The average selling price of a passenger vehicle in India has increased by almost Rs 4 lakh in the past five years. According to data shared by top carmakers, the average selling price of a car in India in FY24 was Rs 11.5 lakh, which is a sharp growth from Rs 7.61 lakh in FY19.
Also, in FY24, 47% of cars sold in India were priced above Rs 10 lakh—a figure that was just 15% in FY19. “In FY24, 47% of cars sold in India were priced above the Rs 10-lakh mark, and 53% under Rs 10 lakh. In FY19, the corresponding figures were just 15% for cars priced over Rs 10 lakh and 85% under Rs 10 lakh,” they said.
Carmakers have attributed this growth to a rise in input costs of cars, thereby increasing their sticker price, rising interest in SUVs which are priced more than sedans and hatchbacks in the same segment, a strong GDP growth seen after the lockdown, rise in the number of women buyers, growth in corporate earnings, and a YOLO (you only live once) mindset among Indians after Covid-19.
Madan Sabnavis, chief economist, Bank of Baroda, said after the lockdown there has been a clear move towards purchase of premium cars and SUVs. “As soon as one starts working, there is a desire to own a big car—a vehicle that stands out. Banks and NBFCs provide the nudge by offering easy credit facilities,” he said. “With ESOPs and high levels of salaries, especially in the BFSI industry and the services sector, young people have high purchasing power, and that’s getting reflected in booming sales of premium cars and SUVs.”
Carmakers added that SUVs today form almost 55% of car sales, and the starting price of SUVs is Rs 7-8 lakh.
“While some SUV models are available under Rs 10 lakh, most sales happen of top-end variants of sub-4 metre SUVs (in the Rs 10-14 lakh segment), or midsize SUVs (Rs 11-20 lakh),” they said.
Even within midsize SUVs, top-end variants are in demand. For example, although Hyundai’s Creta —India’s bestselling SUV—is available at starting price of Rs 11 lakh, the range-topping SX(O) variant, priced from Rs 17.27 lakh to Rs 20.15 lakh, is the real puller, and it contributes to more than 30% of Creta sales. In addition, variants with sunroof contribute to 70% sales, variants with connectivity features 50% sales, variants with ADAS semiautomatic driving 42% sales… it implies that most Creta buyers go for top-end variants, the ones loaded with features.
When Honda launched the Elevate SUV last year, over 70% bookings were of top-end variants. Similarly, 90% sales of the Kia Seltos—a popular SUV priced from Rs 10.89 lakh to Rs 20.37 lakh—come from its top variants.
Dealers told FE that some carmakers play a smart game that nudges buyers to go for a higher-end variant. “They launch a model at an appealing entry-level price. Let’s say, Rs 9.99 lakh, and that attracts people to showrooms. But they don’t produce enough units, so that model goes into a long waiting period. At the dealership, the salesperson nudges buyers to go in for the next ‘available’ model with more features—which is like Rs 12-13 lakh. The buyer sees it as a good deal, and the sale is closed.”
Another reason car prices in general have increased is the two new emission norms. In April 2020, the market shifted to BS6 emission norms, and in April 2023 came BS6 Phase 2. This requires cars to be equipped with more advanced technology, increasing their prices.
Lastly, rising sales of luxury cars have pumped up the average car price. Although luxury cars form just 1% of the market, their ticket size is heavy, and that impacts average prices.
There are three segments within luxury cars—under Rs 50 lakh, Rs 50 lakh to Rs 1 crore, and Rs 1 crore and above, and market leader Mercedes-Benz told FE that Indians are shifting towards the upper end of the segment (Rs 1 crore and above).
The carmaker added that the average age of a luxury car customer is also reducing, meaning the same customer will buy more luxury cars in his lifetime than his parent did. According to Mercedes-Benz India, the average age of its flagship Rs 1.6 crore S-Class sedan is just 38 years. According to BMW India, most of its customers are in the age group of 35-40 years, down from 40-plus a few years ago. For some models of Audi, the average age is just 28.
Vikram Pawah, president, BMW Group India, told FE that previously luxury cars were bought by wealthy families, but now young buyers who are well-travelled globally and have an eye for luxury products are spending on premium cars.
In the first few months of FY25, however, people have been downgrading purchases, according to some dealerships. Sabnavis said that inflation and higher interest rates have impacted lower-income people, and some car-buyers have downgraded purchases—going for entry-level models—but the affluent are not affected by either of these factors.
