Honda becomes India's 4th biggest car maker, Amaze hurts Maruti

Honda's India unit became the country's fourth largest car maker by sales in May riding on the success of its newly launched entry level sedan Amaze. Honda reported its highest ever monthly sales as Amaze clocked 6,036 units (over 50 per cent of Honda's sales) during the month.

Honda sold 11,342 cars in May 2013, ahead of what Tata Motors (at 11,134 units, cars and utility vehicles together), Toyota (at 10,023 units), GM (at 8,500 units) and Ford (4,002 units) sold in the last month.

Honda's sales rose 34 per cent in May as compared to April, 2013 and 10 per cent as compared to May last year (2012). In contrast, Maruti Suzuki 's domestic volumes fell by 13 per cent (at 77,821 units) year-on-year. The drop was higher than the 4 per cent cut global investment bank Nomura had estimated.

While, Toyota and Ford saw over 30 per cent decline in sales as compared to last year, the impressive debut of Honda Amaze has seemingly hurt Maruti Suzuki the most.

Here's why:

1) The Amaze, Honda's first diesel vehicle in India, competes directly with DZire, Maruti's best-selling and most profitable model in the super compact segment.

2) Amaze's competitive pricing and its "most economical" tagline drove customers away from DZire models.

3) Maruti registered a 2.5 per cent (year-on-year) drop in DZire sales in May. As compared to April, 2013, DZire sales fell a sharp 11 per cent at 17,265 units.

4) Maruti has also suffered a massive 29 per cent drop in its compact segment (Swift, Estilo, Ritz) in May, which should be a big worry for the company.

5) Maruti has no major launches lined-up for this year, which should worry investors. In contrast, Honda, Renault and GM are capitalizing on their recent launches. Renault India's sales jumped thirteen-fold in May on the back of its popular SUV Duster.

GM volumes increased by 40 per cent (year-on-year) led by launch of new MPV Enjoy and continued good customer response for its Sail sedan, Kapil Singh and Nishit Jalan of global brokerage Nomura said.

Other auto makers are gaining even as sales of one of Maruti's major launch (Ertiga) have started to plateau. Maruti's utility vehicle sales were down 44 per cent in May following a 5 per cent decline in April.

For now, Honda seems to be the biggest concern for Maruti because it's hurting the company's most profitable segment. The Swift and DZire models contribute over 50 per cent to Maruti's profitability, analysts say.

Shares in Maruti, India's biggest car maker by volumes, fell for the third day as May sales missed Street estimates. Maruti shares fell 2.3 per cent on Monday and traded 0.24 per cent lower on Tuesday, underperforming a 0.6 per cent gain in the BSE Auto benchmark. (Track stock)

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