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More families going in for a second one

More families going in for a second one

Author | Source: The Economic Times | Monday, Jan 15,2007 8:21 AM

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More families going in for a second one

MR Sanjay Moorti, 33, bought the newly-launched Zen Estilo from a Mumbai dealer last month, but Sanjay may not get into the driver's seat very often. The new car, a second for the Moorti household, will be used by his spouse to ferry their young children to school and for their weekend jaunts.

The Moortis have joined the increasing tribe of urban households owning more than one car. Increasing salary levels across industries, higher proportion of double income households, easy availability of finance, a higher propensity to spend and little improvement in public transportation have spawned a whole new generation of multiple car households across the country.

According to a recent TNS survey, over 45% of the car buyers in 2006 were people adding a second car to the family while first-time car buyers constitute 28% of the total car sales last year.

The data signifies an important socio-economic indicator for the country. For most people buying a house and then an automobile are very important priorities. But with real estate prices going through the roof housing is not affordable anymore. People seem more willing to spend that money on buying cars because the prices of cars have not increased much relatively.

“Two decades ago a person could buy a decent apartment in Delhi for around Rs 2 lakh or he could buy a Maruti 800 for a little less than that. Today that Rs 2 lakh house is ten times more expensive but the Maruti 800 still costs around the same,” says TNS Automotive senior vice-president Pradeep Saxena.

Increased salary levels with the emergence of the service sector also means automobiles have become more affordable proportionately. Another factor contributing to the second car phenomenon is an increasing proportion of working women in urban centres. According to the TNS data nearly 10-15% of car buyers last year were women.

But that number does not indicate the actual user base as cars are often bought in the name of a spouse or other family. The second car phenomenon is not just restricted to the big metros, even in the so-called smaller cities people, especially from entrepreneurial families, are opting for a second car.

Around 27% of the total cars sold in 2006 were replacements of existing vehicles mostly upgrades to bigger cars. “The highest proportion of replacement cars were people upgrading from small cars to sedans. Those with three-box cars aspire for sports utility vehicles (SUV). Stylish hatchbacks like the Maruti Swift also constituted a fair proportion of replacement cars, “said Saxena.

Industry observers point out that the market dynamics set to change in the next couple of years as a slew of small cars are waiting to hit the market. The launch of the Tata Rs 1 lakh car, for example, is likely to usher in a whole new set of first-time car buyers and widen the overall car market in India substantially. But even then the second-car sales are bound to grow at a higher rate as people will have more affordable options to chose from.

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