Focus on SUVs, Sedans in Rs 5-10 Lakh segment: End of the road for entry-level cars on premium switch – ET Auto

0
41

Barring Maruti Suzuki with the Alto, Renault Kwid and Nissan redi-GO, most carmakers have vacated the space and are focusing on the Rs 5-10 lakh segment.

Indian carmakers are reducing exposure and ending the production of no-frills mini cars as consumers are increasingly moving up the value chain toward more aspirational, premium products. After the demise of the Tata Nano and the Hyundai Eon, Nissan Motor India will likely stop making the Datsun Go and the Go Plus models.The easy availability of loans and a desire for better technology has slashed demand for cars costing below Rs 5 lakh to 416,000 units in 2020 from 1 million in 2016. From being a third of the overall market in 2016, cars under Rs 5 lakh accounted for just 17% at the end of 2020. Barring Maruti Suzuki with the Alto, Renault Kwid and Nissan redi-GO, most carmakers have vacated the space and are focusing on the Rs 5-10 lakh segment.

However, the market for used cars below Rs 5 lakh is witnessing strong growth. The mantle of market expansion has now shifted to used vehicles and this is a win-win for original equipment manufacturers (OEMs) and consumers, according to Ravi Bhatia, president of automotive consultancy firm JATO Dynamics India.

“We are beginning to see nearnew cars (three years old or below) becoming available at less than Rs 5 lakh,” he said.Most of India’s used cars are below Rs 5 lakh and the segment is growing at 20%, led by first-time buyers, said Ashutosh Pandey, MD, Mahindra First Choice Wheels Ltd.

“There has been a marked shift from entry new cars to used cars — as these cars are more premium and well equipped,” Pandey said. “Since the used car market is more of a trading business, the vehicles sold are based on what is available. There is a clear shift towards premium cars and SUVs; if they are available, the price point in the used car market too could go up.”

Focus on SUVs, Sedans in Rs 5-10 Lakh segment: End of the road for entry-level cars on premium switch

To be sure, the average used-car price point has moved up from Rs 2.4 lakh to Rs 2.5 lakh to Rs 3.5 lakh over the past few years, and it is shifting toward Rs 4-5 lakh, Pandey said.

The mini hatchback, or low-feature entry cars, segment has played a key role in driving ownership early on. Carmakers like Maruti and Hyundai, and later Renault Nissan, built up market share by offering such products at low margins. But demand has dropped over the years. The number of variants below Rs 5 lakh has more than halved — 66 at the end of January 2021 compared with 142 at the end of January 2016.

India has been significantly behind developed markets in the average weighted price of the car, according to JATO. This is changing as vehicle makers are beginning to move new product planning focus to bigger cars from the entry hatch segment.

As propulsion systems are common across vehicle segments, the only way to better margins is to offer “more car per car” in terms of size and packaging, Bhatia said. “The consumer preference in suburban and rural markets is changing as bigger and better-packaged cars are now available with attractive finance, making it easier for entry consumers to enter into personal mobility.”

A new car depreciates 40% in the first 36 months of purchase, according to JATO.

Indians are gravitating toward higher-priced cars as the per capita gross national disposable income rose to Rs 154,349 in FY20, up 10.6% annually in the last decade, according to Central Statistics Office data. In the past five years, the entry car segment has witnessed a decline of 6%, versus industry volume, which fell 1% in the same period.

Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here