New Delhi: Gone are the days when Indian customers had utilitarian taste when it came to cars. YOLO (you only live once) outlook, now, defines a rising class of young professionals who are increasingly keen on getting top-of-the-class products and luxury.
Carmakers, too, are taking note of this aspirational set of car buyers. Demand for cars with fancy features and new standards of safety are increasingly pushing this new class of buyers to go for premium models.
With a decline in the unemployment rate among the youth, and more financing options, the average expenditure on cars has also gone up, according to industry insiders, and many young buyers are preferring a four-wheeler over a two-wheeler as their first vehicle.
What this means for carmakers and advertisers is that they have had to change communication strategies to better attract the attention of buyers, who consume media in radically different ways than their previous generations did. It also means carmakers have increasingly started to fill their portfolios with models appealing to the younger, more discerning customers.
“The Indian automobile market is moving from functionality to aspiration,” Tarun Garg, COO at Hyundai Motor India, told ThePrint. “Earlier, it was all about going from point A to point B at a lower price and higher fuel efficiency.”
“Now, customers want a lot more,” he said. “They aspire for better safety, better features, better design and better technology… very clearly, this is a reflection of the ‘YOLO’ attitude of younger customers.”
Garg added that Indian automobile buyers were getting younger and the company has been seeing this trend for sometime now.
According to him, the average age of Hyundai car buyers was down from 43 years in 2018, to 38 years in 2023. Additionally, buyers aged less than 30 years now comprised 27 percent of Hyundai’s new car customers as compared to 12 percent in 2018.
German luxury car maker Mercedes-Benz India also claimed to be seeing a similar trend. Santosh Iyer, managing director & CEO of Mercedes-Benz India, said there was an increasing desire to own a Mercedes-Benz among the young, successful and upwardly mobile customer base.
“Our customers have been getting younger, we see rising penetration of professionals and salaried individuals into our brand,” said Iyer. “The average age is coming down, and an S-Class customer’s average age now is just 38 years.” Five years back, an average S-Class customer would be in their mid-forties.
“This also underlines a significant transition. Young buyers are now opting for our high-end portfolio like the S-Class and Maybach.”
Asked if Tata Motors was seeing a similar trend of decline in the average age of car buyers, Vivek Srivatsa, head, marketing, sales, and service strategy, Tata Passenger Electric Mobility Ltd, said, “Certainly! Cars have transcended from being mere necessities to aspirational symbols, especially among the younger generation.”
Srivatsa added that this paradigm shift is propelled by several underlying factors reshaping consumer preferences. These factors include burgeoning disposable incomes, evolving lifestyle choices influenced by increased internet exposure, environment consciousness, a diverse array of appealing vehicle styles, notably SUVs, flexible and enticing vehicle financing options.
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Looking for more features
According to Garg, as buyers were getting younger, they were going for more feature-rich models and aspiring for advanced features such as better connectivity, advanced driver assistance systems (ADAS) and a sunroof. There was now a high preference for SUVs and top variants across models.
“As you know this is the mobile generation, they want to stay connected,” he said. “Connected cars’ penetration is continuously going up. It used to be only 5 percent in 2019 for Hyundai; it is 30 percent in 2023.”
Garg added that even though all cars in the company’s portfolio do not sport a sunroof, the share of such cars in Hyundai’s sales has jumped from 17 percent in 2019 to 45 percent. SUVs now account for 60 percent of the company’s sales, he said.
The company is also seeing a change in colour preferences as customers are getting younger. Earlier, while white and silver, seen as conservative colours, were most popular. The preference has shifted to black or the ‘starry night’ colour, said Garg.
For example, the black variant of Creta, which accounted for nine percent of sales in 2018, has grown to 32 percent in 2023. Similarly, in Verna, sales of the black variant is up from 26 percent to 40 percent. For Exter, 30 percent of the sales are coming from the ‘Khaki’ colour, another preferred colour among young car buyers.
“Perusal of the economic and demographic data shows clearly that the consumers of cars have become younger and richer,” Shashank Srivastava, senior executive officer, Marketing & Sales, Maruti Suzuki India, told ThePrint.
“The buying criteria of the new age consumer has changed from functionality to aspiration,” he added, agreeing with what the other car companies have been seeing as well. “This reflects in the features and technology that is preferred by the Indian consumer.”
According to Srivastava, original equipment manufacturers (OEM) have had to adopt new strategies for their communication to the consumers as the media consumption habits of these consumers have altered dramatically.
An internal study by Maruti Suzuki India, the largest car manufacturer in the country, showed the average age for car buyers was 37 years in 2022, as against 37.3 years in 2018.
Echoing similar views, Srivatsa said that there has been a certainly a paradigm shift in consumer behaviour today, compared to five years ago. The earlier expectations were limited to features like air conditioning and power windows, but today, customers demand more advanced and connected features like touchscreen displays, voice recognition, and navigation systems have become standard expectations. Interestingly, he added that the company was seeing a marked shift between the buyer profile of an Electric Vehicle (EV) customer against an ICE (Internal Combustion Engine) customer.
“Currently, a traditional ICE customer is someone who prefers minimal interaction with the OEM and is less demanding. They only want to reach out or want to be reached out to when there is a fault with their vehicle or when they want to upgrade their vehicle. In contrast, an EV customer is someone who will actively seek interaction opportunities with the OEM and prefers avenues of frequent communication. An EV customer builds his community around him, and willingly serves as a brand ambassador without financial incentives, becoming true brand evangelists. This is very similar to the consumer behaviour displayed by that of consumer electronics,” he said.
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More premium features, higher the cost
The average price paid by buyers for a car across the industry has grown from Rs 9.3 lakh in 2018 to Rs 11.9 lakh in 2022, according to Maruti Suzuki’s Srivastava.
For Hyundai, cars priced over Rs 10 lakh now contribute around 50 percent of its sales as against a 21 percent contribution in 2019. “So you can see the effect of the economy and aspirations from these numbers,” Garg said.
According to Maruti, overall, cars priced above Rs 10 lakh accounted for 15 percent of sales for the sector in 2018-19, and have grown to 40 percent in 2022-23.
Quoting a 2020 report by consultants Boston Consulting Group (BCG), Srivastava added that the number of households earning more than Rs 5 lakh per annum increased from 51 million in 2010 to 95 million in 2020. This number is expected to go up to 190 million by 2030. Also, GDP per capita has grown to $2,515 from $1,998 in 2018.
“Thus, overall affluence in India is going up,” he said.
Economy & demographics mean trend will stay
The monthly economic review published by the Department of Economic Affairs for October 2023 noted that according to the Periodic Labour Force Survey (PLFS), the unemployment rate among the youth (15-29 years) declined from 17.8 percent in 2017-18 to 10 percent in 2022-23. The Labour Force Participation Rate (LFPR) among this category has grown from 38.2 percent to 44.5 percent over the same period.
“Concurrently, the proportion of employed youth rose from 31 percent to 40.1 percent in these six years,” the report added.
India has the world’s largest young population, with 66 percent of its population (808 million) below the age of 35. Despite the estimated decline in the numbers, India will still remain a relatively ‘young’ country in 2030, with 24 percent of its population (365 million) in the 15-29 age group.
“With the changing corporate landscape of India, we are witnessing the emergence of young professional buyers,” Iyer said. “These new generation customers, be it doctors, engineers, lawyers, chartered accountants, start-up founders, entrepreneurs, are highly aspirational, have a penchant for luxury goods and they’re bringing in the culture of consumption, which is important.”
“These young customers have travelled across the world and demand the best of luxury and technology in their cars.”
Garg added that this trend can absolutely be linked to the economy, especially to do with booming sectors such as IT. However, he added, that the most important factor is that financing is easily available and aspirations are rising.
According to data shared by Maruti Suzuki, cars bought using financing options stood at 89 percent in 2018 across the industry, which increased to 91 percent in 2022.
“India is now slowly imaging global peers in terms of market,” Garg said. “Some are of the opinion that unless the bottom end [entry level cars] grows, the industry will not grow, but that is not true.”
“This year, the industry is expected to grow at around eight percent despite the bottom end not growing,” he added. “This shows that the customers who were earlier buying entry-level cars are now shifting to higher segments. And this is the aspiration coming in as more and more younger customers come in.”
More and more youngsters buying four-wheelers could also signal a change in their preference for two-wheelers as the first vehicle, “…we are seeing a shift in the demographic as young buyers increasingly prefer purchasing a 4-wheeler as an upgrade to their lifestyle. The mobility preferences of younger individuals have shifted from two-wheelers to cars due to factors such as safety, ease of commuting, state-of-the-art technology, and changing urban dynamics. Owning a car symbolises status, convenience, and safety on highways, while advanced features attract tech-savvy buyers. So, there is a visible trend of buyer shift in India,” Srivatsa added.
(Edited by Tony Rai)
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