Team-BHP > The Indian Car Scene


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Old 8th February 2024, 11:49   #1
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Sub-Rs 5 lakh cars make up just 0.3% of the market

The share of entry-level cars has been steadily declining over the past few years, as more and more people are opting for models that are high on frills like sunroofs and advanced safety tech. According to a report, the share of sub-Rs 5 lakh cars has dropped from 33.6% in 2015 to merely 0.3% in 2023.

Sub-Rs 5 lakh cars make up just 0.3% of the market-2022marutialtok1001.jpg

Among the mainstream brands, Hyundai and Tata Motors have graduated to bigger or more feature-packed cars. Maruti Suzuki is the only brand that currently offers a true entry-level car in the form of the Alto and to an extent, Renault, with its Kwid.

Higher commodity prices and revised safety norms have also affected the prices of vehicles. The sub-Rs 5 lakh segment being the most price sensitive, prices have jumped by 65% over the last 5 years, while SUVs and luxury vehicles have seen a price rise of 24%.

According to Shashank Srivastava, Senior Executive Officer (Sales & Marketing) at Maruti Suzuki, post-Covid, disposable incomes of those in the lower income bracket may have shrunk, affecting demand.

“Please remember that people are buying variants that offer more features on vehicles in terms of connectivity, safety, entertainment and design instead of opting for base versions,” Srivastava said. “They are ready to pay for an SUV design, larger infotainment screen, 360-degree camera, sunroof and connected vehicle, all of which carry their costs. So we see a structural shift in the market with buyers more inclined to higher-end versions,” he added.

As a result, the share of cars priced above Rs 10 lakh has reached 46% in the last 8 years compared to just 12.5% in 2015.

Source: ET Auto

Link to Team-BHP News

Last edited by TusharK : 8th February 2024 at 11:50.
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Old 8th February 2024, 13:13   #2
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Re: Sub-Rs 5 lakh cars make up just 0.3% of the market

Just 0.3% is a shocker. It seems to indicate that while those who can afford cars desire to go for bigger, feature laden and more expensive cars those at the cusp of the 2W and 4W divide do not have the disposable income to bridge it even to the ~Rs 4.00 lakhs that an Alto costs. This point of reference should then be looked at with the static sales of 2-wheelers over the past 5 to 7 years - 15.68 million in FY23 vs 15.98 million in FY15!** Plus that 25% of graduates below age of 25 are unemployed*. View this with the data that in India the top 1% own ~40%** of the wealth. Only Brazil & Russia are worse than us amongst the top 10 economies. As a comparison France and UK are in the 21%-22% range. De-monetization and GST did destabilize the middle economy, the semi-urban economy both of which are big markets for the entry level car.

Other major car manufacturing countries at least in part built their industries on the back of the demand for the entry level car - think VW Beetle, Fiat Tonino, Citroen 2CV etc. A manufacturing pyramid with a narrow base may not augur well for volume growth.

I have long held in the economic threads of Team BHP that below the creamy layer {to which we all belong BTW} all is not hunky dory in the economy.

*Azim Premji University data
**Statista
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Old 8th February 2024, 13:38   #3
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Re: Sub-Rs 5 lakh cars make up just 0.3% of the market

I see it as a good sign. A sign that the market is maturing. A sign of progress. I have posted elsewhere that the real competition to Alto is not the Kwid. It is Spinny.

The household of my *housemaid* has a car bigger (DZire) than mine (Figo). Her son owns a motorcycle (RC390) that is more expensive AND makes more horsepower than mine (Speed 400). Just chew on that.

The economically lower class is catching up with the middle class faster than we realize. Female participation in the workforce is also higher among the lower class than in the middle class. The income situation in the lower class when calculated per member of their family is not too different from those in the educated middle class where the females stay home as housewives.

There are 2 big reasons why the lower class still moves on 2-wheelers and avoids 4-wheelers:

1. Parking: Most such families live in smaller dense housing and lack parking!
2. Access to credit: A sole bread winner in a family of 3 with a monthly salary of 75k (still in the lowest income tax slab) can easily get eligibility for a car loan of 6 lakh. But not a family of 3 with a combined 75k income where each member makes in the vicinity of 25k each. No single member of that family will be eligible for that 6 lakh loan. 6 Lakh loan buys you a 8 lakh rupee car like a i20, Baleno, Punch, Tigor etc. BRAND NEW.

Last edited by antz.bin : 8th February 2024 at 13:39.
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Old 8th February 2024, 13:48   #4
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Re: Sub-Rs 5 lakh cars make up just 0.3% of the market

This number just goes on to prove that there is an absolute dearth of decent cars retailing for under five lakh rupees. The desire for a better car notwithstanding, a first time buyer looking for a comfortable hatch is forced to pay upwards of half a million Indian rupees.

I have not made that calculation, but if someone were to, I am sure that the number of cars manufactured and priced under five lakhs vis a vis those costing more (in the Indian market) will be in a ratio similar to their sales numbers.
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Old 8th February 2024, 13:54   #5
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Re: Sub-Rs 5 lakh cars make up just 0.3% of the market

I recently spent sometime in some smaller towns of Chattisgarh. Even they seem to have moved on from smaller cars. Service class folks are using Punch/Nexon/Brezza/Seltos/Creta and ofcourse the THAR. Didn't see a single Alto or even Kwid that's <5-6 years old over those 10 days.

Earlier when I was there around 2016/17 Alto/i10 was the de-facto choice for most service class folks.
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Old 8th February 2024, 14:25   #6
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Re: Sub-Rs 5 lakh cars make up just 0.3% of the market

This is also to a certain extent driven by inflation. Wagon R was a sub 5 L car a few years back.
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Old 8th February 2024, 14:52   #7
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Re: Sub-Rs 5 lakh cars make up just 0.3% of the market

I would love to see a metro vs rural breakup of Alto sales over the past 20 years.

I feel metro sales have dwindled to near negligible amounts and the reason I believe is the emergence of premium motorcycles in the 2-5 lakh rupee range.

When I started working in 2008, the moment people got their first bonus they used to book an Alto and those who waited until their second or third bonus a Swift. But now I see more Dukes, REs and Triumphs in the parking lot while the entry level car is an i20 and the most popular is the Venue/ Sonet.
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Old 8th February 2024, 15:12   #8
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Re: Sub-Rs 5 lakh cars make up just 0.3% of the market

I think "7 Lakhs" is the new "5 lakhs" and "10 lakhs" is the new "7 Lakhs" owing to many factors like increase in purchasing power as well as inflation.
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Old 8th February 2024, 15:23   #9
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Re: Sub-Rs 5 lakh cars make up just 0.3% of the market

Guys,
Please note there's a host of difference between the products available in the market and the actual on-ground vehicular market across the country.

The tagged report talks about only 0.3% of cars available for sale across manufacturers is priced under 5lakhs. Which is a factor of multiple things; primarily the cost of manufacturing, taxation and of course how manufacturers are pricing the buyer trends.

What we are discussing/assuming in this thread, is that only 0.3% of the vehicular market in India is priced/valued under 5lakhs which is wrong. For instance, if we look at used vehicles even on T-bhp classifieds, the % of vehicles priced under 5L is much higher. And definitely, that's the case on ground across cities/India. If someone was able to assimilate the sales of new cars as well as used cars in 2023, I'm sure the % of cars priced lesser than 5L would be much higher. Yes, it's definitely lower as compared to 2015; no questions about it.

Quote:
Originally Posted by TusharK View Post
the share of sub-Rs 5 lakh cars has dropped from 33.6% in 2015 to merely 0.3% in 2023
...
As a result, the share of cars priced above Rs 10 lakh has reached 46% in the last 8 years compared to just 12.5% in 2015.
I guess the confusion is due to the wording of the post / article. The line in bold would have been better served by stating "share of sub-Rs5L priced cars..."; like you did for the second line in your post above.

Last edited by ninjatalli : 8th February 2024 at 15:37.
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Old 8th February 2024, 15:35   #10
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Re: Sub-Rs 5 lakh cars make up just 0.3% of the market

Quote:
Originally Posted by TusharK View Post
According to a report, the share of sub-Rs 5 lakh cars has dropped from 33.6% in 2015 to merely 0.3% in 2023.
While it is true that consumers are opting to spend higher on cars and go for better tech and features, the comparison of 5L in 2015 and 5L in 2023 is not correct. Just accounting for 4% inflation, 5L in 2015 = 7L in 2023.
So the share of <5L in 2015 when compared with <7L in 2023 would be the fair comparison

Swift base model was priced at 4.4L in 2015, it starts at 6L today (ex-showroom price)
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Old 8th February 2024, 16:09   #11
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Re: Sub-Rs 5 lakh cars make up just 0.3% of the market

Based on just inflation, Rs. 5 lakhs in 2023 should be equivalent to approx. Rs. 3.27 lakhs in 2015. So we should compare against the number of vehicles sold in 2015 which were priced below 3.27 lakhs instead - which might still be a significantly higher percentage than 0.3%, but much lower than the 33.6% that is mentioned in the news.

Apart from the fact that the purchasing parity of the consumers has overall gone up over the last decade and consumers are opting to buy more feature rich cars, the gradual shift towards SUV as the preferred vehicle over the past decade has also contributed to the higher cost of vehicles.

The SUVs/crossovers which are based on the same platform is significantly priced higher than the corresponding sedan/hatchback and manufacturers used to clad hatchbacks with plastic bits in the exterior, raise the ground clearance and sell them as "crossovers" at a premium proce to milk this market sentiment.
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Old 8th February 2024, 18:43   #12
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Re: Sub-Rs 5 lakh cars make up just 0.3% of the market

This feels like a little bit of a narrative spinning piece by ET Auto, a pointless exercise at best or a bad faith comparison at worst. If you're going to run a piece on market trends, the comparison should be with equivalent value vehicles in terms of CPI. A ball park estimate for the equivalence of 5L in 2015 would be around 8+ Lacs in 2023-24. Any comparison, trend forecast should be based around the now inflated equivalent value, else it has no meaning. It would be a bit like saying BMW buyers have moved up a class, and are no longer purchasing sub 35 Lac BMWs as compared to 2015, and are now only purchasing over 45Lacs BMWs, where essentially the demand still revolves primarily around their 1, 2 ,3 series ranges and their X counterparts, just as it was in 2015.

It would be an interesting exercise, if any analyst were to get the figures for car sales under 8.5Lacs and compare it with the 2015 numbers. That would provide some genuine insight into the direction the market is headed towards.

Last edited by ask99 : 8th February 2024 at 18:48.
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Old 8th February 2024, 19:51   #13
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Re: Sub-Rs 5 lakh cars make up just 0.3% of the market

Not surprising since cars that used to be less than 5L a few years ago are now easily more than 7L. Why spend 5L on a barebones petrol only Alto when you can get a decently loaded swift/ baleno/i20 diesel without the annoying speed alarms and what not for the same price.
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Old 8th February 2024, 20:38   #14
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Re: Sub-Rs 5 lakh cars make up just 0.3% of the market

Not surprising, and I feel ET is trying to sensationalize it without much meaning to those numbers.

Now, if you don't have a car selling for that cost, how can you expect people to buy it? Volume movers like the Alto 800 are discontinued and there are now just 3 cars below 5L.

Sub-Rs 5 lakh cars make up just 0.3% of the market-screenshot-20240208-8.10.09-pm.png


Also, you don't get the mid or top variants of these cars. Want an S-presso below 5L ex showroom? Just the non-AC Std variant for you. The LXI crosses 5L.

Name:  Screenshot 20240208 at 8.05.24 PM.png
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Tried finding their older listing in web archive, and see the difference. The pity is that this wasn't too long ago either.

Sub-Rs 5 lakh cars make up just 0.3% of the market-screenshot-20240208-8.04.20-pm.png

While it is a good sign that people are being more aspirational and don't want the bare basics anymore, there is a need to offer value in the lower cost segments, which is missing today.
Cars like the Nano can offer fantastic value if offered in an EV format today. Small KEI cars also make a lot of sense for our narrow city streets and traffic.
I guess car makers don't want to cut down their margins, especially when the market is lapping up 20L SUVs like there's no tomorrow.
It is the market which defines everything ultimately. I hope we get good small cars again.

And why set 5L as the cap? You need to adjust for inflation and then check. Take 50K as the budget for two-wheelers.
Today just the e-bikes which don't need an RC seem to be selling for that cost. Not long ago, you could see motorcycles selling for that price.
Going by that, can you say 0% buy two-wheelers below 50K?

Guess the folks at ET need some classes from our @PQR san about how to analyse correctly.

Sub-Rs 5 lakh cars make up just 0.3% of the market-screenshot-20240208-8.32.02-pm.png

Last edited by Vibhav-Van : 8th February 2024 at 20:40.
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Old 8th February 2024, 21:15   #15
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Re: Sub-Rs 5 lakh cars make up just 0.3% of the market

It is very evident that car prices have gone up. And to be honest, the cars have also advance quite a bit. But spare a thought for something that hasn't increased for a long long time, Registration Slabs.

So not only are we paying more for a car, we are paying more for registration. Governments are making significantly more money but the roads aren't showing any signs of improvement yet. Rubbing salt in the wounds, TN Govt has increased registration fee recently.

Last edited by professortarzan : 8th February 2024 at 21:19.
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