Sewells MSXI Automotive Dealer Confidence Index (Jul to Sep 2016 Quarter)

adciAutomotive Dealer Confidence Index

Jul - Sep 2016

SHAPING THE FUTURE OF AUTOMOTIVE RETAIL.

www.sewells-msxi.com

TThe automotive industry in India contributes a significant share to country’s GDP. A healthy domestic market, an active involvement of the government, growth of domestic auto manufacturers and presence of global brands in the country have made sure that this industry has come of age. With everything being executed on a global scale and with global vision, the Indian auto industry also needs a dealer confidence index.

Globally, confidence indices are viewed as reliable precursors to business performance. Such indices aim to capture and quantify the sentiment of various industry stakeholders – be it CXOs, suppliers, vendors or distribution partners who usually are in the thick of the action. People within the industry, typically use these indices to get a sense of stakeholder sentiment and optimize their actions in line with the sentiment. Market analysts, on the other hand, interpret theses indices as ‘lead indicators’ of the performance of a particular industry or sector. An accurately constructed index should demonstrate a high correlation with actual business performance.

About Sewells MSXIAutomotive Dealer ConfidenceIndex

ADCI Survey Methodology Summary of Respondents

SEWELLS MSXI

AUTOMOTIVEDEALERCONFIDENCEINDEX

1


About Sewells MSXIAutomotive Dealer ConfidenceIndex

A ADCI allows the stakeholders in the automotive industry to have meaningful conversations well in time, which in turn helps them put together strategies for a superior performance in the market place.

In the automotive industry, dealers enjoy a unique position which keeps them close to the customers. They are also in constant touch with factory staff, other dealers, financiers and market intermediaries. Consequently, each dealer has exposure to a plethora of information that in turn shapes his/her views about the future of their business in short and medium term.

The Sewells MSXI Automotive Dealer Confidence Index (ADCI) report captures and quantifies this sentiment across the length and breadth of the country. The movement of this collective sentiment in the form of an index indicates the direction of the wholesale and the retail sales in the industry. It is published by Sewells MSXI on a quarterly basis.

Automotive Dealer Confidence Index

ADCI Survey Methodology Summary of Respondents

adci

2


ADCI Survey MethodologyAbout Sewells MSXIAutomotive Dealer ConfidenceIndex

TThe Sewells MSXI ADCI is computed on the basis of responses received to a structured questionnaire from the automotive dealers. The questionnaire attempts to capture their sentiment about economy in general and their business in particular on a six month horizon.

As per the design, the ADCI’s range is between -100 and +100, where an index score of -100 represents the most pessimistic outlook, and +100 indicates the most optimistic outlook. The index is based on how dealers see the overall market and their businesses performing in next six months.

The Sewells MSXI tracks the trend of the index which offers an insight into the future direction of the mar-ket. We believe that it is the movement of the index that offers greater insights than its absolute value in a particular quarter.

In this latest edition of the ADCI, we have captured the sentiment of the dealer fraternity during July - Sep quarter of 2016. The findings of this survey are compared with the findings of the previous three editions to map the trend.

As always, a questionnaire was sent to the automotive dealers across India. A total of 116 responses were received, from dealers, representing 18 brands. These were used to compute the index. Every effort has been made to ensure that the index is meaningful and representative of the dealer sentiment. However, we advise reader discretion in using the results considering the low sample in some cases.

Summary of Respondents

3

ADCI Survey MethodologyAbout Sewells MSXIAutomotive Dealer ConfidenceIndex

Summary of Respondents

2%

TOTAL NUMBER OF RESPONDENTS

LOC

ATIO

N O

F R

ES

PO

ND

EN

TS

*Mahindra,Tata and Honda are common brands across categories.

*Sub-sample size low. Reader discretion advised while considering the statistical significance.

EAST PASSENGER CARS

BEFORE 1975

PASSENGER CARS

YE

AR

OF

INC

OR

PO

RAT

ION

OF

DE

ALE

RS

HIP

27%

22%

10%

8

5 4

26%

15%

74CITIES

WEST NORTH SOUTH CENTRAL

20* BRANDS

TWO WHEELERS COMMERCIAL VEHICLES

BR

AN

DS

RE

PR

ES

EN

TED

12%

1426

76

116

66%

22%

PASSENGER CARS TWO WHEELERS COMMERCIAL VEHICLES

TWO WHEELERS COMMERCIAL VEHICLES OVERALL

1975 - 1989

1990 - 2004

AFTER 2005

4 www.sewells-msxi.com

11

0

1

74%

1%

25% 19%

42%

14%

57%

29%

64%

5%

39%

29%


The overall ADCI during Jul - Sep 2016 indicates that the dealers continue to maintain an optimistic opinion. The sentiment of the Passenger Car dealers continues to show a steady rise. The Two Wheeler dealer sentiment is seen to be galloping ahead due to good monsoon. The Commer-cial Vehicle dealers have maintained the optimism of the last quarter.

The overall ADCI stood at +41 indicating an optimistic sentiment amongst the dealers.

The Passenger Car ADCI stood at +45, representing a positive outlook amongst these dealers.

The Two Wheeler ADCI stood at +32, indicating an optimistic sentiment.

The Commercial Vehicle ADCI stood at +34.

5

SEWELLS MSXI

AUTOMOTIVEDEALERCONFIDENCEINDEXJUL - SEP 2016 INDIA


The index for Passenger Cars segment stood at +45 during Jul - Sep 2016, as compared to +37 during April - June 2016, indicating strengthened optimism of the Passenger Car dealers.

However the sentiment was seen dipping for the Two Wheeler dealers, where the index was at +32 compared +51 at the end of Apr - Jun 2016 quarter.

Commercial Vehicle dealers’ sentiment remained optimistic. In continuation of the positive sentiment of last quarter the index moved down to +34 during Jul - Sep 2016 from an all time high of +40 during Apr - Jun 2016 quarter.

SEWELLS MSXI

AUTOMOTIVEDEALERCONFIDENCEINDEX-TREND

6

JUL - SEP 2016 INDIA


The following pages carry details of the responses received during the tenth edition of the survey to questions covering the areas as described in the index.

To map the trend, the findings of this survey are compared with the findings of the previous three editions which captured the sentiments of the dealer fraternity in the last three quarters.

This section presents the distribution of responses across multiple questions and compared with the findings of the previous surveys.

SEWELLS MSXI

DETAILED ANALYSIS

AUTOMOTIVEDEALERCONFIDENCEINDEX

Current Economic Environment vis-a -vis same Period Last Year

7

01Page 8

The Impact of Current Economic Environment on the Local Market

02Page 9

The Impact of Current Economic Environment on the Dealership Business

03Page 10

Economic Environment Next Six Months Compared To Present04

Page 11

Expected Market Performance Over Next Six Months

05Page 12

Expected Dealership Performance Over Next Six Months

06Page 13

Dealership Performance vis-a-vis Same Period Last Year07

Page 14

Dealership Performance vis-a-vis Last Quarter08

Page 17

Expected Dealership Performance Over Next Six Months Compared to the Present Level

09Page 20

Expected Manpower Strength Over Next Six Months10

Page 23

Dealers’ Opinion On Environmental Pollution Caused by Petrol Cars vis-a-vis Diesel Cars

11Page 24


JUL - SEP 2016

100%

80%

60%

40%

20%

0%1CURRENT

LAST YEAR

ECONOMIC ENVIRONMENT VIS-À-VIS SAME PERIOD

Overall, 78% of the dealers feel that the current economic scenario in the country is positive.

A similar sentiment is expressed by Passenger Car dealers, Two Wheeler dealers and Commercial Vehicle dealers.

However, it should be noted that around 22% of overall dealers still feel that the current economic environment in the country is negative.

PASSENGER CARS

OVERALL

100%

% O

F R

ESP

ON

DEN

TS

VERY NEGATIVE


NEGATIVE POSITIVE VERY POSITIVE

80%

60%

40%

20%

0%

8

7

71

202

1

205

1512 7

74 64

29

4

69

APR - JUN 2016

JAN - MAR 2016

2

27

65

6

11

37

49

35

46

35

14

OCT - DEC 2015


JUL - SEP 2016

APR - JUN 2016

JAN - MAR 2016

OCT - DEC 20152

THE IMPACT OF CURRENT

ON THE LOCAL MARKET

ECONOMIC ENVIRONMENT

During Jul - Sep 2016 quarter, about 72% of the dealers felt that the current eco-nomic scenario was encouraging for their local market.

Of the total Passenger Car dealers, 72% had this opinion compared to 71% in the previous quarter.

As compared to 80% of the Two Wheeler dealers in the previous quarter 77%, felt that the current economic environment has a positive impact on the market in their area.

Opinion of the Commercial Vehicle dealers has also not changed since the previ-ous quarter. About 64% of the commercial vehicle dealers felt that current eco-nomic scenario will have a positive impact on their market.

PASSENGER CARS

OVERALL

100%

% O

F R

ESP

ON

DEN

TS


80%

60%

40%

20%

0%

14

35

46

5

11

37

48

4

2

27

66

5

9

8

64

25

3

3

25

65

7 4

65

19

57

36

12 7

VERY NEGATIVE NEGATIVE POSITIVE VERY POSITIVE


JUL - SEP 2016

APR - JUN 2016

JAN - MAR 2016

OCT - DEC 20153

THE IMPACT OF CURRENT

ON DEALERSHIPBUSINESS

ECONOMIC ENVIRONMENT

Overall, the dealers are little more optimistic about the economic environment im-pacting their dealership business compared to the overall market. Out of 74% of the dealers who indicated that there is a positive impact on their dealership, 9% said that the impact was `very’ positive.

In case of Passenger Car dealers, the ‘very’ positive sentiment was 2% higher than the sentiment about the overall market. When it comes to Two Wheeler deal-ers it is marginally lower at 8% and with Commercial Vehicle dealers its further goes down at 7%. Thus the Two Wheeler and Commercial Vehicle dealers see slightly lesser impact of the economic environment on their dealership business.

PASSENGER CARS

OVERALL

100%

% O

F R

ESP

ON

DEN

TS


80%

60%

40%

20%

0%

15

34

44

7

12

39

44

5

1

27

64

8

7

18

64

11 8

19

65

8

64

29

7

10

9

65

20

6



4 TO PRESENT

ECONOMIC ENVIRONMENT NEXT SIX MONTHS COMPARED

Overall 88% of the dealers felt that the economic scenario in the country is going to improve in the next six months.

89% of Passenger Car dealers, 81% of the Two Wheeler dealers and 93% of the Commercial Vehicle dealers felt that the economic scenario in the next six months, is going to be even better.

PASSENGER CARS

OVERALL % OF RESPONDENTS


11

77

12 154

66

15

79

714

11


13

75

11

1


JUL - SEP 2016

APR - JUN 2016

JAN - MAR 2016

OCT - DEC 2015

100%

80%

60%

40%

20%

0%

PASSENGER CARS

OVERALL

100%

% O

F R

ESP

ON

DEN

TS


80%

60%

40%

20%

0%

4

22

62

12

4

18

68

10

47

61

28

65

5

19

4

62

30

15 21

65

14

5The dealers have a high level of optimism about the future. Overall, 90% of the dealers felt that the market performance was going to be good in the next six months. Of these, 26% felt that it will be `quite’ good.

The optimism was greater in the case of Passenger Car dealers.

30% of the Passenger Car dealers felt that the performance of the market will be quite good. In the case of Two Wheeler and Commercial Vehicle the proportion was 15% and 21% respectively.

EXPECTED

OVER NEXT SIXMONTHS

MARKETPERFORMANCE

12

26

64

91

QUITE POOR SOMEWHAT POOR SOMEWHAT GOOD QUITE GOOD


JUL - SEP 2016

APR - JUN 2016

JAN - MAR 2016

OCT - DEC 2015

100%

80%

60%

40%

20%

0%

PASSENGER CARS

OVERALL

100%

% O

F R

ESP

ON

DEN

TS


80%

60%

40%

20%

0%

6

15

60

19

7

14

63

16

39

49

39

1

45

48

65

8

50

19 21

65

14

6The degree of optimism about the future business of the dealership continued to remain higher. Whereas overall, 26% of the dealers felt that the performance of the overall market will be quite good, the proportion went up to 40% in the case of dealership business.

Passenger Car dealers as well as Commercial Vehicle dealers shared a higher degree of optimism about their dealership business.

50% of the Passenger Car dealers felt that the performance of their dealership will be quite good compared to 30% who felt the same for the overall market. The proportion in case of Two Wheeler dealers was 19% vis-à-vis 15%

The Commercial Vehicle dealers were at par on the opinion about their business vis-à-vis overall market. 21% felt that the overall market and dealership business will be quite good.

OVER NEXT SIXMONTHS

DEALERSHIPPERFORMANCE

13

40

51

63

QUITE POOR SOMEWHAT POOR SOMEWHAT GOOD QUITE GOOD

EXPECTED


JUL - SEP 2016

APR - JUN 2016

JAN - MAR 2016

OCT - DEC 2015

100%

80%

60%

40%

20%

0%7DEALERSHIP

SALES

LAST YEAR

PERFORMANCE VIS-À-VIS SAME PERIOD

77% of the dealers in this quarter felt that their sales improved as compared to the same quarter last year. This is significantly higher compared to the sentiment in the Apr – Jun 2016 quarter.

Opinion of the Passenger Car dealers about sales as compared to the last year is far better vis-à-vis in the previous survey. 80% of the Passenger Car dealers felt that their sales have increased as compared to same period last year.

Very large proportions of Two Wheeler and Commercial Vehicle dealers (73% and 64% respectively) felt that the dealership sales vis-à-vis same quarter last year has increased.

PASSENGER CARS

OVERALL

100%

% O

F R

ESP

ON

DEN

TS


80%

60%

40%

20%

0%

15

34

30

21

13

32

41

14

9

62

24

5INVENTORY PROFITS

3

17

68

12 821

19

65

8

43

29

7

14

12

65

19

4

MUCH LOWER A LITTLE LOWER A LITTLE HIGHER MUCH HIGHER


JUL - SEP 2016

APR - JUN 2016

JAN - MAR 2016

OCT - DEC 20157

Increased sales do not necessarily lead to reduction in inventory as OEM keeps pumping the pipeline. Accordingly only 21% of the dealers stated that they were carrying less inventory compared to same period last year. This proportion was 37% in the previous quarter, hence a higher proportion of dealers are carrying more inventory.

20% of Passenger Car dealers and 34% of Two Wheeler dealers are carrying lesser inventory compared to last year. The proportion was very low in the case of Commercial Vehicle dealers at just 7%.

100%

80%

60%

40%

20%

0%

PASSENGER CARS

OVERALL

100%

% O

F R

ESP

ON

DEN

TS


80%

60%

40%

20%

0%

5

21

50

24

7

23

48

22

6

31

50

13

1

13

67

1912 12

54

22

7

50

43

15

318

63

16


DEALERSHIP

SALES

LAST YEAR


INVENTORY PROFITS


JUL - SEP 2016

APR - JUN 2016

JAN - MAR 2016

OCT - DEC 20157

High sales and low inventories do not necessarily translate into higher profits for every one. Despite 77% of the dealers claiming higher sales, higher profits are stated by only 59%.

The rise in profits is seen by a higher proportion of Passenger Car dealers (64%) compared to 50% in the case of Two Wheeler dealers and Commercial Vehicle dealers.

The gap between the rise in sales and the rise in profits is the highest in the case of Two Wheeler dealers.

100%

80%

60%

40%

20%

0%

PASSENGER CARS

OVERALL

100%

% O

F R

ESP

ON

DEN

TS


80%

60%

40%

20%

0%

26

28

31

15

23

35

31

11

4

52

37

7

5

9

27

59

23

27

42

8 7

43

21

29

16

6

53

26

15


DEALERSHIP

SALES

LAST YEAR


INVENTORY PROFITS


JUL - SEP 2016

APR - JUN 2016

JAN - MAR 2016

OCT - DEC 20158

69% of the dealers felt that their sales in the July - Sep 2016 quarter will be higher than Apr – June 2016 quarter.

There was a big difference between the Passenger Car dealers, Two Wheeler dealers and Commercial Vehicle dealers on this aspect.

It is significant that 57% of Commercial Vehicle dealers and 42% of the Two Wheeler dealers felt that their sales will be lower than the last quarter.

DEALERSHIP

QUARTER

PERFORMANCE

100%

80%

60%

40%

20%

0%

PASSENGER CARS

OVERALL

100%

% O

F R

ESP

ON

DEN

TS


80%

60%

40%

20%

0%

11

28

39

12

12

33

39

16

4

59

31

6

7

16

71

31

46

126

43

36

2111

17

7

62

22

9


LASTSALES INVENTORY PROFITS

VIS-À-VIS


JUL - SEP 2016

APR - JUN 2016

JAN - MAR 2016

OCT - DEC 20158

A whopping 77% of the dealers felt that their inventory levels would go up as compared to 58% who felt the same in the last quarter.

This view was carried by 82% of Passenger Car dealers and 93% of the Com-mercial Vehicle dealers.

Along with the positive sentiment on increase in sales, the dealers were very much conscious of increase in inventory.

100%

80%

60%

40%

20%

0%

PASSENGER CARS

OVERALL

100%

% O

F R

ESP

ON

DEN

TS


80%

60%

40%

20%

0%

4

24

47

25

9

20

48

23

5

37

53

5

1

11

71

17

3838

9

64

7

2915

18

320

63

14


DEALERSHIP

QUARTER

PERFORMANCE LAST

SALES INVENTORY PROFITS

VIS-À-VIS


JUL - SEP 2016

APR - JUN 2016

JAN - MAR 2016

OCT - DEC 20158

Around 60% of the dealers expect better profits than the last quarter. The Passenger Car dealers are more optimistic than the others. Only 36% of the Commercial Vehicle dealers have a bullish sentiments in terms of profit as com-pared to last quarter.

A majority of the Two Wheeler and Commercial Vehicle dealers feel that they will make less profits compared to the last quarter despite higher sales.

100%

80%

60%

40%

20%

0%

PASSENGER CARS

OVERALL

100%

% O

F R

ESP

ON

DEN

TS


80%

60%

40%

20%

0%

17

31

39

13

21

33

32

14

2

49

45

4

9

21

65

5 8 7

46

8

38

7

29

57

19

6

54

31

9


DEALERSHIP

QUARTER

PERFORMANCE LASTVIS-À-VIS

SALES INVENTORY PROFITS


JUL - SEP 2016

APR - JUN 2016

JAN - MAR 2016

OCT - DEC 2015

100%

80%

60%

40%

20%

0%

PASSENGER CARS

OVERALL

100%

% O

F R

ESP

ON

DEN

TS


80%

60%

40%

20%

0%

5 8

71

24 1914

58

15

72

14

9EXPECTED

SALES

OVER NEXT SIX MONTHS COMPARED TO THE PRESENT LEVEL

DEALERSHIP PERFORMANCE

Overall, 89 % of the dealers felt that their sales will be higher than the present level in the next six months. 21% out of these felt that the sales will be `much’ higher compared to the present level.

The proportion of those who expect `much’ higher sales was the greatest in the case of Passenger Car dealers (24%) followed by Two Wheeler dealers (19%)

The Commercial Vehicle dealers also maintained an optimistic stance ( 86%) and expected the sales to be higher in next six months.

INVENTORY PROFITS

20

6

21

47

26

3

20

57

20

14

67

172

21

68

92



JUL - SEP 2016

APR - JUN 2016

JAN - MAR 2016

OCT - DEC 2015

100%

80%

60%

40%

20%

0%

PASSENGER CARS

OVERALL

100%

% O

F R

ESP

ON

DEN

TS


80%

60%

40%

20%

0%

2

18

56

24

117

55

27

2

29

61

8

919 23

27 43

68 36

2184

42

9EXPECTED

SALES



The apprehension about the inventory levels continued and as many as 27% of the dealers expected higher inventories in next 6 months. However this may also be a result of certain thinking that with rise in sales the OEMs will push higher inventories as well.

The apprehension was highest amongst Passenger Car dealers . The Two Wheeler and Commercial Vehicle dealers were a little less apprehensive. In fact 43% of the Commercial Vehicle dealers felt that their inventory level will come down in next 6 months.

INVENTORY PROFITS

21

4

23

59

14



JUL - SEP 2016

APR - JUN 2016

JAN - MAR 2016

OCT - DEC 2015

100%

80%

60%

40%

20%

0%

PASSENGER CARS

OVERALL

100%

% O

F R

ESP

ON

DEN

TS


80%

60%

40%

20%

0%

8

28

44

20

8

26

46

20

9

62

27

2

5 816 11 7

58

8

29

7157

7

23

9EXPECTED

SALES



The expectation of profitability is high but not in proportion with sales as we witnessed earlier. The dealers are a little cautious about committing to the profitability.

There isn’t much of difference between the sentiments of various industry segments. Around 80% of overall dealers believe that their profit levels will go up in next six months.

The Passenger Car dealers are more upbeat than others on this aspect.

INVENTORY PROFITS

22

14

66

14

6



JUL - SEP 2016

APR - JUN 2016

JAN - MAR 2016

OCT - DEC 2015

100%

80%

60%

40%

20%

0%

PASSENGER CARS

OVERALL

100%

% O

F R

ESP

ON

DEN

TS


80%

60%

40%

20%

0%

5

19

35

41

315

49

33

10

54

34

2

34

12

46

12

29

5443

7

21

38

4

10Overall, the proportion of surveyed dealers who expect higher manpower level in the next six month as compared to that at the end of the previous quarter remains the same at 65%.

The proportion of Passenger Car dealers and the Two Wheeler dealers who ex-pect higher manpower strength in the next six months have remained almost stag-nant as compared to that during Apr - Jun 2016.

72 % of the Commercial Vehicle dealers expect their manpower levels to be higher in the next six months as compared to 77% at the end of Apr - Jun 2016.

EXPECTED

OVER NEXT SIXMONTHS

MANPOWERSTRENGTH

23

14

51

33

2



During the time of the survey the issue of environmental pollution caused by Petrol Cars vis-à-vis Diesel Cars was in limelight. Here is the response of the automotive dealers on this.

More than half of the dealers felt that diesel cars pollute more than petrol cars.

14% of the dealers felt that petrol cars pollute more than diesel cars. Around 27% felt that both petrol and diesel cars pollute equally.

Clearly there is a need to educate the dealer fraternity on this critical aspect as they interact with the customers on a day to day basis.

DEALERS OPINION ON

PETROL CARS VIS-À-VIS DIESEL CARS

ENVIRONMENTAL POLLUTION CAUSED BY

24

Petrol cars pollute more

Diesel cars pollute more

0 10 20 30 40

Both cause same level of pollution

Don’t know / Can’t say

50 60 70 80 90 100

14

57

27

2

11


HHeadquartered in Detroit, USA, Sewells MSX International is a leading global business process outsourcing company. The combined organizations is represented by over 6,000 employees across 80 different countries. We operate across Asia Pacific, Africa and the Middle East regions and work closely with leading automotive brands and their dealers.

Our core purpose is to help individuals and organizations in automotive retail, realize their full po-tential and achieve their goals. We aim to be a key catalyst in the transformation of the global auto-motive retail industry into one of the most admired and respected retailing businesses in the world.

Over the years, we have invested in research to build cutting edge and innovative solutions. Leading global automotive OEMs value us as reliable partners, and we work closely with them, supporting dealer development and network performance activities

For more information, visit www.sewells-msxi.com

Sewells MSXI Contacts:

PRANJAL SRIVASTAVAhMarketing Manager, Sewells MSXIE: [email protected] | T: +91 8373917121

PRADEEP SAXENACountry Head - Sewells MSXI IndiaE: [email protected] | T: +91 12 44681163, M: +91 9810305854

ABOUT

SEWELLS MSXIINTERNATIONAL

25


DISCLAIMER

The contents of this report represent the opinion of survey respondents, and not that of MSXI, Sewells MSXI India, any of their subsidiary companies, or employees thereof.

The contents of this report and analysis of responses received in response to the quarterly Automotive Dealer Confidence Index (ADCI) survey are to be viewed as broad trends being observed, and not as definite commentary on the state of economy, state of business or policy framework of any automotive manufacturer and/or franchised automotive dealer group.

The contents of this report should not be viewed as commentary on the prospects of a particular manufacturer or brand as it is only intended to summarize the perceptions and opinions of respondents.

The contents of the report and analysis of responses should not be viewed in isolation, but in conjunction with the number of responses considered in the computation of the index and subsequent analysis.

This survey may have limitation in terms of sample size for some segments or overall. We advise reader discretion in interpretation of results.

Sewells MSXI does not take the responsibility of or does not indemnify any user of the study against the impact of the decisions made using the findings of this study.

26


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