Decline of Sub-5 Lakh Cars: India's Shifting Automotive Landscape

Indian automotive market

11 February 2024, 12:53 PM IST

There has not been much change in the sales share of cars priced between Rs 5 lakh and Rs 10 lakh.

Image: Maruti Suzuki

Cars priced below five lakh rupees are leaving the market in the country. Eight years ago, their market share was 33.6 percent, which has fallen to 0.34 percent. It is estimated that the price of cars, which used to cost less than 5 lakhs, has increased by 65 percent in the last five years. Meanwhile, the price hike in the SUV and sedan segment is only up to 24 percent.

Companies point to the rise in prices of raw materials, changes in basic safety regulations, and measures taken to reduce environmental pollution. None of the companies are introducing new cars under Rs 5 lakh. Only Maruti, the country’s largest car manufacturer, has a car in the market at this price. There is not much demand for this in the market either.

In the first nine months of the current financial year, the company sold 99,634 cars in this segment. Maruti Suzuki also says that there has been a 42 percent decline in sales compared to the previous year. Meanwhile, sales of utility vehicles have seen a growth of 77 percent. The base model of Renault’s Kwid is priced at Rs 4.69 lakh ex-showroom, but it will go over Rs 5 lakh when it goes on sale.

The market changes

The passenger vehicle market in the country is changing drastically. People love small utility vehicles now. Keeping this in mind, automobile companies are also changing with time. In this change, the concept of budget car is gone. Customers are now willing to pay more for extra features like a sunroof, 360-degree camera, larger infotainment system and attractive design. Auto dealers say that the market favors models with more features than the basic models. This is evidenced by the fact that the Datsun company could not keep up in India even after setting the base price below three lakh rupees and had to stop operations.

SUV Time to reign

There has not been much change in the sales share of cars priced between Rs 5 lakh and Rs 10 lakh. In 2015, it was 53.9 percent and now it is 53.7 percent. Meanwhile, the market share of SUVs priced above 10 lakhs is soaring. The increase is 46 percent from 12.5 percent in 2015. Almost a four-fold increase. Currently, two cars are being sold and one of them is estimated to cost more than one million rupees.

Content Highlights: Small cars sale in Indian vehicle market is decreased