India is fast graduating from bread and butter entry-level cars and sales in April shows how. For the first time in over a decade, compact sedan Dzire and its hatchback counterpart Swift has displaced its stablemate Alto to the third spot last month.
Dzire was the best-selling car in April at 25,935 units followed by Swift, which got an overhaul in February, at 22,776 units. Alto came in third with sales down almost 6 per cent over last year at 21,233 units.
While Dzire and Swift within themselves have intermittently pipped Alto at the top over the last 5 years, the trend has grown in the last 12 months. Already, Dzire has outsold Alto in four of the last six months. A thirty-day sales tally could be misleading particularly in a traditionally subdued month like April, but there is increasing evidence that one of the two Swift cousins would eventually end Alto's 14-year reign at the top. Dzire came close to doing that in 2017-18 but fell short of Alto by less than 19,000 units in the end.
The trend is reinforced in other brands as well. Maruti's premium hatchback Baleno outsold its tall boy small car Wagon R in April and Hyundai's Elite i20 edging its stablemate Grand i10.
"Premiumisation trend has gained palpable ground in PVs, amply reflected in changing industry volume mix - entry category which accounted for about 50 per cent of industry volumes in FY05, plummeted to sub-30 per cent in FY17," says a report by brokerage firm Edelweiss Securities.
"Customers, in quest for bells and whistles, have upgraded to higher price mid-size and executive segments: (a) the mid-size segment's share catapulted to 46 per cent in FY17 from about 30 per cent in FY05; and (b) the executive category's share jumped to 20.0 per cent in FY17 from 8.7 per cent in FY05. Interestingly, the broader premiumisation trend entails finer contours: (a) preference for SUVs over cars; and (b) and preference for automatic transmission."
The trend has coincided with rising income profile of the Indian population. According to the same report, the share of relevant income groups-Aspirers, Affluent and Elite (annual income greater than Rs 0.5 million)-jumped to 24 per cent in 2016 from 13 per cent in 2005 (implying 8 per cent CAGR). More importantly, population of relevant group is expected to post a healthy 6 per cent CAGR (implying addition of 185 million people versus 145 million in the previous decade).
In short, there will be more people looking to buy a Swift, Dzire, Baleno or i20 than an Alto, Wagon R or Eon.