Auto Expo 2018: Entry-level cars and bikes missing; experts say market maturing
NEW DELHI: Entry-level cars and bikes, for long the bread and butter for Indian automakers and those which took the country to be among the top automobile markets, are conspicuous by their absence at Auto Expo 2018. Industry experts said it is a sign of maturing market.
More than 75 products were launched at the Expo, but only 5-8% of those were in the mass segment. The buzz word in the two-wheeler industry is scooterisation and premiumisation. And in passenger vehicles, it is the time to own a hot hatch or a compact SUV. The share of entry bikes has gone down to 37% of the local two-wheeler in the April-December period of fiscal 2018, compared with 55% in FY12. In the same period, the share of entry-level scooters — which even after coming at a premium of around 20% over motorcycles — has doubled to 34%.
Mini cars — the likes of the Maruti Suzuki Alto, Hyundai Eon and Renault Kwid — accounted for 17.9% of the passenger vehicle market in the first nine months of this fiscal year, a six-and-half percentage-point drop since FY12. Just three companies currently hawk products in the mini segment: Maruti Suzuki, Hyundai and Renault. For many buyers, the entry car is now the premium hatchback, or even a compact sedan.
As much as half the buyers of the Maruti Suzuki Swift and Swift Dzire are purchasing a car for the first time. These models are priced almost double that of the mini cars. Even for mid-size sedans like the Maruti Suzuki Ciaz and Honda City, about a fifth of the customers are owning a car for the first time. In two-wheelers, more than half of the buyers of Honda’s Shine 125cc motorcycle are first-time buyers. VG Ramakrishnan, managing director at consultancy firm Avanteaum Advisors, attributed this to rising income levels, aspiration and easy access of finance.
“Vehicle buying is an aspirational purchase and it is almost a no-no to buy a budget or a nofrills car (now). As income levels rise, more and more buyers will upgrade to higherpriced vehicles,” said Ramakrishnan. In the two-wheeler segment, Yamaha, Suzuki and Mahindra & Mahindra have already vacated the mass market space. Large players such as Hero MotoCorp, Bajaj Auto and TVS Motor see a majority of new product action in the 125cc and higher categories. Hero MotoCorp managing director Pawan Munjal told ET that the focus of the company is now on scooters — within scooters, in the 125 cc segment — and premium motorcycles. The focus is to gain a respectable share in the premium Motorcycle segment and a higher market share in scooters, he said.
He, though clarified that Hero MotoCorp was not taking its eyes off the commuter segment. “It is our bread and butter … All the money we get from there we put into premium products, electrification, global business,” he added. The Auto Expo highlights the trends that the market will see in the coming year and the absence of major entry-level or mass offering is a clear sign of the customer moving up, a senior executive at a two-wheeler company said.
In the two-wheeler space, with the regulation on ABS and BS-VI emission standards to be implemented, prices are likely to go up and, given the price sensitivity in the entry-level market, manufacturers are delaying new launches to beyond 2020. In cars, the lack of product action can also be attributed to slowing demand at the entry level. Companies though aren’t yet ready to ignore the segment. Hyundai Motor India is scheduled to launch an all-new small car later this year, but decided to keep it under wraps — it wasn’t displayed at the Auto Expo.
But Honda is moving away from the smallcar segment. The Japanese company didn’t launch a new-gen Brio hatchback, which was expected. Honda Cars India CEO Yoichiro Ueno said the Amaze sedan would be its volume car now. Newcomer Kia is also eyeing its entry through an SUV. With the new crash rules to be implemented by 2019, vehicles like the Nano, Omni and Eon could also see their end of life soon.