Five Trends To Rule The Auto Industry In 2023To sustain the growth momentum, the industry is adopting many new trends: from increasing digital sales, expanding the used-car market to increasing safety-related measures, the sector is moving towards a joy ride

The Covid-19 induced restrictions led to a slump in the Indian auto sector. However, the industry emerged victorious, thanks to the emergence of new technologies and innovation within the sector. To sustain the growth momentum, the industry is adopting many new trends: from increasing digital sales, expanding the used-car market to increasing safety-related measures, the sector is moving towards a joy ride.

"Rise in digital sales, SUV dominance, alternate mobility and ownership, increased acceptance of used vehicles, are some of the trends that's going to dominate the sector in 2023," said Rajat Mahajan, partner, Deloitte India.

Rise of digital sales and agency model of dealership

The new-age customers look for transparency and convenience in vehicle purchase. The original equipment manufacturers (OEMs) are looking at digital platforms as an important channel. In one of Deloitte's recent automotive surveys (GACS),nearly 80 per cent of customers from India highlighted ease of use, convenience and speed as main reasons for going through a virtual process. Few OEMs have successfully moved from traditional dealer-led sales model to an agency model, while few others are evaluating a hybrid model. "This model will enable customers to get direct benefits from the OEMs, help dealers reduce interest burden on inventory costs and improve trust. However, in our recent study, more than 60 per cent of the consumers who want a virtual buying process for their next vehicle would still prefer to interact with an authorized dealer," he said, adding that the digital channel contributes to approximately 50 per cent of the total enquiries of several OEMs.

Alternate mobility and ownership

With hybrid work culture and changing preferences, the sector witnesses increase in demand for vehicle leasing, subscription-based ownership and new modes of mobility such as ride hailing and sharing. The Indian shared mobility market consists of ride hailing, ride sharing, car rental, car subscription and micro mobility. It is expected to grow at a CAGR of ~25-30 per cent in the coming three-four years. "Opting for subscription / sharing can lead to significant savings as the average car utilization rate in India is 6 per cent. Ride-hailing, last mile delivery Unicorns are increasingly adopting EVs in their fleet and new business models such as two-wheeler ride hailing platforms are also emerging. The subscription in the EV segment will be driven by partnerships between third party service providers and OEMs to enable special brand offerings."

Increased acceptance of used vehicles

The trend for pre-owned vehicles has been on the rise.The used car to new car ratio is currently at 1.4:1 and is likely to touch 2:1 in the next five years. This trend is driven by factors such as affordability, requirement for personal mobility post Covid and trust created by OEMs and other startups. "Significant numbers of startups and OEMs have introduced solutions which increased adoption amongst consumers, for example, quick evaluation of vehicles, faster settlements, easy finance availability, service & warranty support."

Focus on customer experience and quality

New age buyers expect to have a smooth and hassle-free experience throughout the journey, be it purchase or aftersales, hence an increased focus from the OEMs on improving customer experience will sustain the growth. The growing prominence of new consumer segments is changing the way companies reach out and engage with these prospective buyers. Women, Tier IV customers and the increased use of smartphones are driving expectations.

SUV dominance, safety and government schemes

Due to increase in consumer spending, acceptance of higher ground clearance and introduction of sub-4m SUVs, the market is now dominated by SUV (>46 per cent of total PV sales). Most of the major OEMs are offering multiple products in this segment.

One of the major trends that would dominate the industry would be safety. "Safety has been a major focus area, as many as 52 per cent of the consumers in India are willing to pay more towards safety features," he said. While implementation of six airbags is the first step towards this, crashworthiness ratings and other advanced safety features are being offered which has increased awareness among the Indian consumers. "The government has also been very supportive to the industry and has rolled out multiple schemes in the recent past like Auto PLI, Battery ACC and Fame II. The policies need to be consistent and need to keep pace with the technology advancements for the industry to benefit."