Millennials not speed bumps but drivers of auto sales: Industry experts

Not only do millennials account for a significant part of automobile companies’ sales, but their contribution to sales have also increased over the past five years, according to industry experts and auto companies.

Puneet Anand, Senior General Manager and Group Head — Marketing of Hyundai Motor India Ltd, told BusinessLine that millennials (which the company identified as the 25-39 age group) account for 35-40 per cent of Hyundai’s sales, up from 20-22 per cent in 2013.

Similarly, for Tata Motors, more than half its sales of passenger vehicles have come from the millennial age group, and there has been an increase of the millennial customer base in the overall sales of the company in the last five years, said Vivek Srivatsa – Head, Marketing, Passenger Vehicle Business Unit, Tata Motors

Finance Minister Nirmala Sitharaman’s statement last week attributing the automobile industry slowdown to the “mindset of millennials” who prefer apps like Ola and Uber over buying an automobile, had precipitated discussions on social media disparaging the same.

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Generally, the millennial age group is identified as the age group corresponding to the 1981-1996 year period.

The auto sector is reeling under the impact of one of the worst and prolonged slowdowns ever, with passenger car sales in August declining by 41 per cent year-on-year (YoY) to 1,15,957 units against 1,96,847 units in the same month last year.

Read | August auto sales down 23% across board

Suraj Ghosh, Principal Analyst, Powertrain & Compliance Forecasts, IHS Markit, said it is estimated that the 26-49 years age group constitutes a big majority of Indian car sales. “Though car sales reported by automobile companies do not have age group information, it is estimated that millennials do make up a huge chunk of their sales,” he said.

“The average age of first-time car buyers has decreased to about 29 years from about 40 years two decades ago, a trend entirely driven by millennials,” added Ghosh.

Millennials as customers

OLX India, which sells second-hand goods from smartphones to high-end cars on its platform, said in the third edition of its pre-owned automobile market trend report for the period January-July 2019 that Indian millenials are the driving force behind the fast growing pre-owned car market.

“Over the next three years, millennials will emerge as the largest consumer group in the automobile industry as the pre-owned car industry hits 6.6 million units in market size by 2023,” said Sunny Kataria, VP Auto, OLX India, commenting on the report.

Read | Owning a car vs hiring Ola-Uber: What does math say?

Hyundai’s sale of products like the Grand i10, Elite i20, Nios and the Venue have largely been driven by millennials, said Anand. Millennials have also contributed to Hyundai increasing its market share –on the back of products which cater to this age group– and in the last five months, its market share has reached 18.36 per cent, an increase of 2.76 per cent over the same period last year, said Anand. “So, because of these millennials investing in these technologies, it is also changing the fortune of many companies,” he said.

Srivatsa attributed more than half of the sales of Tata Motors’ passenger vehicles coming from the millennial age group to “the wide acceptance of the segment front-runner models such as Tiago, Tigor, Nexon and the Harrier”. The age group of 28-40 years has contributed the most to the sales of Tata Motors’ passenger vehicles in 2018, he added.

“Tata Motors passenger vehicle customer average age reduced by two years despite the average value of the cars going up by many factors in the last five year period. This is quite evident through the increase of millennial customer base in the overall sales of the company in the last five years,” said Srivatsa.

Cars are the new gadgets

Going forward, the share of millennials as customers is set to increase. According to Anand, cars are more like gadgets these days, with changes happening in the design philosophy, and more features are set to be digitised.

Ghosh affirmed this trend. “Over the last five years or so, new car launches have seen new features in infotainment, safety and convenience. Features which were considered premium have now become standard. This evolution is driven by the rising aspirations and tech-awareness of the highly exposed millennials as they often benchmark their expectations based on global trends,” said Ghosh.

For Toyota Kirloskar Motor, the age group of 35-44 contributes most to its sales, which is close to 48 per cent, said N Raja, Deputy Managing Director. “We are closely evaluating millennial customer needs and will keep upgrading our products and services to cater to the young car owners,” he said.

Meanwhile, for luxury carmaker Audi India 41 per cent of its overall sales come from the age group of 22 to 37-year-old customers (millennials), said Balbir Singh Dhillon, Head, Audi India.

“Over the years, we have catered to a lot of young professionals who are in their first jobs; these customers like to enjoy their success and express their individuality,” he said. Dhillon also said that over the years, Audi India has also been strategically positioned as a “young and dynamic brand”.

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When it comes to Triumph Motorcycles India, Shoeb Farooq – General Manager said that millennials contribute up to 61 per cent to the sales of the company and the remaining 39 per cent is contributed by the non-millennial group(25-45 age group forms its demographic).

As for the discussions abound in the industry on shared mobility, and the propensity of millennials to experiment with different usage models, Anand said that this is a metro-city specific phenomenon or an urban phenomenon, and that the real growth for the auto sector is going to be driven by the tier-2 and -3 towns or the rural market, where the proliferation of millennials is perceptible.

Millennials– especially the urban ones– are open to new mobility options which provide higher convenience, mostly owing to reasons like the lack of adequate and convenient public transportation, highly congested and unsafe city roads, rather than cars not being aspirational products anymore, explained Ghosh.

But, at IHS Markit, they believe that the growth of shared mobility will only add to overall sales rather than cannibalise retail sales as there is more than enough room for growth, added Ghosh.

“With a car density of about 25-30 cars per 1000 people, there is plenty of room to grow and millenials are expected to be a big contributor to this growth,” said Ghosh.