diwali sales: Pandemic fuels India’s premium drive, share of pricier cars, phones & appliances in total sales double
The latest data from market intelligence firm GfK India showed that the share in sales of laptops priced above ₹60,000 has risen to 26% in the January-August period from 13% of total unit sales or volume sales in the same period of 2019. For televisions above 50 inches, it has risen to 12% from 5%; for washing machines with a capacity of 7 kg and more it has increased to 70% from 58%; and for refrigerators of 350-litres plus to 6% from 3%. For smartphones, the unit sale contribution of models priced above ₹25,000 grew 1.5 times in August this year from the same month in 2019.
Similarly, the demand for cars priced above ₹10 lakh has grown at a faster pace than the mainstream market below ₹10 lakh. Between January and August 2021, the sub-₹10 lakh car market grew by 160% from the year earlier, whereas those above ₹10 lakh have grown by 210%, according to Jato Dynamics India.
The automotive consulting firm says the share of sub-₹10 lakh segment in the overall market slipped by over 700 basis points, whereas that of vehicles in the Rs 10-20 lakh bracket gained 600 basis points, accounting for 23% of the overall market in January-August 2021 compared with 16% two years ago. Even in bikes, the pricier 125-250 cc segment has grown almost twice the pace than the entry-level 75 to 125 cc.
Trend Visible in Smaller Cities too
Jato Dynamics said the shift toward higher-priced models has been consistent over the last two to three years but became pronounced after the Covid-19 outbreak. The share of entry-level cars declined from 9.5% at the beginning of 2019 to 6.6% by the end of 2020 whereas the share of higher-priced SUVs and MPVs increased from 33% at the beginning 2019 to 41% by the end of 2020.
“The pandemic has brought some structural shifts in consumer choices and shopping behaviour,” said Nikhil Mathur, managing director, India, GfK. He said consumers are looking for a value proposition in tech and durables rather than just utility, marking a clear shift to premiumisation.
Mathur said this trend of premiumisation is reflected even in smaller cities led by reverse migration, rising aspirations, and improved infrastructure. It will continue to grow, backed by easy financing options.
Tarun Garg, director, sales and marketing at Hyundai Motor India, said customers are stretching and they really want to have everything in a car, with no compromises. “This is happening across brands, across variants,” he said. “Post the first Covid-19 wave, many industry experts predicted downtrading to lower segments. However, today, it is exactly the opposite that has happened. Our share of higher-priced cars and SUVs have gone up, preference towards higher variants have accelerated.”
Higher disposable income
CEOs also attribute this shift to premium cars, bikes, laptops and smartphones to higher disposable income with consumers who don’t have too many avenues to spend on such as eating out, holidays and travel. They said this shift will continue at this pace with salaries restored or hiked, while spending avenues remain limited.
India’s passenger vehicle market has recovered steadily since the slump in 2019 to 2.13 million units in August, although it’s been hit by the global semiconductor shortage, leading to long waiting periods for some models. Vehicle makers have responded by launching 11 new models in 2021 in price segments above ₹10 lakh with 84 variants, as per Jato Dynamics.
Ravi Bhatia, president of Jato Dynamics India, said nearly 16% of households in India fall in the affluent (₹10-20 lakh annual income) and elite (₹20 lakh and above) categories. This upper category has benefited disproportionately, he said.
“Cars priced above ₹10 lakh now account for more than 26% of the overall market and the rate of growth is higher than the overall industry. This augurs well for manufacturers and financiers,” Bhatia said.
Luxe Car Segment
The trend is magnified in the luxury car segment. Vikram Pawah, president of BMW Group, India, said even after the global financial crisis, the top end of the market had recovered the fastest and it’s the same this time around too. To be sure, models such as the X7, 8 Series and M8 models priced above ₹1 crore have longer waiting periods.
“The disposable income at the higher end is much more, hence the multiplier effect is higher,” Pawah said.