5 Key Points Highlighting Future of Automobile Industry In India

  • Rising usage of personal mobility: COVID-19 has changed the preferred mode of commute among people, with more than 50% of people choosing to use a personal vehicle over a public or shared transport. This increased preference for personal mobility vehicles is expected to drive vehicle demand further during post-COVID.
  • Entry Of Electric Vehicles: During FY17-FY20, electric vehicles recorded a growth rate of 44%, with almost 1 million units sold in FY20. Recently there has been a substantial change in consumers perspectives preference for electric vehicles which has increased from 39% in 2019 to 49% in 2020. With support from the government policies like FAME-II, reduced taxes, and an increased preference for EVs among the people the electric vehicle is growing profoundly in the Indian automobile market.
  • Growth in the used automobile market: Consumer behavior is changing rapidly in India as millennials start earning and also tend to spend more. This change in consumer behavior has led to a reduced ownership period for cars. The average ownership period reduced to 3-5 years in 2020 compared to 8-10 years in 2010. Reduced ownership period and other factors like the transition from BS-IV to BS-VI, GST rates differential on purchase of a used car vs new car, etc. are some of the growth drivers for increasing used automobile market. The used car market sees a silent growth rate of 6.2% for FY16-FY20 despite a slowdown in the new car sale during the same period also used two wheeler market have seen a growth rate of 21% and there is still high potential for growth as more and more consumers prefer their vehicle as compared to public modes of travel.
  • Subscription Model In Automobiles: The profit making model for automobile manufacturers is shifting in a larger scale in India. In India subscription and long term maintenance packages are expected to command a larger share in the profit pool. Subscription facility provided by companies are helping the customer to upgrade the vehicle every year and drive the latest vehicle without purchasing it and most importantly a consumer don’t have to go through the pain of after sales services.
  • Compact and mid-size SUVs set to capture more market share: SUVs have gained a competitive market share in the market in the last five years. With increase of compact and mid-sized SUV sales they are better aligned with the expectations of Indian consumers and road conditions. The mid-size SUV has seen the fastest recovery post-COVID with a YoY growth rate of 37% in 2020. The entry of new players in this segment with new models lined up for upcoming years is expected to strengthen the compact and mid-sized SUV segment further.

Bottom Line:

The opportunities created such as changing consumer preference, digitization, friendly government reforms, and new business models will make the way for adapting players to get ahead in this competitive market of automobiles. India has already  world’s fourth largest market for vehicle sales by volume in 2018 and now it is on its way to reach the next milestone.

March 3, 2021
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