Automotive Industry in India

The Boston Analytics report on the ‘Automotive Industry in India’ captures the consumer responses to questions in several areas, including vehicle ownership pattern, price of vehicles and vehicular traffic, customer preferences and buying behaviour, cost of owning a vehicle, infrastructure for vehicles, consumer confidence in public transport and sources of automotive-related information.

The report is based on the Robust Boston Analytics Consumer Sentiment Index (BACSI). Each Boston Analytics Syndicated Research Report captures the consumers’ observations, expectations, satisfaction, confidence, and attitude pertaining to different aspects and sub-segments of a specific sector. The wider scope of our specialised sector-specific questionnaire creates a rich data set to support extensive analysis. We bring you the executive summary of the report with permission from Boston Analytics.

The Indian automotive industry has grown at an impressive rate over the past few years spurred by a large and growing domestic demand, proven product development capabilities, stable economic policies, improving quality standards, and competitive manufacturing cost. Increasing consumer demand has been driven by a buoyant economy, favourable demographics, and improving income curve.

Vehicle ownership is high across the metros with a very high proportion of two-wheelers

Exhibit 1 depicts the nationwide vehicle ownership pattern derived from the consumer responses of middle class consumers. Unsurprisingly, ownership of a motorised vehicle is high across the metros. As depicted in Exhibit 1, 77 percent of respondents own a vehicle. Of these, 41 percent own both, a car and a two-wheeler, 22 percent own only a car, and the remaining 37 percent own only a two-wheeler.

Ownership of a motorised vehicle within the sample is nearly universal in Delhi and Chennai. Both of the cities have relatively underdeveloped public transportation systems. Over nine in 10 respondents in both Delhi and Chennai, and about three in five in Mumbai and Kolkata report owning a vehicle. As per the sample, about three out of four respondents of Delhi and about one-half in Chennai residents own a car; only one in three residents in Mumbai and Kolkata own a car. Perhaps driven by a lack of parking slot, almost 90 percent of Chennai respondents own a two-wheeler.

Based on the survey conducted in the four metros, the following observations regarding customer preferences and buyer behaviour have been made:

Price and fuel efficiency are the primary drivers of preference today

There will be a slight shift towards fuel efficiency in about 3–5 years from now. After sales service, brand image/prestige and resale value are secondary drivers of choice today and remain so in the next 3–5 years. Environmental issues have yet to take root in India and do not show signs of becoming a major factor in about 3–5 years.

Affluence and aspiration are growing in parallel — The Indian consumer prefers a mid-size car

In a market where price is an important determinant of choice, affluence and aspiration also seem to be growing alongside. As income of Indian consumers continue to grow and double-income nuclear families become more common, Indians can aspire to buy a mid-size car. Our survey reveals that about one in two Indian consumers prefer a roomy mid-size family car.

The survey reveals a ‘buy-Indian’ mindset across the metros

The increasing foreign direct investment inflow signifies a growing interest of foreign players in the Indian automotive market. However, findings of the survey bring out a strong preference for Indian automotive brands. Nationwide, about three in four respondents prefer an Indian brand over a foreign one.

Indian consumers are divided in their preferences for recently launched versus established models of cars
According to the results of the survey, 58 percent of respondents nationwide prefer a recently launched model by a slight plurality.

The colour pie