The premiumisation story in consumption has continued unabated in the first half of calendar 2024, as per latest data from companies and researchers. This is even when there is a growth slowdown in car and smartphone sales, while sales of fast moving consumer goods (FMCG) is yet to recover fully.
For the first time ever, vehicles priced over INR 10 lakh accounted for nearly half of all vehicles (about 48%) sold in the country between January to June as compared to 44% in the same period a year earlier, as per top manufacturers. Sales of these vehicles grew at more than twice the rate of the overall industry – by 13% to nearly a million units in this period. Overall, passenger vehicle sales rose 5.5% in the same period.
Partho Banerjee, senior executive officer (marketing & sales) at the country’s largest carmaker Maruti Suzuki, said the company’s sales of above INR 10 lakh cars have gone up by almost 20% in January to June as compared to the same period last year. “Shift towards bigger cars like SUVs and customers’ preference to buy a higher variant has resulted in this increase,” he said.
Industry body Society of Indian Automobile Manufacturers data shows larger utility vehicles including sports utility vehicles and multi-purpose vehicles accounted for 63% of all passenger vehicles sold in the Indian market in April-June quarter, up from 55% a year back.
The share of INR 30,000-plus smartphones has gone up to its highest ever of 20% of the overall market by number of units sold between January to May as compared to 17% a year back, Counterpoint Research data shows. By value, it’s 49%.
Counterpoint said the share of 50-inch plus televisions went up from 21% to 24% in total TV sales in India in the same period. The researcher said preliminary numbers for June show the contribution remains in a similar range.
Counterpoint’s research director Tarun Pathak said while the smartphone market slowed down last quarter due to heatwave increasing unsold inventory, the premium segment continues to outperform. “There were new premium handset launches by Xiaomi, Motorola and Google expanding the portfolio where earlier only Apple, Samsung and OnePlus used to operate,” he said.
Longer duration financing is driving premiumisation in cars and electronic products, executives said.
Shahrukh Todiwala, whole-time director at car finance company Kotak Mahindra Prime, said with car loan tenures now going up to seven years as compared to five years earlier, buyers can afford a bigger car having better safety features (ABS, EBD, Airbags, ADAS) and more engine options (hybrid, turbo) for a slightly higher EMI.
Amazon India director (wireless and home entertainment) Ranjit Babu said that over 81% of every phone that the platform has sold this year is a 5G phone compared to about 60% last year. Two out of every three TVs sold in Amazon this year is a large screen and 4K TV. Babu said Amazon has started offering a lot more affordability options for customers this year such as no cost EMIs for 24 months which are further driving premium sales.
Even in FMCG, discretionary categories are continuing to grow faster as compared to the overall market. Latest data by Kantar for the June quarter shows for the first time bottled soft drinks have breached annual penetration of 50% with the average household increasing its consumption by 250ml in the last two years.
Similarly, consumer spends on the fabric softener have gone up by 50%, while consumption jumped by about 180ml, Kantar data shows. Washing liquids has grown at 50% in volume terms in the last two-years with the category benefitted from an average consumption growth of nearly 500ml, it said.
“Discretionary premium end categories like washing liquids and indulgent products such as bottled soft drinks have performed exceedingly well, and the market might be at a juncture where shoppers start to upsize yet again,” Kantar said in the report.
The fall in consumer age is also driving premiumisation. A senior industry executive said around 60% of new car buyers are under 35-years of age.
“Preference for safety and environment consciousness is on the rise. So is the need for the latest smart features, better drive experience and premium look and feel. The growing demand for SUVs and top variants in each segment portrays this rising trend,” he said.
