Changing Preference of First Time Car Buyers - Chart Of The Day 8 August 2017 - Equitymaster
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Changing Preference of First Time Car Buyers
Aug 8, 2017


The Indian auto industry is witnessing a rapid change in consumer preference. And the change is becoming more evident in the case of first-time buyers. Maruti Suzuki is a market leader in the domestic passenger vehicle segment with seven of its models featuring in the top 10 selling brands in July month. The sales data of the company reveals some interesting insights about first-time car buyers.

Historically, first-time buyers preferred small hatchbacks such as the Maruti 800, the Alto, and WagonR. But the new generation of first-time buyers is moving up the ladder to premium cars. It's similar to what has happened in other consumer segments such as mobile phones and consumer electronics.

First-time car buyers are now buying costlier models such as the Swift or the Dzire. First-time car buyers accounted for 31% of Swift sales in FY14. That number jumped to 52% in the June quarter of FY18.

The growing preference for these feature-rich and costlier models as first cars indicates growing premiumization in India's car market. This trend indicates that first-time buyers are getting more aspirational. Interestingly, the age profile of first-time car buyers and higher disposable income are contributing to this phenomenon.

If this trend continues, going forward, one would see compact SUVs becoming the preferred choice for first-time buyers. The trend is already under way. The percentage of such buyers for Brezza for instance stood at 37% in the first quarter of FY18.

Owning a car is a status symbol, but buying a new, larger, smarter vehicle is one step further down the aspirational road. With this, premiumization will be an important growth driver for the auto industry in coming years.

Data Source: Maruti Suzuki, Mint

This Chart Of The Day was published in The 5 Minute WrapUp - Survive the Financial Apocalypse with a 'Cockroach' Portfolio

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