Drop in sub-Rs 10 lakh car sales intensifies industry slowdown, says Bhargava

The passenger vehicle industry has been experiencing a slowdown in sales for the past few months, and speaking at Maruti Suzuki’s half-yearly results announcement, Chairman RC Bhargava, attributed this overall slowdown to the declining sales in the sub-Rs 10 lakh segment.

“The sub-Rs 10 lakh car segment has witnessed a sharp decline in recent years, and if this segment does not grow, there will gradually be less feeders for upper segments as well,” said Bhargava.

1. Maruti Suzuki witnessed 14 percent growth in retail sales in festive season
2. Overall industry outlook is 3-4 percent growth for next quarter

Bhargava pointed out that 80-90 percent of all retail car sales in the 2018-19 period were in the sub-Rs lakh segment. However, the pattern has completely reversed post Covid where the Rs 10-20 lakh segment is currently the most booming segment.

“This time the slowdown is not due to supply chain constraints or shortages in semiconductors. I think affordability could be a factor as prices of new cars have gone up massively,” added Bhargava. He also noted that first time car buyers have declined for Maruti Suzuki, but it’s the additional and replacement car buyers that have increased in the recent past.

Stringent emissions norms and safety regulations have, no doubt, massively pushed up new car prices in recent years. This has also made it more difficult for carmakers to make profits in these more affordable segments, which is why they tend to push for more-profitable SUV categories.

Maruti Suzuki, too, has capitalized on this wave with several new models in the Rs 10-20 lakh category which includes the likes of the Fronx, Jimny and Grand Vitara, as well as existing strong nameplates like the Brezza and Ertiga.

“We were late to the above Rs 10 lakh segment, but if we didn’t grow here, we wouldn’t have above 40 percent share in the market today,” acknowledged Bhargava.   

Bhargava projected the overall industry to grow by 3-4 percent in the next quarter, driven primarily by midsize SUVs and MPVs, and a similar growth rate is also expected at Maruti Suzuki.