Car buyers switch gears to go for feature-rich, bigger models

A growing number of Indian buyers are opting for bigger, feature-packed cars, marking a shift from what used to be a predominantly cost-conscious market. The share of the Rs 7.5-25 lakh price segment is currently the largest at 67%. Within this, the Rs 7.5-12.5 lakh price band, at 42%, is the biggest, according to Jato Dynamics data.

Five years ago, the cars priced below Rs 7.5 lakh constituted the largest segment at 58%.

With car prices going up owing to rising commodity prices and stringent regulatory standards, the price-sensitive segment below Rs 10 lakh has seen falling sales, said Shashank Srivastav, senior executive director, Maruti Suzuki, the country’s biggest carmaker.

There is a paradigm shift in consumer behaviour regarding aspects such as technology and safety. Expectations were previously limited to features such as air-conditioning and power windows. Car buyers have now started seeking out features such as voice-recognition navigation systems, sunroofs, touchscreen displays, 360-degree cameras, electronic traction, cruise control, hill hold control, low tyre pressure indicators etc., all of which have led to a further increase in prices.

This segment of car buyers is less affected by rising prices as they have more disposable income, said Srivastava. Some consumers are also seeking features such as advanced driver-assistance systems (ADAS) to enhance safety and convenience.

“Customers are willing to pay a premium for advanced and hi-tech features. To match these rising aspirations of customers we have been enhancing our product offerings with premium & high-tech features,” said Tarun Garg, COO, Hyundai Motor India.

” Going forward, we expect this trend to continue and grow further since the New-age customers are demonstrating strong affinity towards technology and aspire to have premium driving experience,” said Garg of Hyundai.

For most mass-market car makers, over 50% of sales currently is in the price band above Rs 10 lakh. This has also led to more launches in the segment — nine this calendar year.

Due to changing lifestyles and the rise in disposable income, at least for some, the average age of car owners has dropped. Today, with increasing internet penetration, social media awareness and education programmes, customers are being guided more than before by environmental impact, safety, fuel efficiency, technology, connectivity and design while buying a car.

Customers now extensively research vehicles online, read reviews and compare prices. This is a big change from the past where the comparisons were limited to price, said a spokesperson of Tata Motors, which now has over 65% of its sales in the price band above Rs 10 lakh.

Maruti Suzuki, which built its market dominance on small cars, has just launched a seven-seater MPV at Rs 25 lakh. The company hopes the premium gloss of the Invicto will rub off on other Maruti brands, Srivastava said. The Invicto is being built by partner Toyota, which sells it as the Innova Hycross.

Fifty percent of Maruti Suzuki sales still comes from its small and compact cars. This is expected to drop over the next few years, as it looks to launch more premium models, which includes a marked focus on SUVs such as the Grand Vitara, Jimny and Brezza.

Currently, more than 50% of Hyundai’s sales comes from vehicles priced above Rs 10 lakh (ex-showroom), up from 20% in 2018.

Also, in the last four years, the sales contribution of models priced above Rs 15 lakh has risen eightfold, said Garg, of Hyundai Motor India. The Hyundai Tucson SUV was launched last year at a starting price of about Rs 30 lakh. The variant that comes with ADAS level 2, which goes up to about Rs 35 lakh, accounts for 85% of all Tucson sales, Garg said.

Recent research shows that customers are willing to pay a premium for advanced and hi-tech features and car companies have been enhancing product offerings to meet these rising aspirations.

“These features are cascading from the luxury segment into the mass models, as OEMs (original equipment manufacturers) are offering more car per car to attract customers,” said Ravi Bhatia, president, Jato Dynamics.

The Indian passenger car market is undergoing a significant transformation driven by urbanisation, income growth, technological innovation and consumer preferences, experts said. These trends are expected to create new opportunities and challenges for car manufacturers and stakeholders and will have significant top-line impact for OEMs, as they can capture higher value and margins from the premiumisation of the market, they said.

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