Customer shift towards diesel vehicles affects sales of Ford, GM, VW
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The Indian subsidiaries of three foreign auto makers, namely Volkswagen, Ford and General Motors (GM), witnessed a fall in their volumes. All the three giants tried to take over the positions of Maruti Suzuki and Hyundai in the country by introducing small cars in the domestic market in 2010. However, during the past five months, American car maker Ford reported negative monthly sales successively, whereas its compatriot GM posted the same four times. The least affected among the three was German auto giant Volkswagen as its sales reports went in the negative zone three times.
In May 2012, both American auto makers, Ford and GM, delivered 14.33% and 27% less cars in the Indian market, respectively, when evaluated against the figures of same period last year. Joining the league of negative trend, the sales of Volkswagen witnessed a downfall of 26.15%, reported Society of Indian Automobile Manufacturers (SIAM). During this period, the passenger vehicle segment of Indian industry surged by 7.54% and resulted in sales of 2,21,135 units.
According to analysts, the focus of potential buyers has shifted from petrol to diesel models, which has mainly affected the sales of these auto makers. Models like Maruti Suzuki Swift, Swift DZire and Ertiga and Hyundai Verna helped the top two car makers of the country lure buyers away from these three competitors. On this, Mahantesh Sabarad, Senior Vice President (Equity Research), Fortune Equity Brokers Private Limited, said, “Consumer confidence in the models of these companies is not there. Stronger products from Maruti are creating problems for them.”
He further said hatchbacks like Ford Figo, Chevrolet Beat and Volkswagen Polo were great hits in the market until Maruti introduced the new version of its Swift, which turned out to be a game changer. The latest edition of Swift was introduced in July 2011 and the company delivered around 250 units of this new car on a daily basis that month. In November 2011, the numbers surged to 600 a day and rose to 700 a day in February 2012.
In the period between January and May, the volumes of Figo diesel declined by 0.9% because of new Swift’s launch, against the figures recorded in July-December 2011. During this time, the sales of Beat Diesel dropped by 4.3%, whereas the figures of Polo Diesel reduced by 2%. Meanwhile, the share of Swift Diesel surged from 19.3% between July-December to 31% in January-May.
As per SIAM, Ford’s unsold inventory of diesel vehicles stood at 5,539 units in May, whereas the same figures for GM were 1,000 units and 2,952 units for Volkswagen. Joseph George, Auto Analyst, India Infoline Limited, quoted, “A drop in GM’s sales is clearly a function of the petrol-diesel phenomenon. While Beat has been driving sales, a major impact is on Spark’s sales.”
P. Balendran, Vice President, Corporate Affairs, GM, said that the sales of the company were affected because it did not introduce even a single model last year in the country as well as till June this year. However, he added, “We have a couple of models - Sail hatchback and sedan - coming in by the end of this year. These models will generate excitement in the market and should increase our share in the market.”
GM’s yet-to-be-launched hatchback Sail will deliver a stiff competition to big players of Indian auto industry, including Hyundai i20, Volkswagen Polo and Honda Jazz. On the other hand, the sedan version of Sail will square off against Hyundai Verna, Volkswagen Vento and Ford Fiesta.
Nigel Wark, Executive Director, Marketing and Sales, Ford India, credited customer migration to diesel cars and the unavailability of the same in the company's line-up as the reason for the sales slump in Q1. He further added, “The contribution of petrol models to our total sales has come down from 45% in the first quarter of last year to 15% this year. This led to a sudden spurt in demand for our diesel models and we were not able to meet that kind of demand.” In response to the consumer demand for diesel cars, Ford India expanded its diesel engine manufacturing capacity in April 2012.
As per a Delhi-based dealer of the company, the auto maker needs to expand its portfolio. He further quoted, “We can’t just bank on Figo, which has competition from all corners and other models have not been a success in a real sense. After these models, what are we left with to sell? We are awaiting the EcoSport, which will be a volume player for us.”
In the same context, George said, “Figo was down clearly because of the success of Swift, whereas even their Fiesta portfolio has not been a success. The new Fiesta has not been able to capture customers’ attention.” Talking about the German car maker, George said that the company is facing stiff competition from its sister concern Skoda in India.
Elaborating on this, he stated, “Volkswagen’s Vento is technically similar to Skoda’s Rapid, which has led to cannibalisation in the group.” Volkswagen Group follows badge engineering throughout the world and, as a result, Skoda and VW vehicles compete against each other and eat up the other’s market share.
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