India is one of the largest automotive markets in Asia and growing. The automotive industry in India has hit the fast lane with almost all global manufacturers queuing up their launches. The existing manufacturers have drawn up their plans to introduce new models every year. Given this scenario, it is important for manufacturers and other stakeholders in this industry to take stock of the current situation and ponder over the emerging issues in this category. The key question is – Where is the Indian Automotive market headed?
Emerging Trend # 1: Dieselization of the industry
Contrary to the earlier perceptions of diesel engines as noisy, vibrating, high wear & tear, slow on pick up – the perception of diesel engines is changing leading to more and more customer readily accepting diesel vehicles as personal mode of transportation. A number of reasons are contributing to this important evolving trend:
(1) Introduction of CRDI engines in below Rs.10L brands - for e.g. Hyundai Accent and Toyota Innova. CRDI engines have contributed in a big way in changing customer perceptions of diesel vehicles. This has been supported by effective communication a la Accent CRDI communication in showcasing the lack of differentiation between petrol and diesel.
(2) Better quality and additive diesel fuels being made available and advertised by fuel marketers have also contributed to this cause
As the awareness and knowledge of both CRDI and improved fuels increase, we are likely to see increased acceptance of diesel vehicles. In fact, we are likely to see a diesel variant of every model coming up in the near future.
Emerging Trend # 2: Emergence of Premium Hatches
Premium hatches such as Getz and Swift are here to stay. At this stage, Indian consumers have not evolved to the extent of accepting premium hatches as a better alternative to entry level sedans. However, introduction of Getz & Swift, though not fully, has initiated the advent of this segment. This segment would flourish with introduction of premium hatches from global players such as General Motors, Toyota & Honda.
For this segment to reach a kindling platform from which it could possibly become a large market would require, introduction of premium hatches from manufacturers such as General Motors, Honda & Toyota – providing customers with an option of owning a vehicle from these manufacturers at an affordable price.
Premium hatch segment is likely to overtake the B segment i.e. Santro, Zen, WagonR segment once it reaches a certain level of installed base and presence of more players. As the current B segment overtook the A segment (Maruti 800) in 1999 with introduction of multiple models.
This would drive the prices down for B segment and the prices of the premium hatches would also be rationalized further. This would pose a serious threat to entry level sedans, as customer would either prefer a premium hatch or opt for a mid sedan; bypassing the entry level sedans.
Emerging Trend # 3: Emergence of Crossovers
We have witnessed more and more crossovers being introduced in India – Fusion, Innova etc. – one of the key strategic moves by key manufacturers. However, the knowledge among customers about crossover is at a very nascent stage – not enough communication has been done about the concept of crossover in India.
The need for manufacturers to introduce crossovers is due to the following possible reasons:
Most customers cannot afford different vehicles for different usages – hence crossovers help in fulfilling the need for different usages from one vehicle – not to mention that currently one vehicle in household is used for various purposes, but sometimes customers get constrained by the issue of space, power etc.
Crossover being what they are – likely to appeal to a wider cross-section of audience – for e.g. MUV-Sedan crossover is likely to attract not only MUV but also sedan customers
The crossover as a concept is new not only in India but globally as well – customers need to get used to the looks of this segment which of course is new and different from what customers have been exposed to.
Emerging Trend # 4: Evolving Consumer Needs and Expectations
The key display of evolving consumer needs and expectations - largely, led by manufacturers are:
B segment taking over A segment in terms of volumes in CY 1999
Power steering becoming hygiene due to Santro zip drive initiative
If we recall 10-15 years back, customers’ basic need was for a ‘4 wheel’ vehicle in whatever form or shape, as the options for customers increased – their needs and expectations also evolved, for e.g. with introduction of Maruti’s Zen, customers got an option of a smaller vehicle but more powerful and better drive quality – this changed the customers’ definition and expectation of power and drive quality; when Lancer was launched - it defined status, however with the launch of Optra, Corolla and Octavia, the definition and benchmark of status changed again.
The thing to notice is – these evolving needs have been largely due to manufacturers’ led initiatives and introductions – Indian customers have started to evolve in terms of their needs and expectations without manufacturer initiatives; hence it would become increasingly important now to understand these customers and their changing needs in order to be ready with a product which fulfills their needs and NOT led by what the manufacturers desire to offer.
Customers currently are led by differentiation on product, performance & comfort; however, this is likely to change when the market dynamics lead to parity on these attributes across models in a particular segment. Once parity on these attributes is achieved, the playground is likely to be higher order Emotional benefits. For e.g. in developed and mature markets, there is not much to differentiate between vehicles in terms of product performance or comfort, the game play happens at image and emotional level.
Emerging Trend # 5: Blurring Price Boundaries
It is increasingly becoming difficult to differentiate the segments basis price both for the manufacturers and customer alike – in some segments the price boundaries have just vanished. This is principally due to following reasons:
(1) Reduction of price of entry 3-box taking it closer to hatches and in some case overlapping with hatches.
(2) Increase in competition in financing options leading to low differentiation in EMIs for vehicles in consecutive segments. If I can afford a high end B segment car, then I can afford a low end entry sedan as well – leading to blurring price boundaries in consumers’ mind. It’s no more about whether I can afford a car worth Rs.X, its all about whether I can afford a car with a down payment of Rs.Y and EMI of Rs.Z
Emerging Trend # 6: Rising Expectations from Post Sale Touch Points
The evolving customer needs are not just limited to vehicle purchase and decision making, BUT also to the post sale experience. To cite an example: one of the key reasons for Fiat Palio not picking up post initial success, apart from mileage: Post Sales Service. The consumer perception of Post sale service and back up support has increasingly started to play a big role in the decision making process.
Customers are increasingly becoming more and more demanding in terms of after sales service – a factor recognized by manufacturers which has led to communicating post sales service packages.
Customer expectations are likely to keep on going up in terms of after sales service towards:
Better quality servicing at shortest possible time
Better quality service workmen – as customers start understanding the post sales service issues better
Value Add services such as vehicle pick and drop, stand by vehicle for long duration services etc.
There is increasing trend in understanding customer issues as quickly as possible with regards to Post sale service experience. In future, the customer feedback is likely to be a 24X7 exercise, where, feedback from every customer is taken and actioned as soon as the customer experiences the touch point – feedback and subsequent action within 24 hours of experiencing the touch point.
Emerging Trend # 7: Rising Expectations on Continuously Improving Existing Models
The concept of Model year launches have not come into this country in a big way; however, it is not far off when manufacturers would have to get into model year launches. Many manufacturers are actually doing it on a small scale. Basically, for same brand with slight modifications to be launched every year as a new model year – this keeps the excitement of the brand alive in customers’ mind.
This is a prevalent concept in developed countries and as consumers start becoming more knowledgeable and integrated with what’s happening in automotive sector globally – their expectations would also be to desire new model year launches.
When customers are fully integrated with this concept, then manufacturers are likely to seriously look at doing design convergence across models. The manufacturers who are looking at or planning design convergence now are better equipped to handle this scenario 3-4 years down the line.
Emerging Trend # 8: Emergence of Multi Brand Outlets
With distinct crunch in time amongst customers, sooner or later they would expect to evaluate multiple vehicles under one roof. This is one of the requirements which might be thrust upon manufacturers due to customer demand. This is likely to lead to the following:
(1) Emergence of Large National dealership groups which is likely to change the dynamics between manufacturers and dealerships – overall leading to better quality experience for customers
(2) Customer’s decision making becoming faster – one stop shop for customers leading to overall decision making & purchase process becoming shorter
Currently, there are dealers who have multiple brands (different companies); but not under one roof. The whole concept of DMA/DSA is likely to converge into formal multi brand outlets. We are likely to see emergence of Car Malls & Complexes in major cities in India - in the next 2-3 years.
Indian automotive industry has just got onto the Autobahn – and it’s time to step on the gas. The coming years will see our customers turn savvier – and this will lead to transfer of knowledge from manufacturers to customers and vice versa.
Emerging Trend # 1: Dieselization of the industry
Contrary to the earlier perceptions of diesel engines as noisy, vibrating, high wear & tear, slow on pick up – the perception of diesel engines is changing leading to more and more customer readily accepting diesel vehicles as personal mode of transportation. A number of reasons are contributing to this important evolving trend:
(1) Introduction of CRDI engines in below Rs.10L brands - for e.g. Hyundai Accent and Toyota Innova. CRDI engines have contributed in a big way in changing customer perceptions of diesel vehicles. This has been supported by effective communication a la Accent CRDI communication in showcasing the lack of differentiation between petrol and diesel.
(2) Better quality and additive diesel fuels being made available and advertised by fuel marketers have also contributed to this cause
As the awareness and knowledge of both CRDI and improved fuels increase, we are likely to see increased acceptance of diesel vehicles. In fact, we are likely to see a diesel variant of every model coming up in the near future.
Emerging Trend # 2: Emergence of Premium Hatches
Premium hatches such as Getz and Swift are here to stay. At this stage, Indian consumers have not evolved to the extent of accepting premium hatches as a better alternative to entry level sedans. However, introduction of Getz & Swift, though not fully, has initiated the advent of this segment. This segment would flourish with introduction of premium hatches from global players such as General Motors, Toyota & Honda.
For this segment to reach a kindling platform from which it could possibly become a large market would require, introduction of premium hatches from manufacturers such as General Motors, Honda & Toyota – providing customers with an option of owning a vehicle from these manufacturers at an affordable price.
Premium hatch segment is likely to overtake the B segment i.e. Santro, Zen, WagonR segment once it reaches a certain level of installed base and presence of more players. As the current B segment overtook the A segment (Maruti 800) in 1999 with introduction of multiple models.
This would drive the prices down for B segment and the prices of the premium hatches would also be rationalized further. This would pose a serious threat to entry level sedans, as customer would either prefer a premium hatch or opt for a mid sedan; bypassing the entry level sedans.
Emerging Trend # 3: Emergence of Crossovers
We have witnessed more and more crossovers being introduced in India – Fusion, Innova etc. – one of the key strategic moves by key manufacturers. However, the knowledge among customers about crossover is at a very nascent stage – not enough communication has been done about the concept of crossover in India.
The need for manufacturers to introduce crossovers is due to the following possible reasons:
Most customers cannot afford different vehicles for different usages – hence crossovers help in fulfilling the need for different usages from one vehicle – not to mention that currently one vehicle in household is used for various purposes, but sometimes customers get constrained by the issue of space, power etc.
Crossover being what they are – likely to appeal to a wider cross-section of audience – for e.g. MUV-Sedan crossover is likely to attract not only MUV but also sedan customers
The crossover as a concept is new not only in India but globally as well – customers need to get used to the looks of this segment which of course is new and different from what customers have been exposed to.
Emerging Trend # 4: Evolving Consumer Needs and Expectations
The key display of evolving consumer needs and expectations - largely, led by manufacturers are:
B segment taking over A segment in terms of volumes in CY 1999
Power steering becoming hygiene due to Santro zip drive initiative
If we recall 10-15 years back, customers’ basic need was for a ‘4 wheel’ vehicle in whatever form or shape, as the options for customers increased – their needs and expectations also evolved, for e.g. with introduction of Maruti’s Zen, customers got an option of a smaller vehicle but more powerful and better drive quality – this changed the customers’ definition and expectation of power and drive quality; when Lancer was launched - it defined status, however with the launch of Optra, Corolla and Octavia, the definition and benchmark of status changed again.
The thing to notice is – these evolving needs have been largely due to manufacturers’ led initiatives and introductions – Indian customers have started to evolve in terms of their needs and expectations without manufacturer initiatives; hence it would become increasingly important now to understand these customers and their changing needs in order to be ready with a product which fulfills their needs and NOT led by what the manufacturers desire to offer.
Customers currently are led by differentiation on product, performance & comfort; however, this is likely to change when the market dynamics lead to parity on these attributes across models in a particular segment. Once parity on these attributes is achieved, the playground is likely to be higher order Emotional benefits. For e.g. in developed and mature markets, there is not much to differentiate between vehicles in terms of product performance or comfort, the game play happens at image and emotional level.
Emerging Trend # 5: Blurring Price Boundaries
It is increasingly becoming difficult to differentiate the segments basis price both for the manufacturers and customer alike – in some segments the price boundaries have just vanished. This is principally due to following reasons:
(1) Reduction of price of entry 3-box taking it closer to hatches and in some case overlapping with hatches.
(2) Increase in competition in financing options leading to low differentiation in EMIs for vehicles in consecutive segments. If I can afford a high end B segment car, then I can afford a low end entry sedan as well – leading to blurring price boundaries in consumers’ mind. It’s no more about whether I can afford a car worth Rs.X, its all about whether I can afford a car with a down payment of Rs.Y and EMI of Rs.Z
Emerging Trend # 6: Rising Expectations from Post Sale Touch Points
The evolving customer needs are not just limited to vehicle purchase and decision making, BUT also to the post sale experience. To cite an example: one of the key reasons for Fiat Palio not picking up post initial success, apart from mileage: Post Sales Service. The consumer perception of Post sale service and back up support has increasingly started to play a big role in the decision making process.
Customers are increasingly becoming more and more demanding in terms of after sales service – a factor recognized by manufacturers which has led to communicating post sales service packages.
Customer expectations are likely to keep on going up in terms of after sales service towards:
Better quality servicing at shortest possible time
Better quality service workmen – as customers start understanding the post sales service issues better
Value Add services such as vehicle pick and drop, stand by vehicle for long duration services etc.
There is increasing trend in understanding customer issues as quickly as possible with regards to Post sale service experience. In future, the customer feedback is likely to be a 24X7 exercise, where, feedback from every customer is taken and actioned as soon as the customer experiences the touch point – feedback and subsequent action within 24 hours of experiencing the touch point.
Emerging Trend # 7: Rising Expectations on Continuously Improving Existing Models
The concept of Model year launches have not come into this country in a big way; however, it is not far off when manufacturers would have to get into model year launches. Many manufacturers are actually doing it on a small scale. Basically, for same brand with slight modifications to be launched every year as a new model year – this keeps the excitement of the brand alive in customers’ mind.
This is a prevalent concept in developed countries and as consumers start becoming more knowledgeable and integrated with what’s happening in automotive sector globally – their expectations would also be to desire new model year launches.
When customers are fully integrated with this concept, then manufacturers are likely to seriously look at doing design convergence across models. The manufacturers who are looking at or planning design convergence now are better equipped to handle this scenario 3-4 years down the line.
Emerging Trend # 8: Emergence of Multi Brand Outlets
With distinct crunch in time amongst customers, sooner or later they would expect to evaluate multiple vehicles under one roof. This is one of the requirements which might be thrust upon manufacturers due to customer demand. This is likely to lead to the following:
(1) Emergence of Large National dealership groups which is likely to change the dynamics between manufacturers and dealerships – overall leading to better quality experience for customers
(2) Customer’s decision making becoming faster – one stop shop for customers leading to overall decision making & purchase process becoming shorter
Currently, there are dealers who have multiple brands (different companies); but not under one roof. The whole concept of DMA/DSA is likely to converge into formal multi brand outlets. We are likely to see emergence of Car Malls & Complexes in major cities in India - in the next 2-3 years.
Indian automotive industry has just got onto the Autobahn – and it’s time to step on the gas. The coming years will see our customers turn savvier – and this will lead to transfer of knowledge from manufacturers to customers and vice versa.