Four factors that may boost demand for small cars in post-lockdown times

The Indian auto industry has had a tumultuous 2020 so far with the national lockdown since March 24 severely affecting production and demand. While 2019 was a difficult year to negotiate as is due to numerous factors, this year may remain as gloomy, if not worse. The ray of hope on the horizon, however, could be in the form of demand for smaller cars with companies like Maruti Suzuki, Hyundai and Tata Motors on the cusp of benefiting to some degree from it.

Several industry experts have time and again explained why there could be a slight spurt in sales in the upcoming months. They feel a fear psychosis may be at work with people looking to avoid public transportation in the light of Covid-19 and many could end up buying personal vehicles. While the second-hand market could also benefit, demand for new small vehicles, they claim, could go up.

Shashank Srivastava, Executive Director (Sales and Marketing), Maruti Suzuki, feels that while short-term forecast may be dependent on the market mood as car sales depend on overall sentiments, long term outlook has several positives indicators for smaller vehicles. "Car sales are discretionary buys and depend on sentiments. Current sentiments are obviously not positive but these are transient in nature and do change," he told HT Auto on Thursday. "In the longer term, four factors can help. Firstly, people may avoid public transport and move towards personal vehicles. Secondly, people are likely to gravitate towards trusted brands if they choose to make new purchases. Thirdly, the number of first-time buyers will increase as will numbers of functional buyers who also may scale down their purchases for smaller vehicles. Fourth is how people may also start opting for a second vehicle in the family which mostly could be a smaller car."

Nearly 70% of the passenger car market in India has been dominated by the small car segment, ably powered by a rising middle-class which prefers a low-cost, fuel efficient vehicle. Some regard depressed income levels, however, as a key reason why cars in more expensive segments have not expanded as much as they could have. Market expert Manish Chokhani at a recent webinar hosted by Axis Capital, highlighted average price per car bought in China is thrice that of India. "They are buying Toyota Altis, while we are buying Maruti Alto. It became a 30x larger market than India," he said. (Full report here)

And whether it is because smaller cars are becoming better equipped with convenience and safety features or for their affordability factor, a bump up in sales could be witnessed towards the festive months later in 2020 even if many are still shying away from making confident predictions due to the clouds of uncertainties that continue to prevail regarding Covid-19.