Base variants of cars no more in vogue
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Indian buyers may be value conscious, but that does not mean they go for the cheapest offer on the table. In an interesting trend, around 50-70% of the car buyers today are opting for the more feature-packed middle and top-end variants, rather than the cheapest base variant.
While already true in luxury cars, this trend is noticeable even across the mass segments — starting from compact hatches such as the Maruti Suzuki Alto, its elder brother Swift, to sedans such as the Hyundai Verna and Chevrolet Cruze. Such a shift in consumer preference has been attributed to rapidly growing aspiration levels among the young that have made many luxury bits of yesteryear, such as air-conditioning and power steering, a standard requirement today.
From half, about two-thirds of Maruti Alto buyers today choose the top variant with AC and power steering. In the Swift, the demand for the middle and top variants account for 70% of sales, up from about half three to four years ago.
Maruti Suzuki's vice-president for marketing Manohar Bhatt said, "When you translate to EMIs (for cars bought through vehicle loans), there is not much difference for a customer. For a higher variant with a R20,000-40,000 higher sticker price, he has to pay extra instalments for just a few more months," he said.
Easy availability of financing and an increased acceptance to buy cars on loan over cash-down purchases is probably the key driving factor in the rising popularity of models with more features. For Maruti, around 76% of cars are purchased on finance, versus 60-70% range for a more premium carmaker such as Honda.
General Motors (GM) and Honda both said that the middle variant has the highest demand because of the perfect value-for-money proposition. "Aspirations have gone up and lifestyles have changed, so customers want more facilities. In both the Beat and Cruze, about 60% of sales is from the middle and top variants. People are also going for premium hatches versus minicars," GM India vice-president P Balendran said.
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