BackAre Toyota, Honda, Renault and Ford one-hit wonders in India?
Despite cars at various price points, the four auto makers rely a lot on one model to drive sales in the country
Premium
What is common to the local arms of Honda Motor Co., Toyota Motor Co., Ford Motor Co. and Renault SA? With their India fortune tied to single models, it’s only fair to say that each is a one-hit wonder.
In the past 11 months, four in every 10 cars sold by Honda is a City and close to five of every 10 cars sold by Toyota is an Innova. About one in every two cars sold by Ford and Renault is an EcoSport and a Kwid, respectively.
For the four companies, sales of these best-selling models have stayed the same or increased as a proportion of overall sales—an indication of their importance.
This is in sharp contrast with the sales trend at the top two car makers in India, Maruti Suzuki India Ltd and Hyundai Motor India Ltd, where the share of the best-selling models does not have an over-arching effect on overall sales.
Honda and Toyota have managed to entrench themselves firmly in one segment of the market with their flagship models—City and Innova. But they have met with little success in replicating this in other segments. City has been on Indian roads since 1998 and continues to drive Honda in the country.
Ford and Renault managed to create a niche in a crowded market with EcoSport and Duster, respectively, but have had little success in sustaining the volumes. For them, the Indian market has been nothing short of a roller-coaster ride: buyers have got drawn in hordes with a new launch, sales have climbed for a year or so and then tapered off.
For Renault, it was first the Duster, which received all the attention and eventually saw sales fizzle out. Now, it’s the compact car Kwid that is driving sales at the local arm of the French car maker.
Sumit Sawhney, chief executive and managing director at Renault India, did not respond to an email sent on 11 March.
In an email response, a Ford India spokesperson said the company is “following the product-led transformation" and accelerating its product promise by introducing models that “customers want and value". Ford has launched three brand-new vehicles—compact sedan Figo Aspire, next-gen hatchback Figo and the SUV Endeavour. It also introduced a refreshed EcoSport in the market during the period.
“After adding the iconic Ford Mustang, which will go on sale in the second quarter of 2016, Ford has the youngest and most vibrant product portfolio in India," the spokesperson said.
So, why have multiple models at varied price points not paid off in volume terms and what is plaguing product sales and strategy at these auto makers?
Vinay Raghunath, partner (automotive practice) EY India, says creating a niche within a product segment is becoming critical in India. If identified well, it has a significant payback.
In order to ensure that the model launched continues to turn in brisk volumes, introducing a product refresh/variant well in time is inevitable, he said, adding that “only those firms which are able to continuously innovate at a sub-segment level have succeeded in having sustained volumes".
While certain players have been able to identify segments that immediately caught the buyer’s fancy, not being able to sustain innovation within the sub-segment has led to a loss in sales momentum.
The disproportionate contribution the Innova and the City have had on Toyota and Honda, respectively, also indicate that over the years, whatever new models they have introduced have done little in terms of changing the overall sales mix.
Jnaneswar Sen, senior vice-president (sales and marketing) at Honda Cars India Ltd, sees things differently. The reliance on one model was unintentional in the past, but it has been a deliberate one in the current financial year as Honda produced fewer Amaze cars to make way for the newer generation, while bumping up production of the City. Still, Honda is working towards reducing dependence on the City, he added.
“Going forward, the City, Jazz and Amaze will be Honda’s three pillars of growth in India," he said. Sen conceded that while the Mobilio (a multi-purpose vehicle Honda launched in 2013), has been struggling owing to the company’s lack of experience in the taxi market, the Jazz, which was turning in brisk volumes till Maruti launched the Baleno in November, has seen a resurgence in demand again and is expected to gain further volumes.
Honda is now counting on the BR-V, a compact sports utility vehicle it plans to launch in the first quarter of 2016-17, for expanding its market share.
The strategy of relying on one model is fraught with risks and makes a company very vulnerable to cyclical swings, the entry of a new models from rival firms, or external headwinds, says Puneet Gupta, associate director at IHS Automotive, a sales forecast and market research firm.
No one can vouch for this better than Honda. In 2012, the car maker was caught napping after the market saw a sudden shift to diesel. With its best-selling City only having a petrol option then, the model was sidelined; this in turn, impacted the company’s overall sales.
For Toyota, an over-dependence on one model is a lot more pronounced owing to a small product portfolio.
“For any company, too much of dependence on a single model is not good," admits N. Raja, senior vice-president and director of marketing and sales at Toyota Kirloskar Motor Pvt. Ltd, adding that ideally, the Innova’s share in the overall pie should not exceed 30-35%.
“That’s the direction we are working on," said Raja, adding that it will take at least four to five years for the company to enhance the contributions of other models and reduce the share of the flagship model. This can be done by launching newer models and increasing sales of the existing ones, he said.
To be sure, the danger of over-dependence on one model is not lost on these companies.
Renault launched the new-generation Duster to take on competition from new rivals on 12 March. On 11 March, Ford cut prices of the EcoSport by up to ₹ 100,000 after Maruti entered the compact SUV market with the Vitara Brezza. Toyota is ready to bring the new-generation Innova called Crysta into its showrooms by June.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
