The demand for cars below Rs 5 lakh is almost non-existent in India. India is one of the largestautomotive markets globally. It has overtaken some of the biggest economies in the last couple of years. The number of car owners keep increasing rapidly with each passing year. Hence, the demand for entry-level vehicles has traditionally been extremely high. However, in the last few years, people are beginning to opt for slightly bigger cars in search of better amenities and convenience features. That has led to a sharp decline in sales of cars under Rs 5 lakh. There are many other reasons for this as well. Let us discuss these in depth here.
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Demand for Cars Below Rs 5 Lakh Almost NIL
As per recent reports, back in 2015, the market share of cars below Rs 5 lakh was a considerable 33.6%. This means that one-third of the total car buyers were spending under Rs 5 lakh on their cars. However, this number is now a mere 0.03% in 2023. That is almost negligible. To understand this, we must look at the overall scenario of our automobile industry. Firstly, there are barely any car models whose top trim sells for under Rs 5 lakh. Even if you consider entry level cars which start at under Rs 5 lakh, a variant with modern features easily takes the budget to over Rs 5 lakh. Apart from that, Shashank Srivastava, Senior Executive Officer at Maruti Suzuki, mentions a few other reasons for this decline in sales in this category. These include:
Customers Demand Connectivity Features
The biggest change in every car these days is the availability of a large touchscreen infotainment system and smartphone connectivity. People prioritize their entertainment over everything else. Having a touchscreen is quite enticing for modern-day car buyers. You would see that most cars already come with this feature. However, there are barely any models which offer this from their base trims. Hence, people have to spend more on higher variants to access such amenities. Connectivity enhances the convenience of occupants immensely. In fact, the younger car buyers experience connectivity in almost everything they buy. Hence, not having that in their cars is not acceptable. Resultantly, people opt for higher and more expensive trims.
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High Need For Safety
In the last few years, the Indian car buyers have become immensely conscious of the safety ratings of their cars. This trend became extremely prevalent after the Tata Nexon got 5 stars at the Global NCAP. Ever since, people value the safety ratings of their cars a great deal. Now, to offer the highest levels of safety in base models of entry-level cars is almost impossible. If carmakers try to make these car stronger or offer active and passive safety features, the price of the cars shoot up. On top of that, the government is enforcing stricter safety regulations. Hence, the costs of all cars have gone up in recent times. As a result, getting a decently-equipped safe car under Rs 5 lakh is quite tough.
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Premium Cabin Ambiance and Features
Then there are customers who want premium features inside the cabin of their cars. We know that people have access to information about the latest opulent functionalities in high end cars. Understandably, they don’t expect all these features to trickle down to entry-level cars, but some features are in particular demand. A prime example of this is an obsessive demand for sunroofs. It is a component which gives a premium appearance to a car. Hence, people opt for sunroof trims of cars. Carmakers don’t offer sunroofs in base models for most cars. Hence, people have to spend upward of Rs 5 lakh.
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Better Driving Experience
These days, people also love to drive their vehicles. In fact, as the emission norms become strict, carmakers are ditching diesel powertrains from their lineups. That led to the popularity of turbo petrol mills. In general, people who want a great driver’s car, look for the performance-focused trim in the lineup of any car model. Again, carmakers restrict this to the higher trims. Hence, people often end up purchasing the higher variants due to the fact that they want the exciting engine and transmission combination.
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ADAS
Finally, people look for the top-notch features in modern cars. ADAS enhances the active safety prowess of any car. It is the buzz word in the Indian automobile industry in the last couple of years. While a lot of high-end vehicles already boast this feature, many relatively budget cars are also getting this amenity. But there is still a long way to go until ADAS starts being offered in entry-level cars. Therefore, even if a relatively inexpensive car gets ADAS, it will be limited to its top trim. That trim won’t sell for under Rs 5 lakh. These are the top reasons why there is a sharp decline in cars under Rs 5 lakh in India.
