John Dias, a 42-year-old IT professional in Bengaluru, had been saving for months to buy a new car. His budget was tight and all he wanted was a reliable, fuel-efficient car with basic features like Bluetooth connectivity, rearview cameras and adequate safety ratings. However, at the showroom, Dias was taken through the features of higher models, with the salesperson highlighting advanced driver assistance systems (ADAS), ventilated seats and a panoramic sunroof. Initially hesitant, Dias was eventually tempted.“The thought of driving a car with cutting-edge safety technology, improved comfort and a luxurious feel outweighed my concerns about staying within the budget,” says Dias, who finally drove out with a higher model. Rohit Shah, a 35-yearold entrepreneur in Mumbai, too, paid about INR 4 lakh more for a fully loaded version, with the latest features. “The technology makes it worth it,” he says.
Car buyers like Dias and Shah are driving a change in India’s automotive industry. They are stretching their budgets to buy upgraded versions, hoping the long-term value of premium features is worth the extra cost.
This has led to a shift in the automotive market. While overall industry volumes grew only modestly by 4% in the 11 months of CY2024 over the same period last year, it has generated about 7% more revenue. The data from Jato Dynamics India, an automotive business intelligence agency, shows that top seven personal vehicle (PV) manufacturers, accounting for three-quarters of India’s auto market, achieved 10.4% revenue growth while their volumes increased by only 6%. This divergence between revenue and volume growth signals a structural evolution in what has long been considered a pricesensitive market.Maruti Suzuki’s volume growth was only 1.4%, but its revenue growth was 4%. Tata Motors, which is currently seeing a slowdown in sales, is seeing a demand uptick in features like panoramic sunroof, automatic transmission and ADAS. This is reflected in the numbers. Its volume growth was 2% while the revenue growth was 4%. For BYD, the volume growth was 20.6% and revenue growth was 37%.
As growth in mass-market segments slows down, the automotive industry’s future appears to be tethered to premiumisation. With cars becoming more technologically advanced, premium features are becoming crucial for car buyers. These features, once the preserve of luxury models, are now being offered in more affordable trims.
Among fuel types, CNG vehicles had a 46% revenue growth and a 38.5% volume growth, demonstrating value creation in what has traditionally been a cost-driven segment. It is a pointer to commercial users and private buyers opting for higher trims.
“The Indian auto industry is demonstrating remarkable maturity,” says Ravi Bhatia, president, Jato Dynamics India. “Automakers, whose revenue has grown strongly, have seen average sales prices rise by 25%, particularly in SUVs and multi-purpose vehicles (MPVs), which have grown faster than sedans and hatchbacks. Within each model, premium variants now account for 40% of sales, driving revenue growth.”
Revenue growth is exceeding volume growth in specific segments like MPVs, which include BYD eMax, Kia Carens, Innova Crysta and Maruti Ertiga, and mini vans. Force Motors’ volume growth was 131% and the revenue growth was 162.5%.
The story is, however, different in other segments such as sedans and hatchbacks which are seeing negative growth in both volumes and revenues.
Meanwhile, in the SUV segment, volume has grown by 16.3% while revenue has grown at a lower 12.9%. “This isn’t a failure of premiumisation,” says Bhatia. “SUV manufacturers are successfully expanding the market while maintaining premium positioning in higher segments.” Automakers are focusing on expanding their SUV line-up to capitalise on the segment’s popularity.
Feature comforts
Premiumisation is still the name of the game. Auto dealers say there is a higher offtake of feature-rich cars. “With not many options at the lower end, even firsttime car buyers are opting for premium, feature-rich variants,” says Sai Giridhar, VP, Federation of Automotive Dealers Associations, and dealer of MG, Volvo and Skoda cars.
The upward-pricing gradient is reshaping market dynamics in an industry dominated by a handful of players. Market leader Maruti Suzuki has strategically expanded its presence in the INR 15-30 lakh segment. Its recently launched new-generation Dzire, which was earlier more of a no-frills, entry-level sedan, comes in the INR 7-10 lakh price band and packs in features the modern car buyer would demand, says Partho Banerjee, senior executive officer, marketing & sales, Maruti Suzuki.
Mahindra has posted the strongest growth among major players through its premium SUV offerings. “We are enthused by the broad-based demand across our portfolio with a healthy preference for top-end variants, indicating a wider acceptance of our premium offerings,” says Nalinikanth Gollagunta, CEO, automotive division, Mahindra and Mahindra. It offers products in the INR 8-25 lakh price range.
The UV major maintains a guidance to deliver volume growth in the mid- to highteens for SUVs in FY25. Its recently launched XUV 3XO and the Thar Roxx could help it keep the growth momentum.
Similarly, Hyundai Motor India, which recently listed on the Indian stock market in the biggest initial share sale, is also seeing a shift toward higher trims in its lineup, with the premium segment forming a larger portion of its overall sales. “For the Indian customer, aspirations are taking precedence over functionality. Sunroof penetration in Hyundai models has gone up to 53% in the first six months of FY25, as against 47.4% in the same period last year,” says Tarun Garg, chief operating officer and whole-time director, Hyundai Motor India. When it comes to ADAS, which Hyundai offers in 8 out of 13 models, the penetration went up from 3.3% in H1FY24 to 14.4% in H1FY25. At the same time, penetration of automatic transmissions has gone up from 23.2% in H1FY24 to 25.3% in H1FY25. The Korean automaker’s SUVs continue to capture a significant portion of the market.
Toyota Kirloskar Motor, the makers of Innova and Fortuner, is looking to drive in more premium models, with diverse powertrains, including hybrids and battery electric vehicles, as customers move towards bigger-sized and hi-tech vehicles. The Japanese auto major, which is expanding its production capacity to cater to growing demand, thinks bringing in more premium cars is essential.
In 2024, India became the third largest automobile market in the world. “There is a lot of interest now in the passenger vehicle space and this will see investments, too, flowing in,” says Kavan Mukhtyar, partner and leader–automotive at PwC 2025 could be an inflection year for the Indian automotive market, with new launches and investments resulting in alltime high volumes. Further, the geopolitical scenario will also lead to more sourcing of automotive and EV components from India, says Mukhtyar.
Industry observers say 2025 could be the reset year, with more hits than misses. In 2024, commodity prices have been more or less stable, with no major disruptions in supply. With high stock levels across the network and factories, discounts have been at an all-time high. Despite this continuous market pressure, CY2025 could see PV volumes touch 42-43 lakh units, a record high in sales, says an industry veteran who did not wish to be named. Between January and November 2024, the PV segment clocked sales of 39.83 lakh units. In 2023, it recorded 41.09 lakh units. 2025 could then be the year of revving up for the auto industry
