Tuesday, March 5, 2024
Tuesday, March 5, 2024
HomeBusinessWhy are cars under Rs 5 lakh disappearing? Price increases... Who...

Why are cars under Rs 5 lakh disappearing? Price increases… Who is responsible?

The Indian automotive landscape is witnessing a significant change, with the entry-level budget car segment seemingly on the brink of extinction. As of now, the base (STD) variant of the Maruti Suzuki Alto K10 remains the only competitor with an on-road price of less than Rs 5 lakh. This stark scenario underscores a broader trend: The choice of affordable new cars is rapidly declining.

Market share plummets

The last eight years have seen a staggering decline in the market share of entry-level cars, falling from around 33% to just 0.4%. Shashank Srivastava, Executive Director (Marketing and Sales), Maruti Suzuki, highlighted the drastic fall in market share of cars priced below Rs 5 lakh, from a robust 33.5% in 2015-16 to an almost negligible 0.4% in 2023-24.

Factors behind the disappearance

Several key factors contribute to the demise of the sub-Rs 5 lakh car segment:

Inflation and buyer demands

The automotive industry has faced widespread price increases due to inflation and changing consumer preferences. Cars that were once priced at Rs 4 lakh have now gone up to Rs 6 lakh, putting them beyond the reach of the budget-conscious buyer. Srivastava noted that the demand for more features, which were traditionally reserved for premium segments, is now a standard expectation among buyers across all car categories.

Increased material costs

Post-COVID-19, the cost of critical auto manufacturing materials such as steel, copper, aluminum, platinum, rare earths and lead has skyrocketed. Since the cost of these materials constitutes a significant part of the total price of the vehicle, its increase has directly impacted the final price of automobiles.

Regulatory standards

Stricter regulatory standards related to emissions and safety have also contributed to rising costs. The transition from BS-4 to BS-6 emissions standards, along with compliance with frontal and side impact safety norms, has required technological upgrades, further inflating prices.

The shift towards SUVs

The changing consumer trend towards SUVs has also contributed to the declining market share of small cars. As buyers gravitate toward larger, more feature-packed vehicles, demand for compact, affordable cars has taken a hit.

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