Deloitte: Driving through the consumer’s mind – Considerations for Car Purchase

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Deloitte has come up with a report on the conditions for car purchase. Titled as ‘Driving through the consumer’s mind – Considerations for Car Purchase’, the report gives an insight into behaviour of car buyers in India. Here is the report:

Throwing light on the purchase behaviour and patterns of consumers, when buying an automobile, Deloitte in India today released a report titled “Driving through the consumer’s mind – Considerations for Car Purchase”. While the brand itself and the perceptions around it are important, the buyer today looks to buying a car for the family and subsequently looks at the quality of the dealership for service, vehicle reliability and re-sale value while short listing brands; thereby ensuring that several brands get into the consideration set of a buyer, says the report.

According to Mr. Kumar Kandaswami, Senior Director – Deloitte Touche Tohmatsu India Private Limited, “Contrary to the popular notion that car buying is an emotional decision, rationality has come out as a strong aspect amongst Indian buyers. Once primary reasons to buy a car such as space, family requirements or need to upgrade are fulfilled, buyers look for quality of service, product reliability and re-sale value. Fuel efficiency is no longer a unique differentiator to attract consumers; presumably, it is a table-stake matter. Given these factors, it becomes extremely important for the OEMs to manage the expectations of the consumers appropriately through the life cycle of the product to be considered favourably for the next purchase”.

Key findings of the report have been detailed under three broad areas impacting the decision making process towards any particular brand:

Purchase Drivers –

• Necessity of having a car for the family needs drives the buying behavior of the first time buyers irrespective of their age and gender. Once the buying decision is made, factors such as reliability, dealer service and resale value determine the brand choice of the consumers.

• For repeat buyers, technology and larger space requirement stood out as ruling factors. Unlike the first–time buyer, a repeat buyer understandably aspires to upgrade. In their case, a more sophisticated product is the primary requirement. As in case of first time buyers, repeat buyers too use reliability, dealer services and resale value as filters to make brand choices.

• In respect of choices related to changing their cars, the average time between purchases of two cars is likely to be 6-7 years. While males typically drive a car for 55,000 km or more before making a new purchase, female consumers are likely to change cars after 45,000 km.

• Future usage trends indicate that the share of personal cars is expected to increase over the next five years at the cost of other mobility solutions. This increased usage will largely be driven by Gen Y and women drivers. Consequent to the increased usage, the time to own a car is also likely reduce from the current 6+ years to about 5.5 years.

Brand Consideration –

• While considering which brand to buy, what has come out as a significant trend is that both first time and repeat buyers, consider 3–5 brands before making their final selection, thus giving most brands a chance to get into the consideration set. This trend has been true for Indian buyers for over seven years, covering both the high growth and difficult periods. Further, SUV and Mini-Van owners tend to look for more options before making their final decision on a particular brand as compared to consumers who look out for a hatchback and sedan.

• One key highlight remains that the number of brands considered remains similar for non-luxury as well as luxury cars, indicating importance of a car value proposition in both the consumer segments. Even in case of repeat purchases, buyers don’t behave very differently from the first time buyers, thus indicating that they do not identify themselves with a brand in terms of personality or performance.

• Rural buyers look out for limited number of brands in comparison to urban or semi-urban buyers, which may also be a function of the choices available and the price points they consider.

• There is a small but increasing trend amongst the urban population of going with a single brand which may be on account of familiarity of the brand, loyalty programs of OEMs, or the aspirational value offered by a brand at that point of time for a particular product.

• With the increase in the car price, consumers tend to evaluate greater number of brands, with Gen X considering more brands as compared to Gen Y consumers. Gen X consumers, who own a car between Rs.6-8 lakhs, tend to evaluate more number of brands, with more than 40% evaluating 6 or more cars for their last purchase. However, less than 20% of Gen Y consumers evaluated 6 or more across the price range.

• Sedans are placed at the top of the consideration set for the current hatchback owners for their next vehicle purchase and SUVs for the current sedan owner. Similarly, respondents with cars in the price range of Rs.2-6 Lakhs are more likely to consider sedans for their next purchase. This highlights the aspiration of the consumers to purchase a larger car and move up to the next segment. However, SUVs owners buck the trend with more than 50% of SUV owners expressing a desire to go for another SUV in their next purchase.

Brand Perception of Car Owners –

• Interestingly, when respondents were asked to specifically mark the brands they considered before making their selection, they ended up with more number than their stated position of considering 3-5 brands, thus suggesting that they started with a long-list of several brands but seem to think of a smaller number as a serious set of possibilities.

• In case of brands considered by existing car owners, SUV owners considered more brands as compared with Van/mini-van users. From the number of brands that are considered, it is apparent that product types other than what they eventually select are considered.
• While rating their own brand choice, owners seemed to be reasonably happy with what they have. Consumers are likely to once again consider several brands when they are in the market to buy their next car, thus making it imperative for the OEMs to convert their current satisfaction levels into brand loyalty and repeat purchase.

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