Outlook Remains Positive
Footfalls increase strongly, indicates recovery in consumer sentiment
3rd UBS India Auto Dealer Survey
Survey Takeaways
Footfalls increase strongly, indicates recovery in consumer sentiment
In Oct'09, we surveyed auto dealers across the country. Based on responses received from 49 dealers, we believe there has been a strong recovery in consumer sentiment. 82% of dealers saw sequential increase in footfalls and 61% dealers reported increase in new customers. However, only 39% of dealers expect sales growth of 5%-15% or more over the next 2 months (lower than 65% in our last survey), we believe driven by seasonal trends.
Finance availability environment steadily improving
Finance availability remains a key constraint with 49% of dealers feeling that finance availability remains 'stringent than normal'. However, environment is improving with 65% of the dealers reporting more liberal financing over the past 2 months. Average financing rates to customers buying new cars have also eased with 70% of the dealers reporting decline in interest rates.
Stable OEM discounts, limited impact of below normal monsoon
OEMs offered normal level of discounts during the festive season (as reported by 73% of the dealers). Inventory levels are reasonable, we believe slightly on the lower side post the festive season. 80% of dealers felt under-normal monsoon would have no impact on car sales and 18% responded it could be moderately negative (up to 10% decline in sales).
| Sharp increase in footfalls |
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| Finance availability |
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Company-wise Summary of Findings
Maruti: Strong growth in footfalls, dealers more optimistic than industry
86% of Maruti dealers reported increase in footfalls and 43% expect sales to grow 5%-15% or more in the next 2 months. 57% of Maruti dealers still feel that finance availability is stringent than normal but 65% reported decline in financing rates over the past 2 months. None of the dealers reported more than normal level of discounts. 93% of Maruti dealers felt under-normal monsoon will have no impact on car sales.
Tata Motors - Dealer outlook in line with industry
Only 57% of dealers reported increase in footfalls (vs 82% for the industry). 43% of TAMO dealers expect sales in the next 2 months to grow 5%-15% or more (vs. 39% for the industry). 29% of dealers reported higher than normal level of discounts. 29% of the dealers reported greater than 4 weeks of inventory and 57% dealers felt finance availability is stringent than normal.
M&M: Financing sales remain high, dealers less optimistic
While 81 % of dealers reported increase in footfalls and only 9% of dealers have more than 4 weeks of inventory, dealers remain less optimistic. Only 27% of dealers expect sales to grow 5%-15% or more in the next two months (lower than 39% for the industry). 72% of the dealers reported decline in financing rates over the past 2 months and 82% of dealers felt under-normal monsoon have no impact on car sales.
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Survey Questions & Findings
Question 1: Compared to the last 2 months, what has been the trend in footfalls?
We assigned a numeric value to each response, with "down>15%" assigned a value of 0, "down 5-15%" assigned a value of 25, "flat" assigned a value of 50, "up 5-15%" assigned a value of 75, and "up>15%" assigned a value of 100. We then computed the average response to the question using the values assigned to each response. This survey's average response of 79 implies very strong sequential increase in footfalls.
Overall, 82% of dealers have seen an increase in footfalls driven by festive demand. 100% Hyundai dealers have seen increase in footfalls followed by 86% Maruti dealers. Other players also recorded strong increase in footfalls.
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Question 2: Have you seen a change in no. of first time customers?
We assigned a numeric value to each response, with "decreased" assigned a value of 0, "unchanged" assigned a value of 50, and "increased" assigned a value of 100. We then computed the average response to the question using the values assigned to each response. This survey's average response of 79 implies very strong increase in new customers.
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61 % dealers reported an increase in new customers, while only 4% reported a decrease in new customers. 100% Tata Motors dealers and 83% Hyundai dealers reported increase in number of new customers. 36% Mahindra dealers reported an increase in new customers. 'Others' also saw a lower increase in new customers.
Question 3: What percentage of total sales are on cash basis?
We assigned a numeric value to each response, with "0-10%"assigned a value of 5%, "10-20%"assigned a value of 15%, "20-30%" assigned a value of 25%, "30-40%" assigned a value of 35%, and ">40%" assigned a value of 50%. We then computed the average response to the question using the values assigned to each response. This survey's average response of 22% implies the level of overall cash sales for our sample.
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Maruti's cash sales have declined recently as only 28% of dealers reported more than 30% of sales on cash basis. Hyundai has the highest cash sales within the industry as 50% dealers reported more than 30% of sales on cash basis. Mahindra has the highest sales on financing with 54% of dealers reporting less than 20% cash sales vs. 43% for the industry.
Question 4a: How has the finance availability for new cars changed over the last 2 months?
We assigned a numeric value to each response, with "restrained" assigned a value of 0, "unchanged" assigned a value of 50, and "more liberal" assigned a value of 100. We then computed the average response to the question using the values assigned to each response. Average response of 86 implies sharp sequential improvement in finance availability.
65% of the dealers reported liberal financing than previous 2 months, while 33% reported no change in financing environment. M&M and Maruti dealers reported the maximum improvement in financing environment with 82% and 64%, respectively reporting an improvement. 43% of Tata Motor's dealers have reported liberal financing than previous 2 months.
Question 4b: How is the finance availability for new cars?
While financing environment has been showing signs of improvement, finance availability continues to remain relatively tight. 49% of respondents felt that availability was stringent than normal, while 35% felt it was normal.
Question 5: How have the average financing rates to customers buying new cars changed in last 2 months?
70% of the dealers have seen a decline in financing rates to customers buying new cars. Most Hyundai dealers (84%) and Mahindra (72%) dealers reported a decline in interest rates over the last 2 months. Tata Motors dealers saw the most limited decline in interest rates with 57% reporting decline in financing rates.
Question 6: How have manufacturer's discounts to customers changed in last 2 months?
Discounts have got more normalized with strong demand. Most of the manufacturers (73%) are offering normal level of discounts, with only 18% of the dealers reporting more than normal level of discounts by OEMs. Tata Motors is the most aggressive with 29% of dealers reporting more than normal level of discounts.
Question 7: How much inventory does your dealership carry?
Inventories across the industry remained at reasonable levels with 82% dealers having up to 4 weeks of inventory indicating no significant inventory build up post the festive season. Tata Motors dealers are carrying the maximum inventory with 29% of dealers having greater than 4 weeks of inventory. M&M dealers have the lowest inventory with more than 90% of dealers reporting less than 4 weeks of inventory.
Question 8: What is your outlook for car sales over the next 2 months?
We assigned a numeric value to each response, with "down>15%" assigned a value of 0, "down 5-15%" assigned a value of 25, "flat" assigned a value of 50, "up 5-15%" assigned a value of 75, and "up> 15%" assigned a value of 1 00. We then computed the average response to the question using the values assigned to each response. This survey's average response of 47 implies sequential decline in car sales.
We believe this is driven by seasonality as sales typically slow down post the festive season. 39% dealers expect sales to grow 5%-15% or greater (lower from 65% dealers during last survey in Aug'09) in the coming 2 months and 38% expect sales decline. Maruti and Tata Motors dealers were the most optimistic with 43% expecting sales growth, followed by Hyundai with 33% of dealers expecting sales growth.
Question 9: What is your outlook for used car sales over the next 2 months?
Dealers expect OEM discounts to increase in the next two months and expect this to impact used car sales growth. 50% of dealers expect used car sales to increase 5%-15% or greater and 31 % expect flat used car sales. 75% Mahindra and Hyundai dealers expect used car sales to grow 5%-15% or more over the next 2 months.
Question 10: Do you think that below-normal monsoon will impact cars sales?
We see limited impact of below normal monsoon on car demand. 80% of the dealers responded that there is no impact while 18% stated moderate negative impact (0-10% decline in sales). Highest number of Maruti dealers (93%) responded that under-normal monsoon don't impact car sales.
Dealers' Comments on Industry Environment
Maruti Suzuki
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Industry is doing well; competition will increase in the future.
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Industry seems to be on growth trajectory; however growth will depend on availability of finance at attractive rates. |
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Positive trend at present. |
Mahindra & Mahindra
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Industry sentiment is very high, but core work is not happening as per expectations. Seems a little slowdown is in the offing. Keeping fingers crossed!
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Industry is positive overall. Post festive season dip in sales will be compensated in Jan'10; expect big rush in Jan'10. |
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Growth shall continue. |
Hyundai Motors
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Very positive. Rural development will drive growth in the long-term.
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Trend is positive and sentiment is also positive. |
General Motors
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The industry is more competitive now and those who do not fall in line with the customer requirements and the general customer outlook on purchase of new product or service will have to face very tough times.
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Industry is looking positive. |
Toyota
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In current scenario it is very difficult to forecast the vehicle sales. |
Ford India
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