In fact, while sales of small cars (M800,Alto, WagonR, Estilo and A-Star) declined by around 13 per cent to 305,209 units between April and December this financial year for the company, that of bigger and more premium products Swift, DZire and Ertiga (tagged between Rs 4.5 lakh an Rs 8.70 lakh) increased by a whopping 83 per cent to 299,248 units in the period.
Share of these small cars in the company’s overall tally decreased to 41 per cent (from 51 per cent in April-Dec 2011) in this period, while the proportion of bigger cars increased to 40 per cent (from 24 per cent).
Mayank Pareek, chief operating officer (sales & marketing), Maruti Suzuki India Limited (MSIL) while agreeing that the Indian buyer has become more value conscious and is showing increasing preference for more premium products informs the price differential between diesel and petrol could have had a play in the sales numbers, “While there is a demand for more premium products with major proportion of sales for even entry-level products coming from high-end variants, we also have to consider that entry-level products don’t have diesel options. This may be fuelling demand for bigger cars.”
This shift towards more premium products can also be noticed in sales at the country’s second largest car maker Hyundai Motor India Limited (HMIL).At Hyundai too, despite new launch Eon pushing volumes, the share of Eon, Santro and i10 in Hyundai’s total volumes has decreased to 58 per cent in the period under review. The Korean auto major sold 163,611 units of these three models between April and December 2012, which is a decline of 5.7 per cent over the 173,460 units sold in the corresponding period the previous year.
Sales of i20, Verna, Elantra and Sonata have, in the meantime, shot up by nearly 19 per cent to 115,020 units contributing to 41 per cent (up from 35) of overall sales at HMIL. Rakesh Srivastava, Vice-President (Sales & Marketing), HMIL informs, “Due to the increased price differential between diesel and petrol prices, there was a substantial swing in consumer preference for models with diesel power trains. This lead to volume growth for the models i20 , Verna and Elantra. Strong brand differentiation with addition of premium & unique features such as Day running light (DRL) in the i20 also translated into improved customer interests bringing in more customers.”
V G Ramakrishnan, senior director (automotive practice, South Asia, West Asia and Africa), Frost & Sullivan says, the trend has been precipitated by the economic slowdown. “While consumers at the entry-level are more sensitive to factors such as inflation, high interest rates, fuel expenses, buyers up the ladder have more disposable income at hand. For an entry-level buyer, the cost of a car would be equal to or more than his annual salary, for a mid-level consumer the proportion of the vehicle cost to his overall salary would be much lower thereby making purchase decisions easier”, says Ramakrishnan.
It is also true that with the age of the first time buyers going down, consumers are moving towards bigger and premium cars. Abdul Majeed, partner and leader (automotive practice), Pricewaterhousecoopoers says, “As consumers are moving from middle to higher middle class, the cash flow is increasing. And the first aspirational need they want to address is mobility. A bigger and better car is a status symbol.” Over the last five years, in fact, while the proportion of first time buyers at the entry-level (cars priced between Rs 2 and Rs 4 lakh) has declined to 55 per cent from 62 per cent in 2007, the number of first time buyers in the A2+ segment (cars priced over Rs 4 lakh) has nearly doubled to 46 per cent from the earlier 24 per cent.
The trend of customers moving towards a more premium car is also being pushed by the large base of existing customers who want to upgrade. “The rising interest rates could have somewhat deterred the first time buyer but, there is a large base of people who are looking at upgrading their vehicles", says a senior executive at a leading automobile company. Industry estimates suggest, there are around 15 million people who own vehicles in the country, of these around 10 million are looking at switching to a better car.