Slowdown: The Indian Automobile Consumer Comes of Age

Indians are not buying enough cars. Vehicle sales numbers have been falling for the past many months, generating mass hysteria sweeping the country. We’ve been warned repeatedly about the dire danger our economy is in, given that it apparently survives only thanks to the graces of the automobile industry, which has run crying to the government for help, which in turn has smiled and said no cigar (or e-cigarette). The signs are ominous. Is it a slowdown? Are we all doomed? (Why isn’t it called a speedup when the economy is doing well? Also, why do we have to accept automobile sales as an economic performance benchmark when all it does is increase pollution, congestion and debt?) Anyway, it is a fact that there is a liquidity crunch in the economy as loans seem to be hard to come by and consumer confidence is low. But is there really a downturn in the automobile industry? Let us look at this from a different angle. What if Indian consumers are not buying cars because they don’t think our cars are worth buying, and the “slowdown” is only a catalyst?

The finance minister has famously blamed Ola and Uber for the apparent downturn. The rationale is that Indian Millennials, the country’s prime spending class is not spending money on cars as they prefer app-taxis for their commutes. While this does not seem to make sense at first, on deeper analysis you can see that she was indeed right, but not in the way everyone understood it. Car sales are not decreasing because we (I am a Millennial, in fact the apex Millennial) take app-taxis, but car sales are decreasing for the same reason why we take app-taxis. It is definitely not because we have shunned cars, in fact it is the other way around. But this is getting buried under statistics. This statement is important because it will help up analyse the actual state of the industry later on in this chapter. If there were to be an actual slowdown, it should’ve actually affected the entire industry. But at one end we have falling vehicle sales but at the other end dealers of some models had to stop taking orders because they could not build cars fast enough to meet the demand! What the MG Hector and Kia Seltos (and Hyundai Venue) have achieved is phenomenal. In the midst of this so-called downturn, these and some other models across classes and price points have delivered unprecedented numbers, while at the same time the others have tanked. So what is going on?

The Numbers of India’s Automobile Slowdown

For me, I am surprised that everyone is surprised. I have always wondered how any sane person who values their money could really put down said money on the contraptions they sell in India under the guise of automobiles. Falling automobile sales is the best thing that has happened to the Indian consumer market since, like, ever. Indian automobile manufacturers should know better than to complain because it is not the government to blame on their falling fortunes but themselves. Let us approach this case from an analytical point of view. Only numbers can tell the real truth. The truth and results will always be revealed by diving deep into numbers. What we are attempting to find here some kind of pattern across brands, models, segments, price points etc. that would reliably explain the decrease in overall car sales numbers.

Units sold in August 2019 | August 2019: 195800 | 278866. The difference: 83066 units! A drop of 30%! The market has lost nearly a third! Or has it?

“Final figures” like these often hide more than they reveal. We would have to look beyond the results and probe further inside to know the real truth. In this case, since we are trying to find why car sales decreased, we first need to find out what models actually led this decline. Which ones had the most number of sales fall? let us have a look at all car manufacturers, models and segments that registered an actual decrease. Car segments are vague classifications, so for the convenience of our calculations, we will take models grouped according to body type and price point. All data is sourced from AutoPunditz.

The actual drop of units (deficit) in Aug '19 over Aug '18, or the total of all models which registered a net-decrease in sales was (-)119,240 units. Here is the segment-wise breakup.

Surprise, surprise! The hatchbacks (Swift, Wagon R, Celerio, i10, Tiago etc.) were nearly one out of nearly four cars that failed to sell over last year. The increase is for the Santro. While they are by far still the top-selling segment, accounting for one-fourth of all sales, their numbers have fallen by 35% from 70k year-on-year. Entry level hatchbacks (Alto, Kwid, Go) and entry level sedans (Dzire, Amaze etc.) follow. Not even one model among compact sedans, mid-size sedans and entry hatches could manage to turn positive. In absolute percentages, the mid-size sedans (City, Ciaz, Verna) were a bloodbath. They fell 61% from 15700 to a mere 6140! At the same time, the compact SUV segment actually registered a very minimal increase in numbers! This gives us the first indications on why there is a downturn.

Now let us identify the actual models which where at the core of the mess. Here are the top 20 cars with the most fall in sales.

Car models that registered the heaviest fall in numbers across all segments overwhelmingly (7/10 models) come from one manufacturer: Maruti Suzuki. The Alto alone accounts for 10% of cars not sold in August 2019 when compared to August 2018. And this bloodbath is not restricted to any one segment. All of the diminutive Marutis which formed the bulk of Indian car market have tanked. The Alto and Celerio, the Swift, Baleno, Dzire and Brezza, all have gone with the wind. Only the Wagon R manages to hold, but only barely. The real horror is however, the Dzire and the Ciaz, which were quite literally annihilated with a 68% and 77% year-on-year fall from 7000 to 1500 units and 16440 to 7000 units respectively! The Ciaz records the largest fall across any model sold last month. This is a very well-defined correction as the Ciaz is just too big and unwieldy (and underpowered) for our mostly narrow roads. In all, the seven Marutis accounted for 52736 cars not sold, or nearly half of all the cars not sold this August over last. Creta customers shifted to Hector and Sentos. The Tiago is also outdated and was possibly cannibalised by its sibling, the Nexon.

So we have our pattern. What we see here is established models that have been leading the charts for the past decade are witnessing massive fall in numbers. It looks like Marutis seem to be at the receiving end of the customers’ ire in particular. If you were to remove the Marutis from the charts, you will see that the slowdown is only a drop of 8% year-on-year. What is evident is what we know, that the market is moving from low-sung cars (sedans and hatchbacks) to tall-stance cars (pseudo SUVs) en-masse. But this does not explain why Maruti overwhelmingly dominates the list, and why even models like the Brezza and small cars are not doing well. Let us try to find out.

The Concept of Car Ownership is Changing

Something very fundamental about the Indian consumer, the way they think and perceive “value” and “ownership”, has changed. When we say the personal car is an aspiration for Indians, we also need to understand what “aspiration” means. For most Millennials, the car is a lifestyle aspiration, meaning, Millennials consider the car a utility that is also a lifestyle symbol. A Maruti or a small car is by no means a lifestyle symbol, and now it is becoming less of an aspiration for the entry level first time buyer who wants something better. Indians have moved on from being star-crossed at the sight of cars and lapping up anything that is offered to being rational about our purchases. What Indian car manufacturers, especially Maruti, seem to fail to understand is this little bit. Marutis which were super solid symbols of reliability, low running costs and mileage are now increasingly also being viewed as cheap, unsafe tin cans with bare-bones features bought only by those who cannot afford anything else. I call this the Nanofication of Maruti. The Tata Nano was said to have failed because people didn’t want to be seen driving a “cheap” car and the same affliction seems to have caught Maruti as well. Let us go back to the Millennials.

Some other reasons why people are shying away from buying cars: the massive clusterfuck that our roads are with our unmentionable, nonexistent infrastructure, no matter the city or state you are in. There is no room to drive, no space to park. I guess people are finally waking up to the fact that it is simply impossible to drive anymore. What point is there in buying a car only to sit in traffic? Adding on is the total, absolute absence of anything that can remotely be termed as road sense or rule of law. Not to mention the sheer cost involved in driving: fuel. tolls. parking fees. The great Indian metro railway revolution is the icing on the cake.

NO, really, this is the “Silicon Valley” of India.

Us, Millennials, take cabs because it is practical, easier, sensible, cheaper and hassle-free to do so (see box above). However, we still own cars, but we maybe don’t use them as much as we used to. Make no mistake, we are not getting tired of personal vehicle ownership. We are crazy about cars! They are the only thing we can think about. The car (or two) is still at the center of our aspirational matrix, but, we are also pragmatic. We can’t seem to be able to make sense in spending the equivalent our family’s yearly income on something we don’t feel like we are getting our money’s worth for. At one end we have realised what quality in utility/consumerist items means while on the other survival costs (education, healthcare, rent/EMI) are squeezing us to the level of penury. With finicky private employment as the sole income source for 80% of us, the future is always a question mark, unlike our parents who had either steady government jobs or their lands to fall back on. We know how money is at a premium and we know what quality is. The result is that we have learned to absolutely NOT spend on stuff that does not give us full value in return. This is why we aren’t buying cars. And the rest of the country is slowly realising this as well.

There is no value in buying a car.

For decades, the likes of Maruti had been conveniently using the “mileage” card to sell us utter value-less crap. It does not take a rocket scientist to figure out that the Indian automobile industry is a massive scam of Trisolaran proportions. Indian car models are so way overpriced and underequipped that it is ridiculous. Come on, look at it. A goddamn Swift costs more than a million rupees! And what do you get for that? A mess of bin plastic and rexine enclosed in onion-skin sheet metal adorned with LED lights! For five more lakhs you could get an above-medium variant of the Kia Seltos which gives enormously more value. Same goes for the Venue and Hector (and Kona). All these cars are top-of-the-line, modern and feature-loaded, the same as being sold across the world, offering us much more for the money we pay. The established competition does not even compare! The Maruti Brezza is no match for a Hyundai Venue, which is why despite similar price points and same segment, the latter fell by 6162 units while the latter sold 9342 on debut. Things are changing now as people are starting to look at more value for what they are paying than just looking for mileage. This is also the little secret that keeps Hyundai a close second in the country, despite lagging Marutis on mileage.

The Indian automobile market is maturing as customers are becoming more aware and informed. The future belongs to companies and models that listen to customers and give them exactly what they want from their cars, like great features and facilities at value prices. Indians expect to be pampered by their cars. They want fancy, big, brash, high-stance, in-your-face with an enormous grille. They want LED light strips, sunroofs, knobs and buttons on their steering wheels. They want so-called “clever features” like cubbyholes, cup holders, smart spaces, clips, ambient lighting, technological knick-knacks and thingsamajig like, everything-sensor-automatic everythings, cameras, remote everything else, and of course, a huge-ass touchscreen on their centre console (and wherever possible). They want their car to be controlled by an app. The success of the MG Hector, which can definitely be attributed to the fact that it was marketed as the “Internet Car” underscores the arrival of the “lifestyle car”. Everyone is going crazy about these “connected cars”. It looks like what Indians really want in fact is not a car, but a driveable version of their most loved possession, an extension of this device they spend most of their time with.

The Smartphone

The changes in Indian consumer preferences and increase in awareness can be directly attributed to smartphones. Today every single person is supremely informed about the automobile industry across the world. We know who sells what cars where in the world, their looks, features, quality and cost and what the buyer gets for what they pay. What we know is nearly all western car companies bring their outdated-est models to sell in India. We know that the Indian VW Polo is a decade old to its Deutsche sibling, that Ford sells 17 cutting-edge passenger vehicles in USA but only six in India (actually, only three; Figo/Freestyle/Aspire are the same thing), that Nissan sells the stunning Versa in the USA in the place of the pathetic Sunny in India, that Renault and Nissan (and Skoda and VW) sell us the same cars with different badges. Look at the Captur Renault sells in France and the one it sells in India.

Another big contribution of the smartphone (and CCTVs) is to the general awareness of consumers towards automobile safety. It would be fairly safe to assume that all those pictures and videos of cars crumbling like <insert well worn cliche> after hitting anything from Volvos to autorickshaws have contributed in no small measure to Maruti’s falling sales.

Do you know what we, as Indian consumers, hate? We hate it when companies bring inferior, second-grade versions of their products to India with that condescending attitude as if we don’t deserve better. For instance look at Renault’s lineup in its home country and the comparative refuse they sell here. The smartphone has made us realise the true nature of these companies, that none of them are really committed to us but only want to make money selling us overpriced, outdated garbage. Do you know what this “downturn” actually means? It means that Indians have decided not to humour these profiteers anymore. No, monsieur, Indians no longer want “cheap”. Indians would like better value for the money we pay, because the money we pay is not grain husk, s’il vous plaît.

In short, there is definitely a slowdown in vehicle sales, but what the August 2019 data tells us is that rather than a full-fledged automobile market downturn problem, it looks more like it is a consumer backlash against inferior products being sold at a premium. For decades, Indian car manufacturers dictated the terms to consumers, forcing them to buy unsafe, bare-bones products in a completely unregulated market. Manufacturers like Maruti are desperate to block any attempts at making Indian cars safer and the industry regulated, because they know they cannot survive in the face of real, quality competition. However, things are changing, and like a famous philosopher once said, it is the only constant. Changes happen at such incredible speeds nowadays that the answers become obsolete even before the question is properly understood. Brands that do not change with time, customer preferences and competition stand to lose value and market share before they even realise it. History is littered with the debris of once-invincible brands which were full of it and themselves to respond to customer needs in time.

COCCYX: The funniest thing is that the “industry” and everyone else says they are “committed to “saving” the environment. We all say that we are expected to shun private cars and opt for public transportation to save the world and all that. At the same time the entire dispensation collectively loses their shit when car sales come down. More on that, later.

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