Return to mean

In many ways, the long-term monthly automotive sales data draws a number of parallels with technical charting of an index. Both have their roots in human behaviour, the mass type.

Any market, any product segment, any brand, or any nameplate, have a 'natural' sales volume. The natural size is arrived through years of customer behaviour towards the product / brand / segment.

The natural is the mean.

Think of it as the MA200, the 200-period moving average. It is fairly rock solid and does not show much volatility even when there are sharp spikes or severe dips. It has to be nudged to change direction steadily through months of perseverance.

Ohh, and values tend to return to it now-and-then just for reassurance.

This natural sales volume is not a constant. It changes. Every brand strives to improve this natural. Most do. Except, the natural is stubborn. Changes are slow and need blood-sweat-and-dollars. Volumes would change for a few months and then come back to the natural which meanwhile has hardly moved up at all.

Unless you change the very basics underlying the natural.

For a growing market like India, the overall market has an upward trending natural. This is very similar to how the MA200 would behave in a bullish market. At a more granular level, this is true for most brands as well. Any dip like the present is temporary unless the basic structure of the market is changing.

The converse is also true.

Any spike OEMs experience when they launch a new model is temporary unless there is a sustained improvement in the basics - footfalls into showrooms and the conversions therein. Often, we revert to the mean once the PR driven euphoria has died.

That is why I wait for at least 6-12 months before passing judgement on a product like the MG Hector. Being a new brand, the natural is 'zero' and a platform has to be established before I draw any conclusions.

Same goes for Jawa. Or for TVS Mopeds last year. Or Bajaj 100cc range last year. Or Bajaj Pulsar 150cc this year.

Often the natural is camouflaged by popular terms like product lifecycle, bell curve, yada yada yada...

However, everything boils down to the same - is your natural moving in sync with the sales growth? If it does, the growth is sustainable, else, it is just a spike.

Look at the Jeep Compass which was down 58% y-o-y in July. For a product in its second year of lifecycle, this is not product lifecycle issues. This is a return to mean for FCA and realisation that there is empty space once the early adapters market has reached saturation.

Why did the launch of the EcoSport killed off the Figo in 2013 or why the new Figos haven't really worked is because the natural for the Ford brand could not be improved. The footfalls for the EcoSport cannibalised the Figo.

The natural needs hard work to be improved upon. Consistently successful brands look beyond isolated product launches and focus on improving in every area. Oh, and they have attention to detail even when playing in the economy segment. In the last six months, some of the research work we have been approached for involved the design of the gear-shifter-knob and (a separate study) the design of the fuel filler manifold. This level of market research can only come from a brand focussed on improving its natural, not just on the next quarter and the next hot balloon.