Weak demand was already an existing problem for car manufacturers in India and now the fall in entry-level cars as customers are drawn towards higher priced hatchbacks and sedans forces them to re-evaluate their sales stratergy.
Tata Nano, Nissan Datsun, Honda Brio and the likes have been the backbone of car-makers in India as these entry level cars were designed and priced to cater to the price-sensitive Indian buyer but this may soon change.
An analysis by CNBC-TV18 points to a perceptible change in the way the Indian customer, especially a first-time car buyer, is thinking. In the first ten months of this fiscal year, the market share of price sensitive small cars has fallen.
So far this fiscal, the total small car sales volumes have come in at 7.55 lakh units which is a moderate growth of 3 percent but the share of small cars sales in overall passenger car volumes fallen from 48 percent in FY15 to less than 45 percent in FY16.
Still standing tall in the small-car space are Maruti's Alto and WagonR, which continue to attract first-time buyers.
The Hyundai Grand i10 and Maruti's Celerio, have also seen volumes grow by nearly a third since last year but the real buying action seems to now be centered in the premium hatchback and sedan segments.
Till now in FY16, this segment, led by Maruti Swift, clocked a growth of over 12 percent, increasing its share in the overall passenger car segment to 37.5 percent from 36.5 percent the previous year.
The Maruti Baleno and the Hyundai i20 have also chipped in to cement this trend.
Industry experts say that this change in customer behavior is largely due to a preference for more features, which entry-level cars do not offer it in terms of comfort, nifty technology or just safety.
This trend also has experts postulating that by 2017, small cars may further lose their appeal, especially as car-makers are forced to drive up prices of these cars to meet stricter government regulations on fuel efficiency and safety.
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