Entry-Level Vehicles Are Falling Off Buyers’ Wish Lists, Representing 35% of FY23 PV Sales So Far

Entry-level cars, the bread and butter of Indian automakers until a few years ago, are rapidly losing their place on the consumer’s wish list.

Accounting for nearly one in two cars sold in India in 2016-2017, the segment’s contribution to total passenger vehicle sales in India fell to just over one in three in the first four months of this fiscal year. started on April 1, according to published figures. by car manufacturers.

The two-wheeler market is also seeing a move away from entry-level non-electric offerings. Sales of 110cc motorcycles were 42% lower in the April-June quarter compared to the same period four years ago, according to data from the Society of Indian Automobile Manufacturers. For 125cc scooters, the market fell by 36%.

As customer preference appears to be shifting towards sport utility vehicles, with manufacturers also launching several models in the segment, including subcompact SUVs, companies such as are not ready to give up on small cars.

“This segment will make a comeback in fiscal year 2024 and cannot be undone,” said Shashank Srivastava, chief executive officer of Maruti Suzuki, the largest player in this segment and India’s passenger vehicle market. “The hatch segment has been affected by increasing acquisition costs in recent years due to various factors such as regulatory requirements, taxation and rising raw material prices. The elasticity of demand is quite high relative to price, which has led to negative growth in this segment, but it is still quite high in terms of absolute volume,” Srivastava said.


Trend first vehicle

According to Srivastava, the median age of a car buyer is around 24, and many of these young people still buy the entry-level car as their first vehicle. This trend is expected to continue, and as demand for personal mobility grows with accelerating economic activity, “we can expect demand for affordable entry-level cars to continue,” a- he declared.

Furthermore, the number of cars per capita in India is quite low compared to other major auto markets, providing ample room for growth even for entry-level vehicles.

According to consultancy Jato Dynamics, India, which has 300 million households, had 22.5 million cars in 2019-20, up 1.5% from 2016; and 149 million two-wheelers, an increase of 12% since 2016.

These segments are not yet saturated and there is still a lot of growth potential, said Ravi Bhatia, President of Jato Dynamics.

Great entry-level players like

in two-wheelers and Maruti Suzuki in cars will continue to play in this segment and offer aggressive programs, discounts and new products, according to industry experts.

Maruti Suzuki is launching a refreshed entry-level variant this month and offering cashback, trade-ins and loyalty bonuses to buyers. “Localization, value engineering, dealer incentives and sales promotions are underway to increase sales volumes in this segment,” Srivastava said.

A Hero MotoCorp spokesperson said the entry segment offered immense growth opportunities as India’s two-wheeler penetration was far below that of several other Asian countries and several states were also below the national average in two-wheelers per inhabitant.

The company has tackled the inflation-related affordability problem by offering “innovative retail finance solutions such as Aadhaar-based loans, crop-yield-based EMIs, cash bonuses and low down payment,” the spokesperson added.

In fact, Honda Motorcycle & Scooter India will soon launch a 100cc motorcycle, entering a low-end segment where it has not been present until now.

“It will stir the pot in the entry-level segment,” said Vinkesh Gulati, president of the Federation of Automobile Dealers association. “The upcoming holiday season will be a battleground of aggressive programs, discounts, longer tenures and lower finance rates in the entry-level two-wheeler segment,” he said. he adds.

Despite declining sales, entry-level 100cc motorcycles still account for 35-37% of India’s two-wheeler market of over 13.5 million units, said Atsushi Ogata, managing director of Honda Motorcycle & Scooter. India. It’s a high-volume game, he said.

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