Passenger Vehicle Update

6 June 2013

India | Automobiles | Sector Update

Ambrish Mishra [email protected] Amaze succeeds in beating slowdown blues Tel: (91 22) 66303019 Himanshu Sharma [email protected] FY14 has started on a challenging note for the Indian passenger car industry Tel: (91 22) 66303028 with two of the largest players, Maruti/Hyundai registering 6%/4% domestic Riddhi Kothari volume decline in the first two months. Meanwhile, despite adverse demand [email protected] environment, Honda Cars India managed to grow volumes by 14% during the Tel: (91 22) 66303078 same time, helped by strong response for its first compact sedan “Amaze” (also Honda‟s first diesel offering in India). As highlighted in our earlier note Domestic volume performance (Is Honda back in the game with „Amaze‟? dated 11 Apr‟13), Amaze is very well received, though Maruti Dzire volumes have seen little impact so far. We Honda Amaze volumes (units) revisited Honda dealerships to assess few key variables – a) trend in 8 customer response to Amaze since launch, b) cannibalization of other Honda 6 6 models (if any), c) shift in fuel mix, and d) change in waiting period. Key 5 4 takeaways are: 3

2 Units inUnits '000  Amaze holding on to initial excitement, price hiked by up to `8,000: 0

Despite challenging macro and subdued PV demand, Amaze has done

Apr-13 Mar-13 remarkably well for Honda, registering volumes of 4,852/6,036 for May-13 Apr‟13/May ‟13. Further, our recent dealer visits indicated that given the

response and order backlog, Amaze performance would remain strong going Honda Brio volumes (units) forward. Honda recently announced price hike of 3,000-8,000 for Amaze, ` 6 further reiterating its confidence in the product. Although, dealers indicated 4

that run-away success of Amaze has led to some cannibalization of Brio. 4 000 2 2 2

 Order flow strong, waiting period increases to 5-6 months: Steady order Units inUnits ' inflow for Amaze has resulted in substantial waiting list, especially for 0

gasoline variants. While the waiting period for diesel variants has come down

Apr-13 Mar-13 marginally from 10-12 weeks in April (at the time of launch) to c. 8-10 weeks May-13 now, waiting period for gasoline variants has increased substantially from c.6 weeks to c.16-24 weeks. Our interaction indicated that sudden increase has Maruti Dzire volumes (units) surprised certain dealers; while in some cases this sudden spike has led to 22 20 cancellations. 20 19

000 18 17  As expected, cheaper petrol prices fuels shift in favor of gasoline

variants: Recent cut in petrol prices along with hike in diesel prices has led 16 Units inUnits ' recovery in demand for gasoline vehicles. Against pre-launch estimation of 14

35:65 mix between gasoline:diesel, the current mix stands at c.45:55. This

Apr-13 Mar-13 sudden increase in demand for petrol vehicles along with higher planned May-13 production of diesel variants has spiked the waiting period for petrol cars as highlighted earlier. Interestingly, dealers indicated that the shift in favor of Toyota Etios volumes (units) 6 petrol was quicker and more substantial in urban centers like Mumbai 5 compared tier II cities like Aurangabad. 4 3 2  Maruti Suzuki Dzire still holding up: While Amaze volumes have ramped up 2

well in last two months, Maruti Dzire volumes (current market leader) have '000 in Units shown little weakness (see exhibit 1). While Maruti Dzire volumes can come 0

under pressure due to the current demand sluggishness, we do not expect

Apr-13 Mar-13 Amaze to have significant impact on Dzire volumes given that a) Amaze will May-13 attract buyers from other segment as well (like premium hatchbacks, entry Source: Media reports, JM Financial level sedans), and b) Honda‟s capacity constraints till the new plant comes on stream in CY14.

JM Financial Institutional Securities Private Limited

Passenger Vehicle Update 6 June 2013

Exhibit 1. Volume performance Maruti Dzire – Holding on strong Toyota Etios – Competition impacts volumes

Maruti Dzire volumes (units) Toyota Etios volumes (units)

25,000 6,000

20,000 5,000

4,000 15,000 3,000 10,000 2,000 5,000 1,000

0 0

Jul-12

Apr-12 Oct-12 Apr-13

Jun-12 Jan-13

Mar-12 Feb-13 Mar-13

Apr-12 Oct-12 Apr-13

Aug-12 Sep-12 Nov-12 Dec-12

Jan-13 Jun-12

May-12 May-13

Mar-12 Feb-13 Mar-13

Nov-12 Dec-12

Sep-12 Aug-12 May-13 May-12 Tata Indigo – No respite Nissan Sunny – Unable to sustain the good start Tata Indigo volumes (units) Nissan Sunny volumes (units)

10,000 5,000

8,000 4,000

6,000 3,000

4,000 2,000

2,000 1,000

0 0

Jul-12

Oct-12 Apr-13 Apr-12

Apr-12 Oct-12 Apr-13

Jun-12 Jan-13

Feb-13 Mar-12 Mar-13

Mar-12 Feb-13 Mar-13

Dec-12 Nov-12

Aug-12 Sep-12

Nov-12 Aug-12 Sep-12 Dec-12

May-12 May-13 May-13 May-12 Honda Brio – Facing cannibalization? Maruti Swift – Feeling the pinch – competition or slowdown?

Honda Brio volumes (units) Maruti Swift volumes (units)

7,000 25,000

6,000 20,000 5,000 15,000 4,000

3,000 10,000 2,000 5,000 1,000

0 0

Jul-12

Apr-12 Oct-12 Apr-13

Jun-12 Jan-13

Apr-12 Oct-12 Apr-13

Mar-12 Feb-13 Mar-13

Jun-12 Jan-13

Nov-12 Dec-12

Aug-12 Sep-12

Feb-13 Mar-12 Mar-13

May-12 May-13

Aug-12 Sep-12 Nov-12 Dec-12 May-13 May-12

Source: Media reports, JM Financial

Exhibit 2. Industry volume and market share trends Domestic car volume performance Market share trends

Cars Volume (units) growth % (RHS) MSIL Hyundai TTMT Other Toyota Honda 250 30% 100

20%

19 17

200 17

15 15

80 19

11 14

10% 11

15 13

150 21

20 19

000 60

17 20

0% 18

19 233

100 213 40

Units in ' in Units

198

181

173 172

172 -10%

168

163

161

159

158

156

151

143

141

118

43 42 50 42

-20% 20 40 27

0 -30% 0

Jul-12

Apr-12 Oct-12 Apr-13

Jan-12 Jun-12 Jan-13

Apr-12 Oct-12 Apr-13

Feb-12 Mar-12 Feb-13 Mar-13

Jan-12 Jun-12 Jan-13

Nov-11 Dec-11 Nov-12 Dec-12

Aug-12 Sep-12

Mar-12 Mar-13

Feb-12 Feb-13

May-12

Nov-11 Dec-11 Aug-12 Sep-12 Nov-12 Dec-12 May-12

Source: Media reports, SIAM, JM Financial

JM Financial Institutional Securities Private Limited Page 2

Passenger Vehicle Update 6 June 2013

JM Financial Institutional Securities Private Limited

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