Monday, 3 October 2011

Myvi 1.5 to impact sales of Saga and Persona.


So Perodua has launched the new Myvi, followed by the Myvi 1.5 about three months later. Folks in the financial world have been talking about how the new Myvi would affect sales of the Saga and Persona. Industry analysts at financial research houses have been talking of the same drivel over and over again even before the Myvi Mk2 was launched.
In a latest report from The Star Business, Mixed reactions to recent moves by Proton and Perodua
Perodua's new 1.5 litre variant is expected to strengthen its position as the country's top automaker in terms of sales, given that its entry into the space that's traditionally been occupied Proton, say research analysts.

The 1.5-litre Myvi variants, launched on Thursday, are priced from RM50,900 to RM61,700. At those prices, they are in competition with Proton namely the Saga FL 1.6 Executive, which is priced at RM46,549, and the Persona, which is tagged from RM46,499 to RM59,499 depending on specifications.

“The medium-line Persona (automatic transmission) is priced around RM56,000 compared with the RM54,400 for a 1.5-litre Myvi SE (automatic transmission). So, the price difference is not large,” says a bank-backed automotive analyst.

“Combined with the fact that the Myvi has been the nation's best-selling car, we think Persona sales will be impacted by the new 1.5-litre Myvi variant,” she says.

Even a CIMB Research auto analyst pointed out that the new Myvi could affect Persona sales.

In a faint hope to put a stop to such drivel, I have compiled the data below, based vehicle registration figures from the Malaysian Automotive Association (MAA). In the legend, Myvi here refers to all variants of the Myvi 1.3, excluding the base model Myvi 1.0 SR. The Saga legend includes newly launched Saga 1.6 FLX but leaves out the Saga 1.6 Manual, which is a taxi only specifications model. The Myvi Mk1 was first launched in mid-2005, but to keep the chart length manageable, I left out numbers for prior to 2007, as it is irrelevant for the purpose of our comparison. Both the Saga and Persona were only launched in late 2007. Data for the preceding months are already sufficiently covered here.

Click to enlarge.
Reference for chart :
  1. Proton Persona launch. Any new model launch will see a pattern of a sharp increase for about 3 months before settling down to normalcy.
  2. Similar to the above, launch of Proton Saga BLM
  3. Sudden spike due to heavy promotion by Perodua; monthly installment of RM347/month for the first 5 years (image below). It was an extremely good deal. Almost too good to be true. But market demand for any particular product is finite. There is only so much sales one can draw from the market. The spike lead to a sales "drought" for the following few months where sales of the Myvi dropped to its lowest in its entire model life.
  4. Run-out promotion for the Myvi Mk1 to make way for the upcoming Myvi Mk2. RM500 cash rebate was offered, alongside a low interest rate of 2.88%.
  5. Saga FL launch

Now, look at the chart in detail. At which point did sales of either Myvi or the Saga or the Persona was ever affected by one or the other? Even when the Saga was launched, it left almost no impact to the Myvi (2). And to further emphasize the different playing field for Proton sedans and Perodua hatchbacks, look back again at (3). Even when Perodua was extremely generous with discounts / promotions, sales of Proton models did not suffer one bit. In fact, Proton sustained a rather predictable sales pattern, a marginal increase due to the seasonal pre-Raya holidays boost before slowing down towards the year end.

And lastly, I may not be the most reliable nor the most authoritative person in this area. So let's hear from the Perodua man himself. Surely Perodua's own official statement is far more reliable than my ramblings. Shortly after launch of the new Myvi, Perodua announced that the Myvi's (1.3) sales target is 8,500 units a month. When the Myvi 1.5 was launched, Perodua's MD Datuk Aminar Rashid Salleh said
“With the new 1.5-litre variants, we believe we can increase Myvi sales from about 8,000 units each month to between 9,000 and 9,500 units.
“The 1.5-litre variants should account for 45% to 50% of Myvi sales each month,”
In other words, introduction of the Myvi 1.5 is only expected to boost Myvi's overall sales by 1,500 units a month. A measly sum by Perodua's standard. Datuk Aminar mentioned almost half of all Myvi's sales will be from the 1.5-liter variant. Thus, Perodua expects the majority of its Myvi 1.5 customers to come from Perodua's own pool of potential customers, people who would've have otherwise bought a Myvi 1.3, people who are going buy a Myvi anyway. They are not coming out of a Proton showroom into a Perodua showroom. Instead, they went straight to a Perodua showroom and then decide if they want to shell out a bit more for the 1.5-liter instead of the 1.3-liter. Yes, this would mean that there is a very high level of internal sales cannibalization, but this is only to be expected as previously customers within that segment have little or no other choice. Perodua is introducing the Myvi 1.5 anyway, knowing fully well that it would hurt sales of its existing 1.3-liter variant because for many years, its market research data is telling the company that Myvi customers want a bigger engine in their cars. So the company is doing exactly that. It's not about competing with Proton's sedans. Total conquest sales from Proton is only minimal at best. It's very logical. One buys a Saga or a Persona because one needs a boot! Having a Myvi with a bigger engine on the market is not going to make you change your mind. Of course, there is always a minority who will cross shop between a Myvi and a Saga / Persona, but that is an exception rather than a norm, usually amongst those who are looking for a second or third car in the family.

So with this, let's hope we bury the "Myvi will affect Proton's sales" drivel for good.

In any case, sales of Persona is expected to slow, not because of the Myvi, but because the Persona is reaching the end of its product life cycle. The Persona's origin dates back to 2004 (Gen.2), almost 8-years ago. It's replacement will be due sometime next year.

Those in the know will not take these analysts' comments seriously, but the problem is that institutional investors and fund managers don't read academic automotive materials. Instead, they rely / trust the recommendations of these so called industry analysts. Their recommendations and comments can have adverse impact on a company's stock price. Which is why some say the stock market runs on emotional sentiments rather than rational thought or strong facts. Behavioral science is probably a more important knowledge than economics when it comes to beating the stock market. As always, don't trust everything you hear or read.

source : theautoindustrieblog

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