[S15]

I was in the comment section of a foreign financial newspaper, and was having this debate with another commenter, and he said that Indian Market is a vast stagnant market.
My initial response was one of disbelief, but then he came back with numbers and graphs.

The passenger vehicle market has been stuck at more or less 3 million cars per annum for the past decade i.e. 250,000 registrations a month on average since 2012. (https://tradingeconomics.com/india/car-registrations)

Thus, it is - as you mentioned correctly - a vast market, but, increasingly a stagnant one.

I, out of curiosity did decide to check out the linked website, and was presented with a couple of interesting graphs.

So, I thought we'll discuss here. Have we reached a crescendo? Is 250K cars a month the max we'll ever reach?
If yes, why have we peaked at this number?
If no, why are we stuck at this number for the past decade?

And anything else that you people might want to ad.

[FlashMustang]

Unlike consumable items, buying cars isn't a frequently recurring activity for the majority of the population.

With increasing reliability of cars over the years, the longevity of the cars that are sold can be expected to go up. This leaves more cars in the pool of used cars. So, for buyers of cars, there's more cars available in the used pool.

All of these factors, in my humble opinion, contribute to this trend.

In a lot of major economies where private transport is favored, there's actually a declining trend of the same number.

United States:

Source: https://tradingeconomics.com/united-...-registrations

Australia:

Source: https://tradingeconomics.com/austral...-registrations

Out of curiosity, I checked a few more countries/zones.

United Kingdom:

Source: https://tradingeconomics.com/united-...-registrations

China:

Source: https://tradingeconomics.com/china/car-registrations

Euro zone:

Source: https://tradingeconomics.com/euro-ar...-registrations

Canada:

https://tradingeconomics.com/canada/car-registrations
Source: https://tradingeconomics.com/canada/car-registrations

Germany:

Source: https://tradingeconomics.com/canada/car-registrations

So, even to keep the number of new registrations flat, it requires a lot more new buyers. To even make this happen, there's a need to increase wealth creation and percolation of benefits to a larger population. With the exception of China, I did not see an upward trend in some of the countries I checked out.

These are just my thoughts.

Would love to hear from more experienced members.

Cheers!

[Akshay6988]

There's surely very large potential in Indian car market. The last year was a disaster though, but the demand has picked up at rapid pace post lockdown. I believe the market will grow even more if the atrocious taxes are reduced so as lower middle class people can actually think about getting a car. Car buyer is seen as a cash cow in this country, name anything about car and you have to pay it through the nose. Vehicle taxation rules are in dire need of a change. The less I say about the rising fuel prices the better.

I also think government needs to do away with that absurd sub - 4 meter vehicle tax benefit rule.

We've been denied to so many good cars from international manufacturers and being served all these lame hatchbacks.

[aniyo]

Possible reasons:

1. Income level on the ground has stayed in line with inflation meaning never additional income to buy cars,

2. No culture of car lease in India which would have prompted many people to change cars regularly

3. Financing options. Interest rates in developed countries in extremely low. My brother got car loan at 1% in the US.

4. Cost of living is actually high in India compared to other countries. Barring US, education, medical, housing are unreasonably expensive in India.

5. Many people use cars to show off and use it for a long time, like 60000km in 10 years sorts.

6. Import duties, taxes on cars etc have risen a lot. At 10L rupee car in 2010 costs 18L now with reduced features and quality. Income level have not kept pace for a large population.

[ruzbehxyz]

Here in India, we absolutely have very less choices for actual good cars. Firstly we need to rise above Maruti.

The amount of taxes need to be reduced to make cars more affordable.

Most of the foreign car makers do not want to enter due to Government policies and those that are already there, do not want to introduce their lower models because of monopoly in India.

Government does not want to relax the policies because they want to protect Indian companies like Maruti, Tata, Mahindra etc. Whereas you could actually get a more better foreign vehicle in the same cost of a Tata or Mahindra.

[Jeroen]

Some very interesting observations and statistics. I must admit if you would have asked my gut feeling would be car sales are continuing to be on the up for a country like India. But it appears to be pretty flat for at least the last 5-7 years.

I do believe there are some fundamental difference between the Indian and the more ‘western market’. In many western countries most people will be able to afford a car, one way or the other. Even families with low incomes, will still own a car, second hand obviously.

There have been numerous studies in the past that looked at the correlation between (disposable) income and car owner ship. The bulk of car ownership sits with what is typically classified as “middle income families / middle class”. (I hate those terms, but bear with me)

Whereas in many western countries about 80% of the country’s population can be considered middle income, in India that is a much smaller group (percentage wise at least). So owning a car, new or otherwise is still only affordable for a relative small group.

Over the last couple of decades the “middle class” (to use that horrible world again) in India has steadily grown. Although I am not so sure about this growth for the last 5-7 years.

So when all is said and done, in terms of potential growth, India is in a much better place than any western country. There are of course multiple factors that contribute to people buying (or not buying) cars. But unless your are part of the “middle class” it is a bit academic, as you simply would not have the income to support a car one way or the other.

Another metric to look at this is of course, cars per capita (per head of the population)

Wikipedia to the rescue: https://en.wikipedia.org/wiki/List_o...les_per_capita.

India is at the 124th place, Look at the list and you will notice typical western countries car per capita is easily an order of magnitude higher (10x).

So India has lots of potential, but without economic growth and a reasonable distribution of prosperity, it is not going to happen.

The numbers per capita are actually coming down in many western countries for a variety of reasons. Not sure to what extend India will follow. It is one thing being able to afford a new car, but for a variety of reasons choosing not to buy one.

Or simply not being in a position to own a new car, or even second hand.

Two very different world, different perspective. Not better or worse, just very different.

Jeroen

[GTO]

Amazing thread . Our market has great volumes, but it has been largely stagnant, yes. There are many contributing factors such as the masses preferring 2-wheelers (this is a big one), people holding onto cars for longer, app-based cabs like Uber & Ola bringing chauffeur-driven Dzires & Xcents to the masses, work from home (especially in Covid), traffic & parking woes, rising car prices and what not.

That said, the average transaction price has surely gone up due to the pricier crossovers. Not just 12-lakh ones like the Vitara Brezza & EcoSport, but also 20-lakh ones like the Creta & Seltos. In terms of GMV, we are way ahead of where we were in 2012.

[VKumar]

I would like to put the blame on government policies here. If you work out your fiscal policies in such a manner that inflation goes up, but so does the inequality - market tends to lose the confidence.

Not just cars, look at any big ticket product, above the cars comes the real estate - it's struggling. Cars are comparatively a small ticket purchase, but there is a huge chunk of population who needs to feel confident about their jobs or source of income's consistency - then only they go out to make the purchases.

Coming to the market:

Auto market has a huge imbalance between what comes in vs what goes out. While we have 2.5 lac vehicles coming in every month, we have an even bigger market for pre owned vehicles, well thriving under the covers. Market is stagnant in terms of new cars being bought every month. But the market is well thriving in two terms:

• In terms of total number of cars increasing on the roads per month
• In terms of average ticket size

2,50,000 'new' cars per month since a decade means 3,00,00,000 or 3 crore new cars have hit the roads in last 10 years. This shows that our penetration of cars/1000 people are increasing at a good pace. But, when these 2,50,000 cars hit the roads every month, they can be classified into three different components:

• 1 new car == 1 used car in the market
• First car
• Second or nth car in the house

As per Statistica, this is how our used car market has been in last 3 years:

My point is that, while our new car market looks stagnant. A few things we need to observe are:

• Average ticket size is rapidly increasing
• Used car market is rapidly increasing - which means the number of 'new buyers' in the market is limited, many are just upgrading
• Used car market since last few years has outgrown the new car market

Our PPP is too different from the western countries and developed markets. A direct comparison like this with the developed markets can't be carried out simply in terms of volumes. Yes, stats like penetration of cars per unit population, or growth rate in car penetration throughout the country is something we can compare. They can buy cars like Indians buy Ray Ban - too big a difference IMO.

Also a fact to appreciate is that, while the new car sales volumes are going down in many developed markets, we are still maintaining the same pace. Isn't is appreciable? Probably we are at the peak, staying here for as long as possible is what matters, losing the numbers can raise the alarms though. But in the highly price sensitive market of ours, we have to count our used car market too, we Indians make the cars run for a quarter of a century, unlike many countries where they are off-the-road after a few years of operation. Total number of cars on the road - in operation is what counts here IMO, especially for a low income country like ours.

That said, very few times we come across a post that is written like a gem, one such post is by Jeroen sir; where a simple thanks can't suffice.

Originally Posted by Jeroen

. Two very different world, different perspective. Not better or worse, just very different.

Thanks for sharing dear sir, it helped me go to study and look at a lot more perspectives too.

Originally Posted by JoshMachine

Isn't it interesting to note the contradictions, while the car sales growth have remained almost flat over the last 10 years, the GDP per capita has grown over 50% in the same time period!!

Thanks for sharing mate, really very informative. But I would like to iterate my point again here:
We need to see two things:

• Total number of cars on the road - new + used
• Gross market revenue, which is rising faster than probably GDP itself.

[JoshMachine]

Originally Posted by S15

I, out of curiosity did decide to check out the linked website, and was presented with a couple of interesting graphs.

Thanks for sharing, the site is a treasure trove

And anything else that you people might want to ad.

I did a cross-comparison of India Car Sales vs India GDP per capita, and here's what I found:-



Isn't it interesting to note the contradictions, while the car sales growth have remained almost flat over the last 10 years, the GDP per capita has grown over 50% in the same time period!!

With potentially more money in their pockets every year, people are not spending proportionately/ exponentially on depreciating assets like cars.

Originally Posted by Jeroen

Another metric to look at this is of course, cars per capita (per head of the population).
India is at the 124th place, Look at the list and you will notice typical western countries car per capita is easily an order of magnitude higher (10x).
So India has lots of potential, but without economic growth and a reasonable distribution of prosperity, it is not going to happen.

IMHO, such country-wide comparisons should be taken in a relative context.

The single biggest factor spoiling the calculation is the denominator (India's population number).

With such a huge number, almost all worldly comparisons go against India (or with, depending upon the context).

I checked randomly and Australia is ranked very high at 6th in the list, and yet it has only 1/3rd the total numbers of cars in the country as compared to India.

[Aroy]

Traditionally new car sales are dependent of the second hand car sales. Most people who buy a new car do so after selling their old one. There are very few first time buyers internationally (mostly those who have come of age and/or got some inheritance).

That is unless the government has strict policy of scrapping old cars (or making it prohibitively expensive to keep old cars) - prevalent in a lot of countries.

So the plateau on sale of new cars depends on
. Used car demand
. Compulsory scrapping of old cars
. First time buyers

The last category is what matters as that is the segment that will increase the demand both for new cars as well as used cars. This segment will increase only with economic advancement of the population. Scrapping will help but not much.

[MCR]

The Strict Tax policies are at play here. The demonetization also has shown its effect as has the TCS. Add to these the introduction of GST, high Income Tax and a equally high Road Tax have become a deterrent.
The Traffic scenario has not gotten any better nor has the Parking scenario. There is also a huge drop in the first time buyers thanks to high fuel prices (This can be seen in the drop of Alto Volumes).
Thanks to the cars being reliable (mostly MSIL), there are cars which are >15 years old still available in the used car market.
All of these combined factors along with higher car prices (thanks to the car makers, who would like to break even on a specific model from day 1) have meant that the market remains stagnant.

[ggkg]

It's got to do with parking hassles, traffic jams, improvements in metro services in many large cities. Income levels are surely up in the last decade as real estate prices show.

[freakmuzik]

Originally Posted by JoshMachine

I did a cross-comparison of India Car Sales vs India GDP per capita, and here's what I found:-

Attachment 2142148

Isn't it interesting to note the contradictions, while the car sales growth have remained almost flat over the last 10 years, the GDP per capita has grown over 50% in the same time period!!

With potentially more money in their pockets every year, people are not spending proportionately/ exponentially on depreciating assets like cars.

I think if the graph plotted was GDP vs Avg. Value of Cars purchased, it might be quite close. The value of top 20 cars is so much higher to how Indian market was back then. Creta is doing erstwhile Wagon-R numbers and even cars like Harrier & Safari sell 2k units a month!

It still might not be exactly as the GDP, due to all the factors mentioned earlier in the thread.

Top 20 cars in 2010 August



Top 20 cars in 2021 March



(Data from respective T-Bhp monthly sales threads)

[shobhit.shri]

Originally Posted by FlashMustang

China:
Attachment 2142100

China's market has actually more than doubled - from 1 million to 2.5 million - in those years, and it was 4 times of India, to begin with. The graphs are not scaled properly.

Originally Posted by VKumar

2,50,000 'new' cars per month since a decade means 3,00,00,000 or 3 crore new cars have hit the roads in last 10 years.

You may want to fix the math here, it's 30 Lakhs, not 3 crores. Or am I understanding it incorrectly?

[Motard_Blr]

This is a really interesting thread and it's one of many reasons why I love Team BHP!

My take is on this is from a perspective of income and affordability.

1. My income rises at 5% to 8% every year thanks to increments. I know I am lucky on this
2. The rate of inflation is also about the same, sometimes a little less, sometimes a little more
3. Income tax paid is on total income, not on inflation-adjusted real income
4. Some portions of monthly or annual expenditure are rising faster than the average rate of inflation. E.g. Insurance premiums, education, medical treatment, etc.
5. Car prices are also increasing but, recent increases due to regulations (emissions and safety) have made price rises steeper than usual
6. Effectively, for most salaried, middle class person, their disposable income is not rising appreciably, if at all
7. Most big cities are already saturated with cars. Buying , owning and driving a car is not easy.
8. Uber and Ola have convinced many people, particularly millennials and Gen-Zers that buying a car doesn't make sense. They would rather spend on a fancy new phone or a gaming console
9. For car sales to increase in India, most of the sales have to come from tier 2 and tier 3 cities. For that to happen, there needs to be big increases in disposable income in those cities. This can come mainly from new jobs, not from existing ones.

I think the automotive industry knows all this very well. With no new customers to chase, they are all chasing existing customers (us) by tempting us with new features, engines, etc. If the market size does not increase, the only way to growth in revenue is by increased margins. Competition will become worse and smaller players will drop out. I think we already see this happening in other markets, including North America and Europe, but at a different scale.