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Covid-19 triggers demand for costlier cars: Hyundai Motor India

New car buyers are opting for more expensive and premium variants of vehicles, startling experts who had predicted a shift towards entry-level models

September 28, 2021 / 11:28 AM IST
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Since the start of Covid-19, automobile experts had predicted that there would be heavy downtrading – a shift to cheaper alternatives – but the market has only swung the other way with most new buyers choosing more expensive models and premium variants.

The pandemic was expected to force consumers to spend less and conserve more. However, according to Hyundai Motor India, the country’s second-largest carmaker, buyers are restless following the lockdowns and restrictions and the threat of a third wave of infections, and this is leading to impulsive purchases.

“The customer is stretching (his budget) and wants to have everything today as if there is no tomorrow,” said Tarun Garg, director of sales and marketing at Hyundai Motor India. “People thought Covid-19 would lead to downtrading, but the exact opposite is happening.”

Customers appear to be in a who-knows-what-will-happen-tomorrow frame of mind, Garg said.

According to data shared by carmakers, buyers are opting for middle and higher variants across model ranges and only a small percentage is choosing entry-level vehicles. There haven’t been any cars introduced in the sub-Rs 5 lakh segment over the past few years, while there has been a flurry of launches in the Rs 9 lakh-and-above price bracket.

“More than 75 percent of the buyers are going for the middle, premium or fully-loaded variants. The trend is clearly in favour of expensive, feature-rich trims. In some luxury brands, they have even phased out the entry variants due to lack of demand,” said a senior executive of a New Delhi-based automotive company.

With 80 percent of the cars purchased being financed and auto loan rates at an all-time low, buyers don’t mind paying more for features such as large infotainment units with premium music systems, automatic climate controls, extra airbags, rearview cameras, air filters, temperature-controlled seats, and sunroofs, to name a few.

“People are buying cars to take off on drives, drive to destinations and make trips with family and friends. They have been stuck at home due to work-from-home. Disposable income is high and there are not too many avenues like earlier to spend,” Garg said.

The pandemic brought about a shift towards personal mobility from public transport. While this spurred the number of first-time new car buyers, those who already owned a car in the family also joined in.

The demand uptrend came even after a cost escalation since January. Vehicle prices have increased by an average of 5 percent this year because of higher semiconductor, steel, and rare earth metal costs.

Tata Motors, Hyundai, Maruti Suzuki, and Mahindra & Mahindra are struggling to meet demand despite operating at optimum output levels, subject to the availability of input materials. Bookings are expected to surge in the upcoming festive season.

While the car industry is sitting on an estimated inventory of 25-30 days, the ideal level at the start of the festive season is 40-45 days.

“Demand is very good. Retail and order book are very strong at the moment as we prepare for the festive season,” Garg said.

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Swaraj Baggonkar
Swaraj Baggonkar
first published: Sep 28, 2021 11:28 am