Team PVF had a brief tete-a-tete with Mr. Puneet Gupta, Associate Director Automotive Forecasting at IHS Markit. Below he shares his views on customer evolution and sales trends in the Indian Passenger Vehicle Market.
Q 1. Today’s passenger vehicle customers are more informed and younger. Since you have been part of the industry for almost 2 decades, can you share some insights as to how the customer has evolved?
Mr. Puneet Gupta: In the last two decades, the Indian Auto industry has gone through enormous transformation from both supply and demand side. I remember two decades back; the industry was limited to only few brands and consumers had limited choice. Today I think we have lot of OEMs from every continent competing, offering multiple refined cars in multiple segments and that too with the latest technology.
Two decades back the consumer was conservative and just needed a car for transportation from Point A to Point B, but today the buyer is aspirational, very demanding and is a lot more exposed to latest trends and technologies in the western world. The expectations of today’s buyer is not only limited to buying a car but buying an experience. Even the car manufacturers of today want to support their customers and be in constant touch with them and build a lifelong relationship with them unlike the past. Quality was the buzz word two decades back and was a big marketing point at that time. Now quality is embedded in every car and today’s car manufacturers are stretching themselves to make their brand as a one stop solution and giving the customers an unforgettable experience. Consumers are also ready to pay more for cars today relative to their predecessors. In the last 8 years, the average car price has almost doubled from 3.5 lakhs to 6.5 lakhs indicating that the Indian consumer is no longer interested in only buying the cheapest car.
Q 2. Passenger vehicle sales have been subdued this festive season. How and when do you expect things to take a turn for the better?
Mr. Puneet Gupta: No doubt this Diwali didn’t bring much cheer for the Auto Industry. Even in this auspicious time, the footfall in the showrooms didn’t peak. There are multiple factors which have deteriorated consumer sentiments. The exponential rise in fuel prices, increase in upfront insurance premium and rising interest rates all led to deceleration of growth for Auto Industry. Sudden rupee devaluation is also making the cars more expensive and ownership cost of cars is rising. Apart from this, recent financial stress of NBFCs is also resulting in pressure on lending environment and all these deterrents have led to breakdown of growth momentum.
In calendar year 2018, IHS Markit is expecting that Light vehicle sales (PV + LCV<6 tonnes) to grow by around 9% and it will be the first time in India that Light Vehicles will touch the milestone of 4 million vehicles in a single year.
Going forward we feel that pent up demand from flood hit areas, new model launches and more business confidence will help the industry to grow. Also, newly launched mini cars and compact SUVs coupled with economic revival will continue to drive growth. However, rupee devaluation and higher crude oil prices may be a deterrent to sales and may hit the demand and sentiments further.
In the year 2019, with so many regulations coming from 1st April onwards, it is expected that there will be increase in prices of the car. However, we are expecting that OEMS will try to leverage this and create demand by alluring customers to buy car before price hikes. We are thus expecting high single digit growth in Quarter 1 of calendar year 2019.
Q 3. India is expected to emerge as the world’s third-largest passenger vehicle market by 2020. What are some of the key trends that you believe will drive that growth?
Mr. Puneet Gupta: That’s right, India will Jump from 5th to 3rd largest market in the world, crossing japan and Germany by 2020. Going forward I think few trends to watch out will be more women buyers in fleet. We have already seen women buyers have doubled in last five years. Even the financing age for women buyers is coming down. There may be more demand for automatic cars, more digital content in cars. Leasing will catch up and consumers will like to own an experience of driving rather than owning a car. There is already an increase in traffic on websites which are renting goods like furniture etc. The car industry is reinventing itself and we may see a lot more action on making cars connected, more convenient, congestion-free, charged, cleaner and equipped with cutting-edge technology.
Q 4. Which segments of the PV market do you foresee taking the lead in driving this growth?
Mr. Puneet Gupta: The industry is going through disruptions and a lot of changes in terms of future technology and policies will unfold in India. However, clearly Electric Vehicles will lead the way going forward, Diesel vehicle share will shrink drastically and Fleet will be the Buzz word in the Industry. IHS Markit has done a study “Reinventing the Wheel” wherein we had analyzed how ride hailing companies can be a boon for the Indian Auto industry. Globally while Ride Hailing companies will shrink the market but in India the market will see a growth. The new business models will evolve and the segmentation pattern will change. We feel with so many safety regulations few cars like Omni will disappear and even share of Mini cars will shrink in the next decade. SUVs will continue to grow in terms of market share as consumers will have an affinity towards bigger vehicles and more convenience and also wherein the choices are the most.
Q 5. Lastly, it would be great if you could let us know what excites you to be a part of the upcoming Passenger Vehicle Forum 2018 (taking place on 18 Dec 2018 at The Leela Gurgaon)?
Mr. Puneet Gupta: I am very excited to participate at the Passenger Vehicle forum as it is an excellent platform to connect, collaborate and share thoughts with the leading experts from India and across the world. I wish PVF team all the best for the event and wish you a grand success!