Breaking the price barrier

In a maturing Indian market, the average retail price of passenger vehicles has crossed Rs 10 lakh for the first time. The popularity of SUVs has allowed OEMs to realise higher prices, writes Ketan Thakkar.

- Ketan Thakkar.

In what is a sign of the Indian market maturing and graduating to the next level, the average retail price of a car or an SUV sold in the country has exceeded Rs 10 lakh for the first time ever. In fact, in 2022 they touched Rs 10.32 lakh price band.

A big shift in favour of higher-priced SUVs has taken the average selling price of vehicles higher than Rs 10 lakh for the first time. This rise in vehicle prices has also come in tandem with market growth, which indicates that there is an ability of the growing middle-class to withstand 15-20 percent rise in average selling price thanks to rising per capita. They are not only fulfilling their necessity of personal mobility but are also fulfilling their aspiration of owning a vehicle.

As per the analysis done by Jato Dynamics India, the core of the market has shifted from the Rs 5 lakh to Rs 10 lakh bracket to the Rs 10 lakh to Rs 15 lakh slot.

In the calendar year 2021, about 1.8 million vehicles or 58 percent of the total sales fell in Rs 5 lakh to Rs 10 lakh bracket, this dropped to 45 percent of the total market in the calendar year 2022, with vehicle priced from Rs 10 lakh to Rs 20 lakh and above accounted for over 55 percent of the overall market.

Ravi Bhatia, MD of Jato Dynamics India says the price is driven by technology, regulation and OEM pricing power. Also, the popularity of SUV body style has allowed OEMs to realise higher prices. "As the supply chain was disrupted over the last few years and car makers struggled to meet demand. However, with supply catching up now, we are beginning to see discounts and expect to see fewer price increases in 2023," said Bhatia.

Despite the recent disruption due to Covid-19 issues, economic growth in India has been one of the highest in the world between 2008 to 2018. The disposable income has been rising and along with a positive sentiment, it has created a demand for aspirational products.