Indian automotive consumers under the magnifying glass
The automotive industry of India is one of the largest in the world, contributing 7.1% to the Gross Domestic Product. With the ease of availability of automobile loans, the rise in salary structures and higher buying capacity of the middle-income class, there has been a spurt in cars plying on roads. As a person moves up the ladder in his income, he/she develops a priority to buy a car. Owning a car is becoming more of a necessity nowadays than a luxury.
Presently, a 100% Foreign Direct Investment (FDI) is allowed in this area meaning the foreign investors do not need any prior permission from the government of India to set up their business in the country, which brings thousands of job opportunities and revenue. They also bring with them cheap ownership of cars for the common citizen who otherwise cannot afford to buy a car.
The sale of passenger vehicles in India is growing at a tremendous rate and saw a climb of 13.33% over the period from 2017 to 2019, with more than 34,00,000 passenger cars sold in 2019 alone. Commercial vehicles grew by 40.8% and two-wheeler sales by 20.3% over the same period.
This data helps to analyse that there is a vast potential in the Indian market to expand and given the right opportunities, India can very well take over as the world’s biggest automotive consumer. However, the Indian population is vastly diverse and the trends we see in sales numbers and car popularities are often a result of a community of those buyers.
To learn about the customer segment that brings the maximum revenue to the industry, it is important to look at the consumer demographics of the Indian automotive market, interpreting their characteristics to better suit their requirements with new products and services.
1. Gender: Male driven
The Indian population comprises of 51.96% males and 48.04% females. Given to the small gender gap in population, the car buying trends show a comparatively bigger gap. As per a recent study by the ETAuto.com, majority car sales in India are male driven.
Gender: Male or Female?; pic credits:vectorstock.com
Automotive industry in India is male driven; pic credits:clipartmax.com
Men in India account for 90% of car sales in India’s 2.96 million car market, whereas females account for just 10-12% of the sales. Maruti Suzuki, India’s largest carmaker, saw the share of women buyers jumping from just 7% in 2015 to 12% in 2020.
2. Age: car buyers are getting younger
Millennials are the biggest consumers of automobiles in any country, out of their need of transportation and/or social status, and in India as well continue to reign the consumer segment. The segment in the 30-40 years age group, who have established themselves and their careers and are in a confident position to make purchase decisions. This segment changes the cars frequently as well.
Most consumers are 18+ years of age;picture:iconfinder.png
However, car buyers in India are getting younger as per CarDekho.com's Umang Kumar when he spoke to Live Mint. Many consumers are buying cars early on in their careers, owing to generous salaries and affordable cars, and bringing down the age graph considerably low to 20-30 years. The segment in 40-50 years age group is relatively not so keen to buy new cars very often and endure with their old vehicles commonly.
20-30, 30-40 & 40-50 age groups of consumers; pic credits:keephighwayssafe.org
3. Occupation: Working Professionals
A big majority of the automotive consumers in India belong to the working professional category. Employees, for a big part, buy cars to meet their transportation needs and daily rides to their place of work and hence are the biggest consumers of cars in India. Business owners and self-employed customers come in a close second. A large number of unemployed consumers are also observed, mostly students or consumers in rural areas having irregular streams of income.
Working professionals; pic credits:pngitem.com
Occupation demographics;pic credits:vectorstock.com
4. Income Group: Middle Income Group
The biggest consumer of automobiles and automotive services in India belong to the middle-income group. India’s NCAER (National Council of Applied Economic Research) defines the middle class in India as comprising of two sub-groups: “seekers” with annual household income between Rs.200,000 and Rs. 500,000, and “strivers” with annual household income between Rs. 500,000 and Rs. 1 million at 2001/2002 prices.
45% of the Indian population belongs to these categories and are the ones who can visualise their needs and requirements, while affording solutions to their problems.
Occupation demographics;pic credits:vectorstock.com
The rural households in the country have shown greater numbers in automobile sales as compared to the urban households. As shown in a study done by Swarajya, the demand for two-wheelers and passenger cars in rural areas has outpaced that in urban areas. This could be due to state-level developmental infrastructure push and growth moderation in highly urbanised states, that has availed better public transportation services to the citizens in urban states.
Countering the need for buying a car will undoubtedly cut down sales numbers and volumes. On the other hand, rural segments of the country remain untouched by developmental growth in many parts of the country. The people also are not critically aware of the consequences of over-usage of automobiles, while being deprived of decent transportation services and shared mobility options. All these things lead to make rural areas a budding market for automotive companies.
Budding rural auto markets in India; pic credits:iconfinder.com
6. Number of cars owned: 1
Family ownership of cars of consumers in India helps to analyse buying trends in the future. Most Indian families, taking into consideration the factors discussed above, own one car per household. As much as half the population does not a car and of the remaining half, a majority of the consumers make do with just one car.
Most families own 1 car in India;pic credits:stingypig.ca
Increasing affordability of purchasing new cars has allowed a considerable number of customers to own two cars. However, ownership of three or more than three cars is very rare in India, consumed by only the fortunate few.
Car penetration in India is still at a low stage compared to other countries and comparable markets with just 192 cars per 1000 people. It is expected to grow to around 300 cars per 1000 people in the next 10 years.
7. Type of car preferred: Hatchbacks & SUVs
The most common type of car sold in India is the hatchback, given to small size and high occupancy, which can be easily navigated around the city traffic. Traditionally hatchbacks are affordable as well, which gives them a fit description of a car that nuclear families can buy. However, the global trend of customers preferring SUVs and crossovers over other body types has also been largely prevalent in India for the last three to four years.
India's most famous compact SUV, the Creta;pic credits:autocarindia.com
India's most famous compact hatchback, the Swift;pic credits:zoutons.com
This is mainly due to the increased spending capacities of the people and them wanting a more premium product for their money. Entry level crossovers and compact SUVs have been a big hit in the country since their inception, starting from the Renault Duster to the Hyundai Creta, which slashed record sales PAN India.
To observe minutely, hatchbacks and SUVs in India comprise a near equal market share, more than 30% each, making them more popular than sedans in the country, as per a report by GadiWadi.com.
SUV sales have been exponentially increasing in India for the past few years; pic credits:canstockph
8. Brand Preference & Brand Image
Brand image is a very important factor in the Indian automobile market as the consumers have come to trust a few brands over others, for their superior quality products and services. Indian consumers are highly biased towards the brands that they have learned to know and follow.
Brand preference; pic credits:brian-kolb.com
Reasons for trusting brand image; pic credits:nairametrics.com
The consumer will always rate a list of alternatives on the basis of the image of the brand. They are not exactly brand loyal but do show preference for certain brands over others. For instance, Maruti Suzuki is the go-to car brand for cars in India for a large majority of the consumers. People prefer Suzuki cars for their daily needs, for when they need a reliable ride and for when they need a cheap, value for money car.
Even if they have options, they will choose to go with the Suzuki brand, if and when possible, modifying their needs. Hero MotoCorp is Suzuki equivalent for two-wheelers in India, driving loads of consumer-preferred sales.