INDIA WATCH
AUTOMOTIVE INDUSTRY IN INDIA—REPORT
HIGHLIGHTS
AUGUST 21, 2008

Copyright © 2008 Boston Analytics

Automotive Industry in India—A Report by Boston Analytics
Syndicated Research Reports—By Boston Analytics
The Syndicated Research Reports provide deeper analysis and insights for specific industry sectors. These
reports are based on a survey of consumers and potential consumers. Rich data sets from these consumer
surveys provide an important analytical tool guiding the decisions of policymakers, companies, and investors.

Overview of the Report

The Boston Analytics report on the “Automotive Industry in India” captures the consumer responses to
questions in the following areas:
• Vehicle ownership pattern
• Price of vehicles and vehicular traffic
• Customer preferences and buying behavior
• Cost of owning a vehicle
• Infrastructure for vehicles
• Consumer confidence in public transport
• Sources of automotive-related information

Reports based on Robust Boston Analytics Consumer Sentiment Index (BACSI) Survey Methodology
Each Boston Analytics Syndicated Research Report captures the consumers’ observations, expectations,
satisfaction, confidence, and attitude pertaining to different aspects and sub-segments of a specific sector.
The wider scope of our specialized sector-specific questionnaire creates a rich data set to support extensive
analysis. Syndicated Research Reports are based upon monthly Boston Analytics surveys of 3,000
respondents across four major Indian metropolitan cities—Delhi, Mumbai, Kolkata, and Chennai. A stratified
sampling process was adopted for this with the strata based on the socio-economic conditions of the
respondents in order to ensure a proper representation of the population. All data is collected via face-to-face
interviews.

Copyright © 2008 Boston Analytics 1

 The Indian automotive industry has grown at an impressive rate over the past few
years spurred by a large and growing domestic demand, proven product
development capabilities, stable economic policies, improving quality standards,
and competitive manufacturing cost. Increasing consumer demand has been
driven by a buoyant economy, favorable demographics, and improving income
curve.
Vehicle ownership is high across the metros with a very high
proportion of two-wheelers
Exhibit 1 below depicts the nationwide vehicle ownership pattern derived from the
consumer responses to the Boston Analytics “Automotive Industry in India”
survey of middle class consumers.

Exhibit 1: Boston Analytics Survey Findings: Vehicle Ownership Pattern

Only Car
21.8%
No
23.4%
Car and Two-
wheeler both
Yes 41.3%
76.6%
Only
Two-wheeler
36.9%

Source: Boston Analytics Survey—May 2008

Unsurprisingly, ownership of a motorized vehicle is high across the metros. As
depicted in Exhibit 1 above, 77% of respondents own a vehicle. Of these, 41%
own both, a car and a two-wheeler, 22% own only a car, and the remaining 37%
own only a two-wheeler.
Ownership of a motorized vehicle within our sample is nearly universal in Delhi
and Chennai. Both of the cities have relatively underdeveloped public
transportation systems. Over nine in 10 respondents in both Delhi and Chennai,
and about three in five in Mumbai and Kolkata report owning a vehicle.
In our sample, about three out of four respondents of Delhi and about one-half in
Chennai residents own a car; only one in three residents in Mumbai and Kolkata
own a car. Perhaps driven by a lack of parking slot, almost 90% of Chennai
respondents own a two-wheeler.

Copyright © 2008 Boston Analytics 2

 Based on the survey conducted in the four metros, the following observations
regarding customer preferences and buyer behavior have been made:
Price and fuel efficiency are the primary drivers of preference
today
There will be a slight shift towards fuel efficiency in about 3–5 years from now.
After sales service, brand image/prestige and resale value are secondary drivers
of choice today and remain so in the next 3–5 years. Environmental issues have
yet to take root in India and do not show signs of becoming a major factor in
about 3–5 years.
Affluence and aspiration are growing in parallel—The Indian
consumer prefers a mid-size car
In a market where price is an important determinant of choice, affluence and
aspiration also seem to be growing alongside. As income of Indian consumers
continue to grow and double-income nuclear families become more common,
Indians can aspire to buy a mid-size car. Our survey reveals that about one in two
Indian consumers prefer a roomy mid-size family car.
The survey reveals a “buy-Indian” mindset across the metros
The increasing foreign direct investment inflow signifies a growing interest of
foreign players in the Indian automotive market. However, findings of the survey
bring out a strong preference for Indian automotive brands. Nationwide, about
three in four respondents prefer an Indian brand over a foreign one.
Indian consumers are divided in their preferences for recently
launched versus established models of cars
According to the results of the survey, 58% of respondents nationwide prefer a
recently launched model by a slight plurality.
The color pie in the Indian car market shows that White is the
most preferred color, closely followed by Black and Silver
There is a general belief that the color of a car is a reflection of the owner’s
personality, age, religion, and personal beliefs, etc. Furthermore, market
observers and industry experts often cite color as a determining factor of the level
of maintenance required to be undertaken by the owner, and its impact on the
car’s resale value.
Exhibit 2 below depicts the nationwide preference for car color stated by
respondents

Exhibit 2: Boston Analytics Survey Findings: Nationwide Preference for

Car Color

Brown Others
Red

Blue Black
26.7%

20.7%
Silver/Grey 28.8% White

Source: Boston Analytics Survey—May 2008

Copyright © 2008 Boston Analytics 3

 Approximately 29% of respondents preferred white, followed by 27% and 21% of
respondents opting for Black and Silver respectively.
Close to half of all respondents would opt for a petrol engine
Petrol and diesel are the most popular fuels for cars, with some rejection of diesel
in Delhi compared to the other three cities. Perhaps in reaction to reduced
pollution from a switch to compressed gas by public transport vehicles, residents
of Delhi favor gas (LPG/CNG) and hybrid vehicles compared to residents of the
other metros. Furthermore, about one in three consumers are willing to pay a
price premium for a hybrid car over a traditional petrol/diesel powered version of
the same vehicle.
Car buyers distinctly prefer new cars over old cars
The nation’s major automotive players, including Maruti Suzuki, Toyota and
Hyundai have established their footprint in the Indian used cars market. Despite
their growing presence, the survey reveals that the Indian consumer clearly
prefers a new car. An overwhelming 90% of the respondents prefer purchasing a
new car. Among those who said they would opt for a second hand car, more than
half stated that a second hand car is a cheaper option if the car is in a good
condition.
The entry of organized players in the market has not affected the unorganized
segment. Industry experts and market observers opine that despite the lack of
infrastructure and financial muscle to operate in a large scale, the unorganized
segment continues to account for a major chunk of the used car market. The
survey results corroborate these claims. According to the results of survey,
approximately 31% of the respondents said they would rely on their network of
friends and relatives for buying a second hand car. Furthermore, 26% of the
respondents said that they would go to a dealer of second hand cars, compared
to only 15% who preferred to a company sponsored outlet. The familiarity
between the dealer, seller and prospective buyer tilts the scale in favor of the
unorganized sector.
There are noticeable differences in various cities in car purchase preferences and
buying behavior. For a detailed discussion on these differences please refer to
the full-length “Automotive Industry in India” Report.
Cost of owning a vehicle is on the rise in the wake of rising fuel
prices
Car owners have been hit hard by inflation in recent months. According to the
results of the survey, approximately 60% of those surveyed report that vehicle
prices have risen in the past year and approximately 66% expect them to
increase again next year. Over 80% report increased fuel cost and almost 65%
report increased repair and maintenance bills. These are closely mirrored in
expectations for the next year.
Given the increasing pace of vehicle purchase, there are
challenges on multiple fronts—requisite road infrastructure,
road safety, traffic congestion, pollution, etc.
The Boston Analytics survey asked respondents about their observation (as
compared to 12 months ago) and expectation (in the next 12 months) of change
in vehicular traffic in the respondent’s area of dwelling. Increased traffic is
reported (75–93%) in all the four metros versus a year ago and over 90% expect
it to increase further over the next year.

Copyright © 2008 Boston Analytics 4

 Has the improvement in road conditions, network, and
connectivity been able to maintain the same pace?
The survey reveals that the Indian consumer is optimistic about trends in road
infrastructure in the country overall.
Road conditions: Approximately 70% of respondents said that the road
conditions have improved in the past 12 months, and about 72% respondents
believe that road conditions will improve in the future.
Road network/connectivity: Approximately 64% said that connectivity of roads
had improved in the past 12 month and 72% expect connectivity of roads will
improve in the next 12 months.
These positive views about the infrastructure are mitigated by widely perceived
increases in traffic congestion and pollution and only a tepid improvement in
safety.
Traffic congestion: Approximately 68% of the respondents have observed an
increase in traffic congestion in the past 12 months, and 71% expect traffic
congestion to increase in the next 12 months.
Pollution: Approximately 70% of the respondents have observed an increase in
pollution in the past 12 months in their city of dwelling, and an almost equal
number expect pollution to increase in the next 12 months.
Safety: While respondents are optimistic about road conditions and connectivity
of roads, safety continues to remain a concern for a large majority of those
surveyed. Only 40% of respondents believe that safety of roads has improved in
the past 12 months.
Nationwide, reliance on public transport is low
The only way cities can prevent clogging of their roads is to scale up to an
efficient, affordable and safe public transport. However, increasing urbanization,
rapid increase in the pace of economic activity, and growing city limits is
increasing the number and distance of trips from home to work. The increasing
need of an average Indian to be mobile is placing greater pressure on the public
transportation system within cities.
Nationwide, a little over one-fourth of respondents said that they use public
transport for their commute to work and places of leisure. The usage of public
transport in Mumbai and Kolkata is significantly higher than the national average.

There are noticeable differences in cities in the level of reliance in public

transport. For a detailed discussion on these differences please refer to the full-
length “Automotive Industry in India” Report.
While cost of public transport is expected to rise, overall
confidence in comfort, convenience, and safety is high
There are myriad aspects related to the use of public transport in India that have
been dissected by many expert committees, NGOs, and researchers.
Approximately 75% of respondents report increased cost of public transportation
in the past year. About one-half of respondents felt that comfort and convenience
has improved and about 40% reported improved safety. While costs are expected
to rise in the coming year, expectations of comfort, convenience, and safety are
all high.

Copyright © 2008 Boston Analytics 5

 Methodology
Syndicated Research Reports are based on monthly BACSI surveys of 3,000
respondents across four metros in India. A stratified sampling process is adopted
with the strata based on the socio-economic conditions of the respondents to
ensure a proper representation of the population. All data is collected via face-to-
face interviews.
Sample Distribution
Gender: The survey comprised 65% males and 35% females.
Age: In the survey, 16% of the respondents were in the 18 years to less than 25
years age group; 29% in the 25 years to less than 35 years age group; and 22%
of the sample were in the 35 years to less than 45 years age group. The age
group of 45 years to less than 55 years was represented by 18% of the
respondents; and 15% represented the 55 years and above age group.
Annual Household Income: Of the total respondents, 9% had an annual
household income of less than Rs. 2.5 Lacs; 22% recorded between Rs. 2.5 to 5
Lacs; and 32% comprised the Rs. 5 Lacs to 10 Lacs category. The higher
brackets of Rs. 10 to 20 Lacs and more than Rs. 20 Lacs were represented by
28% and 9% of the respondents, respectively.

Copyright © 2008 Boston Analytics 6

Core Team:
Dr. Sam Thomas, Ted Thorbjornsen, Murlidhar Rao, Dr Nitin Singh, Shirin Bagga, Debopam Chaudhuri,
Shyam Sundar Kundu, Rahul Razdan, Amit Gill, Shalaka Pradhan, Anand Kalyanraman, Ena Sahni, Abhishek
Tupe

Student Intern:
John Thomas, University of Pennsylvania (Wharton School)

The executive summary of the “Automotive Industry in India” is available for download. The full report is
available for purchase, and customized disaggregated reports can be produced by Boston Analytics to meet
clients' specialized requirements.
To learn more, or to purchase a complete report or subscription, visit www.bostonanalytics.com, e-mail
IndiaWatch@bostonanalytics.com, or contact

In India: In the US:

Shirin Bagga Ted Thorbjornsen

Boston Analytics Boston Analytics
3rd Floor, PI# 19A, 175 Federal Street
Godrej & Boyce Complex 14th Floor
LBS Marg, Vikhroli (W) Boston, MA 02110
Mumbai 400 079, India +1 617 457 7888 ext. 302
+91 22 25182092

Copyright © 2008 Boston Analytics 7


Ted Thorbjornsen
indiawatch@bostonanalytics.com
175 Federal Street, 14th Floor
Boston, Massachusetts 02110
Tel: +1–617-457-7888 (Ext: 302)
Fax: +1–617-457-7889
www.bostonanalytics.com
Copyright © 2008 Boston Analytics
Shirin Bagga
indiawatch@bostonanalytics.com
19-A, 3rd Floor, Godrej & Boyce Complex
Gate No. 4, LBS Marg
Vikhroli (W), Mumbai – 400079
Tel: +91-22-25182902
Fax: +91-22-6714-0101