Covid-19 might change car buying habits in India, here’s how

Federation of Automobile Dealers Associations noted that footfalls in dealerships had gone down to 45% by mid-March.

By:April 6, 2020 2:18 PM

Seldom, if ever, has the Indian passenger vehicle (PV) sector faced a hardship such as the Covid-19 pandemic. It’s hit during the BS4-to-BS6 switch—so it won’t just extend ongoing slowdown, but might also change people’s car-buying habits. Production has stopped, footfall in showrooms is zero due to the lockdown, and major events are cancelled or being done digitally. In fact, even before the lockdown started, the Federation of Automobile Dealers Associations noted that footfalls in dealerships had gone down to 45% by mid-March.

Online buying
Many OEMs already have an online car-buying mechanism in place. The impact of Covid-19 on consumer behaviour will make OEMs think about the changing nature of their interaction with consumers, and the role of the dealership network and their sales teams, says Vinay Raghunath, partner & leader, Automotive Sector, EY India. “An integrated phygital (physical plus digital) platform with digitally-enabled salespersons will become critical success criteria to tap into select consumer segments,” he adds.

However, the role of dealerships won’t diminish. Rajeev Chaba, president & managing director, MG Motor India, says that while most people shortlist a car before going to a showroom, a car is a product that you want to feel, touch, smell and drive. “People will still go to showrooms to make the final decision.”

Shared mobility
Kavan Mukhtyar, partner & leader, Automotive, PwC India, says that, for some time, users who earlier preferred shared mobility may consider buying cars—used or new. “There will be a switch in the short term towards ‘owning’ cars.” The thought of social distancing is going to stay for a couple of quarters, before it disappears from the consumer’s mind, adds Gaurav Vangaal, associate director, IHS Markit. “We should see some usage decline in shared mobility, but it will depend on a particular section of the consumer.”

Harish Bijoor, brand expert and the founder of Harish Bijoor Consults, says that ride-sharing platforms such as Uber and Ola will bounce back once the fear of transmission of Covid-19 virus goes away. “Old habits die hard,” he says. Raghunath has an interesting statistical observation: “One could broadly classify total passenger km run on Indian roads into sub-categories related to intra-city work km, intra-city personal km, inter-city km and shared km (shared mobility). While there has been a recent trend favouring a gradual increase in ‘shared km’, it will be interesting to see consumer behavioural changes over the next few months as a result of continued adherence to social distancing. This would impact usage across sub-categories, and in the short- and medium-term impact the portfolio and communication strategy of PV OEMs.”

Economic sentiment
According to the Confederation of Indian Industry’s CEO snap poll ‘Impact of Lockdown due to Covid-19 Pandemic’ released on April 3 (, about 52% firms foresee job losses, in their respective sectors, resulting from the impact of Covid-19 outbreak and the ensuing lockdown, and/or salary cuts. In addition, CARE Ratings has noted that, with the implementation of BS6, new safety norms and higher insurance, the cost of ownership of new PVs is expected to increase by 12-15%. This dual-impact means that some PV model downgrades may happen. “In an upbeat economic environment, a buyer who could afford, say, the i10, could have upgraded to the i20 instead, or may buy the higher variant of the i10. But now there may be a preference towards low-end variants, if new buying indeed does happen,” says Mukhtyar.

“In addition, people may start looking at cars as a service, on a subscription basis, maybe for six months or one year, or leasing options,” he says. However, as of now, it’s tough to take a call how deep the impact on new-car purchase will be.

Changing habits
Chaba of MG Motor India believes the pandemic will leave a lasting impact on consumer mindset. “First, people above 40 years of age, who have more money in their hands, will start thinking about the concept of YOLO (you only live once), and might start spending more on things such as cars and luxury products and holidays, so more consumerism might happen. Second, more people will consider new-energy vehicles, as there is already a lot of talk about pollution getting visibly reduced during the lockdown.”

Brand expert Bijoor calls the Covid-19 as a definitive point that will change habits. “The why-own-when-you-can-borrow movement is going to deepen. Consumers are going to think this from two perspectives. One is from the perspective of fatalism, and the other from the perspective of individualism and the variety-seeking habit. Both diametrically-opposed movements will collide to create less ownership of cars as a habit whose time has come.”

Impact on Chinese cars
Next year China’s Great Wall Motor (GWM) will launch its first car in India, and the British MG Motor (it’s owned by Chinese SAIC Motor) is perceived as Chinese by some customers. On the impact on Chinese brands, Vangaal says it’s too early to comment, but “some carmakers may face more challenges than others.” Hardeep Singh Brar, director, Marketing & Sales for the Indian subsidiary of GWM, doesn’t foresee negative impact on Chinese cars. Indian customers, he says, see ‘value’ in a product. “Today, the quality level and the cost at which China is able to provide a product, there are few alternatives around. If the product quality is good and the price is right, be it a smartphone or a car, the customer will pay for that,” he adds.

Bijoor, however, believes that China needs brand management inputs “desperately,” as does every Chinese company that aspires to grab market share and mindshare in India. “Chinese brands (in general) need to invest in image management. China itself needs to manage its image better,” he says.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Latest Auto News