Mumbai: First-time car buyers in India, who have always flocked to Maruti Suzuki India Ltd (MSIL) for its entry-level Altos and WagonRs, are now buying up costlier Swifts and Dzires, company data shows. While only one out of three first-time buyers purchased these models five years ago, now one of two such buyers goes for these models, indicating the company’s ability to attract more customers to its premium models.
One of every two Maruti cars currently go to a first-time buyer, said Tarun Garg, executive vice-president (marketing) at Maruti Suzuki. While first-time car buyers accounted for 31% of Swift sales in fiscal 2013-14, the number jumped to 52% in the June quarter of fiscal 2017-18.
For Dzire, the jump was from 28% to 52% in the same period, said Garg. “This trend indicates that first-time buyers are getting more aspirational," Garg said in an email.
The growing preference for these feature-rich and costlier models as first cars indicates growing premiumization in India’s car market, where automobile penetration is still low, and shows Maruti’s ability to reinforce the brand’s trust in the market, said analysts.
Rohit Kumar, vice-president at Kantar TNS, a global market research firm, attributes the shift to the change in the very definition of small cars. “The entry car definition has changed from the smallest available to what is it that one desires, and if it’s affordable. Increasing fuel economies, affordable financing and better distribution only whet the appetite further," he said.
Kumar defines first-time buyers as those who are buying a car for personal use through funding arranged by themselves (self or financed); the fact that there was a car present or not in the family from before, does not matter. Of course, being a family product, usage by family is a regular part, sharply differentiated from behaviour in more developed markets, he said.
Rakesh Srivastava, director (sales and marketing) at Hyundai Motor India Ltd, India's second largest carmaker, said his firm does not share data on first-time buyers for competitive reasons.
Premiumization has also been bumping up company’s earnings. Maruti has always been a low-price mass segment car maker, but it has seen the highest growth in its average selling price (ASP) as compared to its competitors, wrote Abhishek Jain and Sneha Prashant, analysts at HDFC Institutional Research, in their 28 July research report.
“In the last five years, MSIL has been able to achieve strong ASP growth by gradually expanding its portfolio in the premium segments, and thereby gaining a sizable market share. A higher contribution of models including the Baleno and Brezza in the overall mix helped the company post a growth of 4.4% in its ASP in the June quarter compared to a year ago," they said in the note. “It (first-time buyers choosing pricier models) is a clear indication of a growing economy," said S.V. Sukumar, partner and head, manufacturing, at consulting firm KPMG India, pointing out that a higher disposable income, and with people spending more time on the road, inside their cars, the trend is not surprising.
“It’s only a matter of time when one would see compact SUVs becoming the preferred choice for first-time buyers. If anything, the rationalization and uniformity in taxes under the new tax regime will only add more momentum to the trend," he added.
The trend is already under way. Maruti’s Garg said the percentage of such buyers for Brezza for instance, stood at 37% in the first quarter of the current fiscal.
Led by the compact SUVs, utility vehicles sales in the three months to June advanced by 7.5% compared to 4% for cars, according to industry body Society of Indian Automobile Manufacturers (Siam). The growth was largely led by Maruti’s Brezza and other compact SUVs such as Honda WR-V.