The automobile industry has had the worst slowdown in terms of sales in the last year. While there was a sense of resurgence in the sector from May to August, the festive months of September and October disappointed auto manufacturers as sales were yet again in the red. November has been a little positive for this sector as recent data revealed by some auto companies saw an increase in sales, however there were others that declined. A further decline had been forecasted by the Society of Indian Automobile Manufacturers (SIAM) whose Deputy Director, Sugato Sen said a month ago that auto sales would remain subdued in the next two months and may only see a revival starting early next year.
Auto sales still remain weak
While Maruti Suzuki, Hyundai Motor India, Honda Cars India and Toyota Kirloskar Motor (TKM) increased sales during November, however Mahindra & Mahindra, Ford India and General Motors India saw a decline. In November 2014 Maruti Suzuki’s sales were up 17% as it sold a total of 1,10,147 units as compared with 92,140 units during November in the corresponding quarter. While TKM’s sales were up 19% in the same month as sales grew to 12,175 units compared to 10,208 units in November 2013. Hyundai Motor India’s sales grew by 8.7% as it recorded sales 54,011 units during the month of November. Honda Cars India on the other hand recorded a phenomenal increase of 64% as it recorded sale of 15,263 units in November this year from the same month last year where it sold 9,332 units.
On the other hand, General Motors India saw a decline in sales as it sold 4,157 units in November 2014 compared with 6,214 units in the corresponding period last year. Mahindra & Mahindra too fell by 12.64% as sales recorded in November 2014 were 34,292 units from 39,254 units during the corresponding month a year before. Ford India’s sales for November 2014 too dipped to 28% as it sold 5,661 units this November compared with 7,909 units in November 2013.
However, in October this year domestic car sales stood at 1,59,036 units as compared to 1,63,199 units in the same month during the previous year according to SIAM data. Car makers such Honda, Tata Motors and Mahindra & Mahindra saw their sales drop. There were few such as Maruti Suzuki India and Hyundai Motor India who saw a growth in sales during the month. Volvo Auto India during September-October posted a 45% growth over last year. While car sales in September 2014 was 1,54,882 units as compared to 1,56,494 units in September 2013.
Auto makers to increase ad spends?
Sudeep Narayan, PR and Digital Director, Volvo India said, “December is traditionally a slow month for off-takes, the year starting with January will see a push. Since our ambition is to grow the Indian market for Volvo cars, our media spends is expected to grow substantially.” He further added, “Despite the slowdown in the mainstream segment, the Indian luxury car market continues to grow and is one of the most exciting in the world. Given the expanding luxury market in India, Volvo Cars has an ambition to reach 10,000 cars by the decade end which could equate to roughly 10% segment share. For Volvo Auto India New Delhi, NCR are the biggest market followed by Hyderabad and Mumbai.”
However, according to Punit Dhawan, Deputy General Manager and Head Corporate Communications, Maruti Suzuki India said that they normally have an annual plan on the basis of which the ad spends are made.
Similarly, Sanjay Gopalkrishnan, AVP Marketing, Fiat India said they will not be increasing their ad spends and will continue with whatever ad spends they had planned.
This shows that many auto manufacturers will keep their ad spends stable with regards to their annual plan despite the market fluctuations. A view taken up by Harish Shriyan, COO, OMD who in an earlier article with exchange4media said just because auto manufacturers’ market share has gone down does not mean that they will cut down their ad budgets or increase it in the near future for that matter. “They will be looking at the whole year perspective (instead of month on month perspective),” he said. While there will be others that will look to increase their ad spends in order to increase their share in the Indian automobile market.
New launches to boost ad spends?
The festive season turned out to be a disappointment for many car manufacturers who saw sales drop 2.55 per cent in October according to SIAM. Though this might be the case media players believe that automobile companies are expected to increase their ad spends in the next few months. Senior media planners they expect a nominal increase in ad spends during the next two months to be to the tune of around 15%.
The festive season sees a number of new launches in anticipation to provide a boost to sales that could be made during this period. Nearly nine new cars or model variants were launched during this period. New launches in this sector are equated with higher ad spends by media planners as auto companies increase spend in promoting these new models. Ad spends from the auto sector during the festive period of September to October this year was estimated to be around Rs 400-450 crore according to media reports.
Speaking to us on the expected launches Sanjay Gupta, Sr. General Manager & Group Head – Marketing, Hyundai Motors India said, “In the past one year we have launched four products. We continue to evaluate new segments for future to create new possibilities.” He further added, “Amidst the challenging scenario, Hyundai launched new products in the market which have become strong contenders in their respective segments. We have posted optimistic sales in the year 2014, which is in line with this year’s objective to grow in market share and volume. The phenomenal success of Elite i20, Xcent, Grand and Santa Fe increased the growth in volumes, thus created positive momentum for us in the industry.”
“The All New XC90 is expected to be unveiled in 2015 with deliveries commencing in the latter half of the year, in India. Closer to the date, VAI will officially announce the same. Globally, the all new XC90 was unveiled in August’14 and its deliveries will commence in Q2 2015. Since India has a homologation process we will not be able to confirm the dates yet,” said Narayan.
Atul Sharma, GM, Starcom MediaVest had told exchange4media earlier, “It (auto industry ad spends) is mostly dictated by launches. So if there is going to be launches then they are not going to reduce (their ad spends). If there are no launches then they will definitely reduce. Nobody wants to do regular buys till there are new launches in the market.”
If we take that premise into account there are quite a few cars that are slated to launch during the months of December and January. During these two months it is expected that almost 15 new cars or model variants will be launched according to automobile portals. This includes the launch of cars such as Tata Bolt, Audi A3 Cabriolet, Mercedes Benz CLA, BMW i8, BMW New X6, Skoda Octavia vRS, Renault Lodgy, Renault Duster Facelift, Ford Ka, Mahindra Quanto AT, Honda New Civic, Fiat Bravo, Ssang Yong Korando Turismo, Maruti Suzuki Ciaz ZDi Plus and ZXi Plus and Mitsubishi Mirage.
This is more than the number of cars that were launched during the festive period. With such launches expected, automobile companies are expected to spend heavily in terms of promotional activities. Apart from this the dipping of sales of cars also may mean an increase in the inventory lying with them that they have to try to clear before the end of the year. This may translate into more efforts in the promotion in order to clear the inventory. With Q3 drawing to a close and the last quarter approaching, auto manufacturers will definitely put their efforts into high gear to push car sales up. It remains to be seen how much of those efforts would turn into ad spends.