigned a numeric value to each response, with “down >15%” assigned a
value of 0, “down 5-15%” assigned a value of 25, “flat” assigned a value of 50,
“up 5-15%” assigned a value of 75, and “up >15%” assigned a value of 100.
We then computed the average response to the question using the values
assigned to each response. This survey’s average response of 36 implies a
very sharp sequential decline in car sales. This is partly on the back of
robust sales during the festival and during the time when various discounts
and schemes were offered.
55% dealers expect the sales to decline in the next 2 months, and out of these
about 31% dealers expect the sales to decrease by more than 15%. All the Tata
Motors dealers expect the sales to decline in the next 2 months, with 80% of
them expecting it to decline by >15%. 58% of Hyundai and 53% of Maruti,
dealers expect the sales to decline. 75% of Mahindra dealers expect the sales to
improve in the next 2 months by 5%-15%.
Question 9: What is your outlook for used car sales over
the next 2 months?
Dealers expect the used cars sales also to slow down with 32% of them expect
used car sales to decline by 5%-15% or greater. 75% of Tata Motors dealers and
50% dealers Maruti, expect the sales of used cars to decline by 5%-15% or more
in the next 2 months.
Question 10: Do you think that higher fuel prices will
impact car sales?
73% of the dealers think that there will be no impact on sales on account of
higher fuel prices. All of Tata Motors and Mahindra dealers think that there will
not be any impact on sales on account of higher fuel prices. 76% of Maruti
dealers and 71% of other dealers think the same.
Dealers comments on current Industry
environment
Maruti Suzuki
Increase in fuel price hike will not have much impact as CNG option is
available these days. The sales of cars will be good for next few years. The
numbers of people having car per 1000 is one of the lowest in India thus
there is lot of opportunity.
Competition is getting stronger. This year should be good. Expecting a
bumper march and reasonable Jan-Feb.
Expect the market to become better in the coming months. Sales are
generally high in the month of March.
The fuel price hike would have a momentary impact and the customers
purchase will get postponed by 15-20 days.
The market conditions are good but there would be general slow down in the
month of Jan-Feb as the past trends indicate.
As many public sector banks have started giving loans in the sector the
consumer has benefited with loan becoming more easily than before.
Expect the sales to grow at the rate of 25-30% this year. The sales in the
month of Jan-Feb will also be impacted by delay in the supply of vehicles as
the vehicles produced in 2011 will reach the dealership only by 3rd week of
Jan 2011.
The months of August-September are the peak in Kerala as there is Onam
festival. They walk in reduce post that. Will see a slow down in the month
of Jan-Feb. Have not yet noticed any impact of petrol price hike.
Sales of diesel and CNG model have gone up since the petrol price hike.
Mahindra & Mahindra
Upbeat environment, but cautious outlook.
With cotton, ground nut & specially onion price the farmers are very happy,
which has resulted in to cash buying at our dealership. We are holding more
bookings than festive season. But again supply shall be a problem. No looks
back till March at least.
Strong growth momentum shall continue further. Expanded manufacturer's
capacity coming online over the next few months will ultimately overtake
demand - leading to sudden pressure on dealer/ manufacturer margins.
Hyundai Motors
Very Competitive as new manufacturers entering the market with new
generation models.
The following points would impact the sales : - New models being launched
by competitors and new entrant - Price increase of the car - No discounts will
be offered in the new models - Increase in fuel prices The first time buyers
will consider these points before making a decision
December months have lots of offers and expect a slow down of 20-25% in
the months of Jan and Feb.
Tata Motors
The increase in petrol prices will not impact the sales as increase in
expenditure will be compensated by increase in income level.
December sales were really good but the coming months will be a bit slow.
Others
Ratio of LPG sales going up gradually
Competition in all segments likely to get pretty intense this year.
Industry is becoming very competitive. With more and more players coming
in, the pressure on value for money will increase and customer tolerance will
decline.
We would like to thank Tarun Malpani, an employee of Cognizant Group, for his
assistance in preparing this research report. Cognizant staff provides
research support services to UBS.
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