New Delhi: Three foreign car makers —Volkswagen India Pvt. Ltd, Ford India Pvt. Ltd and General Motors India Pvt. Ltd (GM)—which took on market leaders Maruti Suzuki India Ltd and Hyundai Motor India Ltd by launching their small cars in the country in 2010, have seen volumes losing steam.
Over the last five months, Ford has seen monthly sales in negative territory all five times; GM four times and German car maker Volkswagen three times.
In May, Ford sold 14.33% fewer cars than the year earlier, according to the Society of Indian Automobile Manufacturers (Siam). GM’s sales fell 27% while Volkswagen saw a decline of 26.15%. The overall passenger vehicle industry grew 7.54% to 221,135 units last month.
Pearl Ford showroom in Ambala. Photo by Ramesh Pathania.
While a shift from petrol to diesel cars has affected the sales of these firms, the success of stronger models such as Maruti Suzuki’s Swift, Dzire and Ertiga and Hyundai’s Verna has taken away potential buyers from these firms, according to analysts.
“Consumer confidence in the models of these companies is not there,” said Mahantesh Sabarad, senior vice-president (equity research), Fortune Equity Brokers Pvt. Ltd. “Stronger products from Maruti are creating problems for them.”
Sabarad said small cars such as Ford’s Figo, GM’s Beat and Volkswagen’s Polo were runaway successes until the new Swift was launched.
The new Swift was launched in July 2011 and Maruti’s supply of this particular model was 250 cars a day that month. That rose to 600 a day in November last year and to 700 a day in February.
After Swift’s launch, the sales of Figo’s diesel version dropped 0.9% in January-May compared with July-December 2011.
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The sales of GM’s Beat diesel fell 4.3% while that of the Polo diesel dropped 2%.
In the same period, the market share of Swift’s diesel models in the segment went up 19.3% in July-December to 31% in January-May.
According to Siam data, in May alone, Ford had 5,539 unsold diesel-run vehicles, GM had 1,000 while Volkswagen had 2,952 units.
“A drop in GM’s sales is clearly a function of the petrol-diesel phenomenon,” said Joseph George, auto analyst at India Infoline Ltd. “While Beat has been driving sales, a major impact is on Spark’s sales.”
Until last year, Spark was selling an average of 3,000 units per month, which has come down to 700 units, George said.
The price difference between diesel and costlier petrol has led to an increase in the proportion of vehicles running the cheaper fuel.
In the last fiscal, the diesel versus petrol ratio was 50:50, compared with the traditionally smaller proportion of diesel cars.
GM’s sales have suffered because it did not have a single launch last year and there have been none this year as well, said P. Balendran, vice-president (corporate affairs), GM.
“We have a couple of models—Sail hatchback and sedan—coming in by the end of this year,” said Balendran. “These models will generate excitement in the market and should increase our share in the market.”
The Sail hatchback will compete with the likes of Hyundai’s i20, Volkswagen’s Polo and Honda Siel Cars India’s Jazz while its sedan version will compete with Verna, Volkswagen Vento and Ford Fiesta.
Nigel Wark, executive director, marketing and sales, Ford India, attributed the market shifting to diesel and the firm’s inability to supply models running on the fuel in the first quarter of this calendar year as reasons for a slump in sales.
“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,” said Wark. “This led to a sudden spurt in demand for our diesel models and we were not able to meet that kind of demand.”
Ford increased its diesel engine capacity in April this year.
According to a Delhi-based Ford dealer, the firm needs to strengthen its portfolio. “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.”
George of India Infoline agreed and said Ford took a hit because its popular models started losing steam.
“Figo was down clearly because of the success of Swift, whereas even their Fiesta portfolio has not been a success,” said George. “The new Fiesta has not been able to capture customers’ attention.”
Ford has two Fiesta models—the Fiesta Classic and new Fiesta. With regard to Volkswagen, George said the firm has been facing competition from its group company Skoda India Pvt. Ltd.
“Volkswagen’s Vento is technically similar to Skoda’s Rapid, which has led to cannibalization in the group,” said George.
Across the globe, Volkswagen Group follows badge engineering strategy for its two group firms—Volkswagen and Skoda. Badge engineering is selling the same product under two brand names by making very few changes in design and features.
A detailed questionaire sent to Volkswagen’s corporate communications team on 18 June remained unanswered.