[cludflare]

Buying a first car can be a very difficult discussion for many. With India shining, most of us would end up owning at least 4 to 5 cars in our lifetime if not more. But the first one is always special. There are different opinions that people hold around first cars – some believe a used car is the best way to get your hands accustomed and then move to a new one, some believe that in the new age one can directly own an automatic and skip the manual world completely, some do not want to compromise on safety these days at all, while for many it’s a pure decision of affordability.

There is a big section of Indian society who are restricted to two wheelers only because of budget constraints and many of them migrate to entry level cars as and when possible. This is one space that I have a particular interest in. I live in Bangalore and often notice that there is an increasing drop in the number of Altos and Celerios on the road, which is understandable with Bangalore having the highest per capita income in the country. But unlike the big cities, this segment is extremely important for a massive part of India. For many of us, the first car was always an entry level car which might be changing now.

Maruti Suzuki’s chairman recently shared his view in their half yearly press conference about the significant drop-in entry-level car-space.

The objective of this post is to have some discussion around the lack of options and OEMs disappearing from this space and second, the importance of safety features in the segment.

Even if MSIL’s sales numbers from this segment remain high, this is not a value segment. I have deep respect for Maruti Suzuki to continue to focus on the demography that buys their first car based on affordability. Decade over decade, Maruti has ensured that the Indian customer is not running out of options at all non-premium price points. While others like Hyundai chose to fold, Maruti holds the fort. It was extremely sad to see first the Eon followed by the Santro coming under the axe. The cheapest Hyundai (Nios - Era) now costs 7 lakhs on road. On the other hand, Maruti still offers the lower middle class buyer the option to chose from Alto, Celerio, Wagon R and even the Ignis priced aggressively. Also notable mentions are the Kwid and Tiago still being around.

I understand that with the commodity costs on the up and the tax treatment for foreign players (excluding Koreans) makes the business less viable in this segment. That makes me think about the mandate of having 6 airbags for all cars. I do believe safety is very important aspect of a car, and it should be one of the top priorities for all car buyers, if you can afford it. But there are millions of Indians who will want to upgrade to an entry level hatch from their scooters – don’t bump in their costs.
Kudos to Tata Motors for raising our awareness towards safety, but hey – don’t mock S-Presso in your social handle for 0 stars. You are not the one offering a car at 4 lakh ex-showroom.

[The Rationalist]

You are simply nitpicking on TATA. The cheapest car, Alto costs ₹4.6 lakh in Kerala, Tiago costs ₹6.6 lakh. In EMI terms it’s around ₹4000. There will be very minuscule percentage of people who can afford a Alto but not a Tiago! The sales of the cheapest 3 cars in India is <5% of total sales! So the percentage who can’t afford a Tiago, yet able to afford an Alto will be less than 5% of car buyers.

Let us assume a person wants to buy a car. I bought my first car 20 years back, it was an used Zen, I drove it for 14 years. Mind you there were less options then. Now for the cost of an Alto you can get lot of good used cars. So, it is not that cost of entry level cars is high, the country has grown up in income and that is reflected in car sales. My first car was bought for ₹3 lakh in 2002, so with regard to inflation the car prices has not grown that much. ₹3 lakh in inflation terms would be ₹11 lakh now. That means while the former could only afford me a Zen, that too a used one, now for same inflation adjusted money I can almost get a new Virtus/Slavia! We can simply crib on imaginary issues, while the fact is entirely different.

[amitjha086]

Originally Posted by cludflare

Attachment 2534351

I understand that with the commodity costs on the up and the tax treatment for foreign players (excluding Koreans) makes the business less viable in this segment. That makes me think about the mandate of having 6 airbags for all cars. I do believe safety is very important aspect of a car, and it should be one of the top priorities for all car buyers, if you can afford it. But there are millions of Indians who will want to upgrade to an entry level hatch from their scooters – don’t bump in their costs.
Kudos to Tata Motors for raising our awareness towards safety, but hey – don’t mock S-Presso in your social handle for 0 stars. You are not the one offering a car at 4 lakh ex-showroom.

Attachment 2534349

Safety is important. And safety gets better with airbags. Getting a zero star car instead of Activa may sound safer but we need to understand that those zero star cars do not move at 40kmph. I've been overtaken several times by S-Pressos doing at least 90-100kmph!

[fhdowntheline]

Originally Posted by cludflare

Buying a first car can be a very difficult discussion for many. With India shining, most of us would end up owning at least 4 to 5 cars in our lifetime if not more. But the first one is always special. There are different opinions that people hold around first cars – some believe a used car is the best way to get your hands accustomed and then move to a new one, some believe that in the new age one can directly own an automatic and skip the manual world completely, some do not want to compromise on safety these days at all, while for many it’s a pure decision of affordability.

There is a big section of Indian society who are restricted to two wheelers only because of budget constraints and many of them migrate to entry level cars as and when possible. This is one space that I have a particular interest in. I live in Bangalore and often notice that there is an increasing drop in the number of Altos and Celerios on the road, which is understandable with Bangalore having the highest per capita income in the country. But unlike the big cities, this segment is extremely important for a massive part of India.But there are millions of Indians who will want to upgrade to an entry level hatch from their scooters – don’t bump in their costs.

I dont think millions of " upgraders" from 2 wheelers are buying Celerio or Alto. They are aspirational folks, and would not want to be seen in anything less than a B/ B+ car. They 'd rather be seen in a used Dzire or Aura or even a Baleno than in an Alto. Thats why the sales of SPresso , Alto and Celerio are languishing.

[Aakash118]

More than anything, it’s the decreasing aspirational value of cars like Alto & Celerio which is responsible for downfall of this segment. I know at least 3-4 people in my circle who bought their first car in the form of a used i10 or Ritz, learned driving on it and then directly upgraded to a Nexon or Creta. A new Alto or even Tiago is just not aspiring enough for them.

[ninjatalli]

Originally Posted by cludflare

I live in Bangalore and often notice that there is an increasing drop in the number of Altos and Celerios on the road, which is understandable with Bangalore having the highest per capita income in the country. But unlike the big cities, this segment is extremely important for a massive part of India.

Correctly identified. If you head to a tier-2 city or even a non-metro city like Mangalore, the % of Alto/Celerios go up quite a bit.

Buying a car is a big jump for a lot of middle-class Indians; but for the same, the decision also focuses on maintenance costs. And with regards to that aspect, Maruti leaps ahead by a huge margin. In reality, the cost of ownership for a Maruti might not be very far from a Hyundai in the same segment, when serviced at regular service centers. But from a mindset, Maruti still screams as value-for-money for the average fellow on the road. And that also gets revalidated when one goes to an FNG or tries to sell an existing Maruti car.


I believe the likes of Hyundai, Tata and others have realized they can't fight this and have "shifted" their entry level segment range while focusing on other aspects (e.g. safety, gadgetry). Maruti would love to do so but the bottom of the pyramid is still a cash-cow for them (even if the margins are very low) and hence they have to make-do with whatever possible (e.g. limited safety features). I expect over time the old models (Alto, etc.) will be phased out eventually.

[M_Poweredd_]

I believe its the easy availability of EMIs and loans. People with jobs can easily sign a few documents and add one more year to their loan tenure and get a car thats segment above. Hence everyone is going for it. Since the idea of having more than one EMIs is getting accepted by the younger earning population, from EMIs for the new iphone and a car feels mostly similar. So why not? Is the question of the new earners. I am not saying anyone is being financially irresponsible with their funds, because at the end YOLO...

[Amrit@wheels]

The major reason for the downfall of entry-level cars is the 'log kya kahenge' syndrome aka social status. I know many people who have held off their car purchase simply because they don't want to buy a 'low-status' car and they can't afford a higher one. They'd rather buy some messed up 4th hand SUV from NCR than an affordable new car. Social media has made things worse. Recently, a friend bought a Tata Punch and the neighbors mocked him for buying an 'ugly' car....

[fhdowntheline]

Originally Posted by Amrit@wheels

The major reason for the downfall of entry-level cars is the 'log kya kahenge' syndrome aka social status. I know many people who have held off their car purchase simply because they don't want to buy a 'low-status' car and they can't afford a higher one. They'd rather buy some messed up 4th hand SUV from NCR than an affordable new car. Social media has made things worse. Recently, a friend bought a Tata Punch and the neighbors mocked him for buying an 'ugly' car....

I think his neighbours are living under a rock or something. Tata Punch is a chartbuster for TML, and in fact all TML cars have actually moved up a notch or two in terms of aspirational value. You can see the buzz around their showrooms in the past couple of years.

[antz.bin]

I did a search on Carwale for all the cars <8 lakh OTR in Pune.

Alto K10: 4.7 lakh
Tiago: 6.7 lakh.

Fair enough, Alto is substantially cheaper. The difference is 2 lakhs. But this Alto variant doesn't even get a power assisted steering or an Aircon.

But then I added a basic feature to the filter. Central locking.

This changed the prices from the above to these

Alto K10: 5.93 lakh
Tiago: 7.16 lakh
Punch: 7.16 lakh
Exter: 7.13 lakh

The bottom 3 are much more desirable cars for 1.2 lakh more.

When I added Touchscreen display, the Alto's price increased by another 33k and the difference between Tiago and Alto dropped to 90k. I need not justify the benefits of a Tiago over an Alto that amply justify the additional 90k.

There is no wonder why Altos are struggling to move off the shelves.

The bigger question here is of the A and B1 segments as a whole losing their sheen and just 1 out of the top 14 and 2 out of the top 20 selling cars in October belonging to these segments.

This is just the market maturing and once again, the biggest competition for these entry level cars are not other entry level cars, but those available with Spinny.

As seen above, the top end Alto is 6.23 lakh in Pune. SPresso is over 7 lakh. You could get a Honda City CVT or a Ford Ecosport Diesel for a similar amount of money with Spinny in Pune.

[rishi.roger]

There is not a substantial difference between 5 lakh and 10 lakhs these days. If someone can purchase a 5 lakh car, buying a used or even a new 8-9 lakh car won't be very difficult. Thanks to the financing scheme provided by banks, and also a change in purchase mentality in modern Indian population (particularly those in Metro/Tier-1 and some Tier-2 cities).
Social media content also has a lot of influence on the youth.
I think the puzzle could be solved further if one gets their hands on amount of cars that have been sold on loan, % of loan amount and age groups they're sold to.

I feel, A lot of people buying cars these days are youngsters, who don't mind the burden of EMIs as they see a bright future for Indian economy. They understand that for sure, they could get an Alto right now but soon enough they'll earn more and desire more - so why not put their money somewhere that's also slightly future proof in terms of meeting the desire/needs.

[KrisTvpm]

Originally Posted by Amrit@wheels

The major reason for the downfall of entry-level cars is the 'log kya kahenge' syndrome aka social status. <snip>

Can vouch for this personally! Not claiming I'm the best judge or what I did IS the correct way to go.

My car evolution (in India) has been M800(3rd hand) --> Zen --> i10 --> Ecosport --> XUV5OO, over 20years.

Have a friend, same age as mine, in 40's, who sought my help for his 1st car purchase. He came across a sudden fortune by virtue of selling some ancestral property in his town, and hence was OK to extend budget.

He was learning driving when this purchase decision was going on!

Suggested him to get a small car like alto/eon or mid-level hatch like swift from used-car-market.

But his missus will have none of it! "Mere bhai ne bhi recently ek Seltos kharid liya hai, hum sasti gaadi lenge toh uski biwi mera mazaak udaayegi!" - was her line of defense.

My poor friend had to go for a brand-new swift in the interest of household harmony, and within one month see the LHS ORVM go flying due to his inexperience on roads! Worst of all, he had to sell the car for whatever it fetched, as he moved out of country within 3-4 months of purchase

[Amrit@wheels]

Originally Posted by fhdowntheline

I think his neighbours are living under a rock or something. Tata Punch is a chartbuster for TML, and in fact all TML cars have actually moved up a notch or two in terms of aspirational value. You can see the buzz around their showrooms in the past couple of years.

I know right? But the problem is that I live in North India and unless you have bought an SUV or a swanky sedan, it's a waste of money for most people. Hell, my Swift has more street credit than a Punch here.

[Nilesh5417]

While its true that these cars do lack aspirational value, for someone who genuinely wants a car and can afford only this segment, the interest rate hikes were probably causing too much burden. Also, banks have now become extremely careful in giving out loans. Days of easy credit also seem to be behind us esp for those who are not salaried.
While this by itself may not be a big reason but probably has accelerated a decline in sales.

[gauravdgr8]

What's also important to note is that in the early 2000, a lot of government officers bought their own cars and that used to be a 800, Alto or Wagon R. In the past 20 years, salaries of government officials too have gone up and they easily can afford a Brezza, Venue, Honda City etc. Spending has gone up and so is the desire to own an aspirational product with features.