Consumers willing to pay premium for next vehicle amid inflation fears

Indian consumers are willing to pay a premium for purchasing their next vehicle despite fears of inflation, with a large portion of them looking at automobiles in the Rs 1025 lakh price bracket, according to a study by Deloitte.

They are now prioritising experience over cost, indicating a clear shift in buying pattern and a majority of them are even willing to accept a longer delivery time up to 412 weeks for a better experience and preferred choice of vehicle, said Deloitte's 2023 Global Automotive Consumer Study (GACS).

The study conducted from September 2129, 2022, with a sample of 1,003 consumers in India found that "vehicle intenders in the price bracket Rs 1025 lakh were around 47 per cent".

"For Rs 10 lakh and below these were 28 per cent. About 57 per cent intenders were willing to purchase Electric Vehicles (EVs) from Rs 1025 lakh and 20 per cent in the range of Rs 10 lakh and below," it said.

There is a clear shift in an Indian consumer's buying pattern, where an average consumer is prioritising experience over cost, the report said, adding,"Traditionally, the Indian consumer has been cost conscious and cost versus mileage was the most important parameter for vehicle purchase."

Deloitte Touche Tohmatsu India LLP Partner and Automotive Sector leader Rajeev Singh said, "Our consumer study indicates the rising demand and expectation of the Indian consumer, who is not just cost conscious anymore but is considering more than one pragmatic way of mobility experience."

This allows them to balance operating costs, and experience through technology (37 per cent) whilst making sustainable choices, he added.

When it comes to moving from one brand to another, the study found that average consumers have defined key factors such as product quality (62 per cent), vehicle features (48 per cent), and brand image (46 per cent).

"For a better experience and preferred choice of vehicle, around 55 per cent consumers were willing to accept a longer delivery time (up to 412 weeks). This opens the door to a more 'build to order' retail paradigm," Deloitte said.

In terms of EV adoption, the top three reasons for purchasing an EV included low fuel costs, better driving experience, and less maintenance, it added.

"However, the availability of charging infrastructure, concerns regarding battery safety, and the price premium required to access EV technology are the challenges that remain," the study said.

Consumers across all age groups preferred to pay for public EV charging via payment apps on their smartphones, signaling the need for easy-to-use digital payment tools, it added.

The study found that 49 per cent of the Indian consumers preferred to pay for the connected vehicle features and technology upfront as part of the purchase price, which "represents a challenge for OEMs looking to build new revenue streams via monthly digital subscription services".