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These days, Puneet Reddy, who runs a real estate company in Hyderabad, often takes the road to Bangalore — where he is opening an office — in his Jaguar XK V8 5-litre automatic. “I could take a flight. But with the national highway to Bangalore being a great road, I cannot resist driving the 540-km stretch,” he says. He makes it in seven hours, a journey that would otherwise take nine hours. “Automatics just make driving easier,” he says.
The ease and comfort of driving could be an important factor behind why most luxury car buyers in India prefer the automatic transmission variants, especially in view of bad roads and growing traffic congestion in cities. Today, 90 per cent of the 15,000 luxury cars sold in the country have automatic transmission. The three largest-selling luxury car brands in India, Audi, BMW and Mercedes Benz offer an almost entirely automatic range.
But this preference for automatic variants is no longer restricted to luxury car buyers. Over the past couple of years, buyers of small and mid-size cars have increasingly been picking up automatic variants, marking a major shift from the past. According to analysts, some 3 per cent of the 2.61 million cars sold in India in 2011-12 were automatics. From 35,000 in 2010-11, the number of automatic cars produced in the country rose to 82,000 in 2011-12, registering a year-on-year growth of 134 per cent.
Of the 388,779 cars that Hyundai sold in the country in 2011-12, 3 per cent were automatic versions of its i10, i20, Verna, Sonata and Santa Fe models. According to a source from Hyundai, of the 237,535 cars it exported during the same period, at least 20 per cent were automatics. “Production of automatics rose by 13 per cent in 2011-12,” the source adds.
|Courtesy: Maruti Suzuki India Ltd|
Other car makers too are offering hatchbacks and entry-level sedans fitted out with automatic transmission, witnessing a growth in sales.
In 2010, when Maruti-Suzuki India introduced the A-Star’s automatic version, sales initially saw a 10-15 per cent spurt and then shot up by 30 per cent. The company also offers automatic versions of its SX4 and Swift Dzire models. But Maruti’s total sales of automatic variants have been just a few hundred a year.
Japanese car maker Honda Cars India, which was one of the first in the country to introduce an automatic variant of its sedan 10 years ago, has registered a significant increase in the sales of its automatic variants. For instance, while the share of automatic variants of the City was only 5 per cent in 2008-09, in 2011-12, it increased to 23 per cent of the company’s total sales of 54,420 cars. Besides, automatic variants of models such as Honda Accord, Honda CR-V and Honda Civic have a share of 60 per cent, 65 per cent and 30 per cent, respectively, of the company’s total sales in India.
Honda, in fact, has been the most successful player in the volume segment for automatics. Honda City was the first model to have brought in some traction to the automatic transmission car market. Analysts from Deloitte, a consultancy, say that the City was the only automatic model in the mass segment to boast of a double-digit share in the model’s overall sales.
| A BIG PUSH: Production of automatic cars in India has more than doubled in 2011-12|
(Photo Courtesy: BMW AG)
In Top Gear
So what triggered the sudden growth in sales of cars with automatic transmission? Earlier, in addition to a lack of awareness about the technology, there was also a belief that automatic variants were not as fuel-efficient, making them less popular in a price-sensitive market such as India. Moreover, the option was offered only in premium cars and not in the mass segment. But all that has changed. “The latest automatic transmission technology present in our cars offers fuel efficiency almost on a par with their manual counterparts. Moreover, automatic variants offer ease of driving in congested city traffic conditions. These factors are increasing the popularity of the automatic variants in India,” says Jnaneswar Sen, senior vice-president of sales and marketing at Honda Cars India.
Higher prices had deterred the automatic segment’s growth. Typically, automatic transmission cars cost 15-30 per cent more than the manual variants. For example, the Maruti Swift Dzire VXi AT costs almost 1.22 lakh more than the manual model. However, longer driving distances, difficult traffic conditions, increasing number of women drivers and owner-driven vehicles have contributed to an increase in sales.
“There will be increasing usage of automatic cars. The more the cars get used for inter-city travel, the better will be their acceptance. Given the age profile of the buyers and a large proportion of first-time car buyers, one would expect the customers to pay the premium for convenience,” says Kumar Kandaswami, senior director of Deloitte India.
Unlike the US where 90 per cent of the vehicles are automatic, in India, automatic cars were made popular only with the arrival of luxury sedans. “This trend soon caught on in the hatchback and executive sedan segment. Also, people who have lived abroad and are returning to India prefer automatic transmission as a matter of habit,” says Abdul Majeed, partner at PricewaterhouseCoopers.
The Ford Motor Company took this opportunity to democratise automotive technology and create excitement and buzz regarding automatics by offering the All-New Global Fiesta Powershift Aotomatic. “We have seen a significant shift in the Indian car consumer’s mindset, in favour of automatics, in recent years. And we are confident that the All-New Fiesta Automatic offers a strong value proposition to the discerning Indian customer who now has access to world-class technology from the global Ford stable,” says Michael Boneham, president and managing director of Ford India.The car has futuristic, smart technologies: voice control and cruise control, both of which are first-in-class offerings. The company also offers the Ford Endeavour SUV with a 4x4 automatic transmission. However, the company’s automatic segment has sales of less than 1 per cent.
Is India going the US way? Perhaps, not for now. But, with all car manufacturers bullish on automatic cars, the segment is well poised for growth, provided people are ready to pay a premium of Rs 1.5 lakh for an easier drive.
(This story was published in Businessworld Issue Dated 03-09-2012)