Why does it make business sense for OEMs Like Maruti and Hyundai to offer premium segment cars

Every Indian car owner knows the most popular, most loved brands in the car business. Maruti Suzuki, Hyundai, TATA, Mahindra are the biggest car brands that Indians swear by. They are not just brands that sell cars but something more for Indian car buyers. As Original Equipment Manufacturers (OEMs), they offer a wide range of small, no-frills hatchbacks that have been driving sales for decades in India.

Take the case of Maruti 800 – the car model that has been loved by Indians for generations. Its sales graph in 1996, which denoted a forty-one percent share of the total industry unit sales, says a lot about its popularity.

However, with time, car buyers have switched preferences. Today’s aspirational Indian customers want more than just a hatchback. In the business sense, this shift in the buyer’s preferences has led bigger car brands to offer premium cars along with the range of other cars they offer.

For instance, Maruti Suzuki launched Nexa in 2015, a new and improved car dealership format in India to sell a range of premium cars, the first one in the range being S-cross. Similarly, Hyundai has cars like Hyundai Grand i10 Nios and Hyundai Elite i2o in its premium hatchback range.

You might be wondering – why do OEMs like Maruti or Hyundai need to offer cars in the premium segment when their affordable cars are so popular? From a business perspective, doing this makes more sense for these brands. This is why:

They Have a Well-Built User Base

Millions of Indians are aware of the most reputable car brands. In fact, many people choose a car based on their brand preferences, most of which fall onto a handful of brands like Maruti, Hyundai, Mahindra and a couple more.

If you are planning to buy a new car, it is likely that you will consider the reputation of a car’s brand first.

Now, think of it in terms of these OEMs. They want to encash their established user base by offering something premium, classy, and better than the standard hatchback. Since people do not want to be seen driving only the entry-level cars these days, a larger hatchback or a compact sedan fits well with their aspirations.

Also, buying a premium segment car has become a ‘status symbol. This notion paired with an already established user base helps the big car brands in lowering their brand marketing expenses to some extent.

The Market of Premium Segment Cars is Growing with Time

Amongst the most popular cars in demand this year are Hyundai Elite i20, Baleno, and Toyota Glanza. Their MoM growth in September 2019 was 43%, 3%, and 17%, respectively, with Baleno grabbing the highest market share of forty percent.

Their cars are priced between INR 6 to 10 Lakhs, which lies in price bracket of an entry-level car and a luxury car.

Rising aspirational levels, easy availability of car loans, and a wide range of choices in the premium car segment will have you considering options beyond entry-level cars.

On the business side of it, premium segment cars offer fatter margins to car brands, thus adding more to their profits. Accordingly, adjusting their range of products to cater to the evolving needs of car buyers is a must for popular automakers in India.

Premium Segment Cars Add More to Their Reputation

Strong car brands in the Indian automotive industry have already created significant value in the lives of car buyers. There are many brands that distinguish their products based on lifestyle or emotional graphics. However, buyers evaluate a car brand in terms of its earned reputation of delivering best-in-class products. Simply put, an automaker’s reputation creates a loyal consumer base and vice versa.

Think of it as per your experience – You would only recommend or buy a car from a specific brand based on your previous experience.

Maruti Suzuki Baleno is one great example of how its popularity has helped build the brand’s reputation. After its launch in October 2015, it has become one of the largest selling cars by Maruti Suzuki. It reached 6 lakh cumulative sales milestone in 44 months by June 2019.

With premium segment cars, the automakers have more reasons to add value to their reputation. People love the wide variety of cars they can see on the roads and wish to own them too.

To conclude, there does exist enormous business value for popular Indian car brands in offering premium segment cars. These cars are well-aligned with customers’ expectations and offer periodic upgrades in terms of technology and design.

If you are one of those who is looking to buy one of these premium cars in the near future, don’t forget to insure it. Having a comprehensive car insurances will be give you peace of mind in the event an unfortunate accident were to occur on the road.

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