15 per cent dip in sales: Why Renault is struggling to grow in India

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Carlos Ghosn, the chief of French carmaker Renault, sounded upbeat on the performance showcased by the India subsidiary in early last year. In the previous calendar year (2016) Renault had registered an envious 146 per cent growth in its India volumes. “We are starting to make money (in India) now after selling 100,000 Kwids,” Ghosn had said at the March 2017 Geneva Motor Show and he also added that the company should be more ‘ambitious’.

But 2017 has been a different story for Renault in India. The three-digit growth of 2016 and a bigger base made it challenging for the firm to sustain growth. Renault has not reported its volume for last calendar year but data collected from Siam shows that the carmaker sold 112,492 units in 2017. This is a decline of 15 per cent over the record 132,235 vehicles it sold in 2016. It is learnt that Renault had set a business plan to clock sales of 120,000 units last year but it could not meet this target. Renault did not respond to a questionnaire from Business Standard.

The decline in volume is primarily linked to a drop in sales of the Kwid, an SUV styled small entry segment car that triggered the spectacular growth in 2016. The car, once seen as a strong competitor to India’s most sold car, Maruti Suzuki Alto, brings 81 per cent of volume for the French carmaker. But Kwid, in 2017, could not maintain or build upon the volume it clocked in the first full year after the September 2015 launch.

Kwid’s sales in the domestic market have contracted by a significant 20 per cent during the April-December period of FY18 to 65,572 units. Alto, which has ruled the entry segment in India for years now, has registered a high single-digit growth in the same period and Hyundai Eon, which is also an entry level car, has seen some expansion. Damage to demand for Kwid may have come from entry of Tata Motors’ Tiago. Launched in April 2016, this entry segment vehicle is clocking a monthly volume of over 6,000 units. Presently, Kwid’s monthly average is less than 7,300 units from over 9,100 units a year ago.

Renault’s performance in domestic market is in stark contrast to the industry. If we take the first nine months of the 2017-18 financial year, Renault has managed to grow in just one month (May). The industry by comparison, has grown in seven of these nine months and with a double-digit growth in five of these months.

The passenger vehicle industry volume has expanded at over 8 per cent but Renault has declined by 22 per cent, becoming the only company to see a double-digit dip this year. Accordingly, the market share of this seventh biggest player in domestic industry has come down to 3.31 per cent from its peak of 4.58 per cent in first nine months of FY17. When the going was strong in 2016, the company had set an aspiration to reach a market share of 5 per cent at the end of 2017. Sumit Sawhney, country CEO and managing director at Renault India, said in November that the company is ‘still building a runway’ in India. “I won’t say that we have arrived. Our target is to reach five per cent and consistently sell five per cent in the mid-term,” he said without specifying a timeline.

Renault’s latest launch, the Captur, a premium SUV and a product on which the company was banking for some volume growth, is yet to make a mark. The vehicle was launched at a price of Rs 1 million in early November. Renault had opened the bookings well ahead in second half of September to take advantage of the festive season demand. But of the 1,582 Capturs manufactured by the company in November, the first month of launch, only 1,119 units were dispatched to dealers.

Globally, Captur has clocked an impressive volume of over a million units since the 2013 debut. But we do not know the number of bookings in India. While not many Capturs are visible on roads, dealers are not doing a great business with this new car either. A Renault dealer from Uttar Pradesh said he lifted two units of Captur since the launch and is still sitting with one in his inventory. “There is limited push from the company on the Captur. It believes the car will pick up at its own pace,” said the dealer.

Industry watchers said buyers are not much excited about the pricing even though Captur claims to offer many industry first features. While the entry level petrol variant begins at Rs 1 million, the top end diesel version comes at an ex-showroom price of Rs 1.4 million. The on road price of the top variant is over Rs 1.64 million. Hyundai’s popular SUV Creta begins at an ex-showroom price of Rs 0.92 million and goes up to Rs 1.55 million for the diesel top end variant. Maruti Suzuki’s S-Cross, another competition, begins at Rs 0.84 million and goes up to Rs 1.12 million.

S-Cross does little over 2,000 units a month. Back in mid 2015, Maruti Suzuki had to cut its prices after a lukewarm response to the launch. However, Renault is understood to be in no mood to review Captur price at this stage. The company is advising dealerships to place Capturs at popular hotspots of the city/town areas to draw buyers. Duster SUV, the only other successful launch of Renault besides Kwid, is also seeing a pressure. The company sold almost 9,800 Dusters in the April-November period, down 26 per cent and is now learnt to be contemplating a price cut.

Many of the 320 plus dealerships of Renault are also sitting on large unsold inventory. “Dealers have carried unusually large unsold stocks of previous year into 2018 compared to the levels in 2017. There is large stock at the company’s plant too”, said another dealer who is sitting on an inventory of over a hundred Kwids. A number of dealers are learnt to have requested the company to give them only retail sales targets for the months of January and February. These dealers have asked for no billing and sales from company to their showrooms in these two months to enable them exhaust the inventory. The company may launch a new multi-purpose vehicle this year..business-standard

Month Renault’s domestic passenger vehicle sales (in units) Per cent change YoY Industry’s per cent change YoY
April 2017 9,545 -23.19 14.68
May 8,639 3.55 8.63
June 6,840 -42.22 -11.21
July 8,964 -25.10 15.12
August 9,585 -26.11 13.76
September 10,874 -10.45 11.32
October 9,305 -25 -0.30
November 7,800 -18.78 14.29
December 8,763 -22 5.22