These are exciting times for the Indian car buyer with a mind-boggling array of new models on offer from most of the global carmakers. But how happy and satisfied are today’s car owners and is the auto industry meeting their rising expectations? To uncover the answers to these questions, leading research firm TNS Automotive recently conducted its annual 2005 Total Customer Satisfaction (TCS) Study, which reveals some interesting findings about how car owners are behaving and what exactly it takes to retain their loyalty.
Significantly, newer models like the Toyota Innova and Maruti Swift have performed very well, leading their respective segments thanks to their combination of fresh looks, powerful engines and overall build quality. This trend has also meant that the overall industry performance during 2005 was weaker as compared to 2004, across all areas of the ownership experience, as buyers get more and more demanding about their cars.
The decline in satisfaction scores compared to 2004 was mostly due to the relatively weaker performance of the older models in the small and entry-midsize segments. These models are starting to show their age and as a result, carmakers are having a tough time sustaining satisfaction among these groups of buyers.
One company that truly knows the pulse of its customers is Honda Siel, which has performed very well in 2005, with all three of its models — the City, Accord and CR-V — emerging winners in their respective segments. Their combination of superb engineering, value pricing and the hugely respected Honda badge all combine to keep Honda owners among the most satisfied in the entire industry.
Customers have become more discerning over the past few years. This is especially true for areas like sales satisfaction, product quality, product performance and design and brand image. The formula for success is rather simple — cars that excel in these areas are much more likely to satisfy owners. While the Maruti Swift and Toyota Innova have done well in overall terms, they have not performed in sales satisfaction, a reflection of the long waiting periods customers had to endure as production was ramped up to meet rising demand.
Other aspects of the ownership experience, which continue to remain important to car owners are after-sales and the cost of ownership. It is here that industry continues to fall short of customer expectations. In the case of cost of ownership, the rising price of petrol and diesel has seen running costs soar and made buyers particularly sensitive about fuel economy.
The study also reveals some long-term trends that have been developing since the first such survey in 2002. Since that time a total of over 25,000 car owners have been interviewed by TNS, making for a very solid base of opinions from which these trends have emerged. One of the most significant trends in recent years has been the gradual decline in the amount of time in which car owners replace their existing vehicles with a new one. There has been a progressive reduction from an average of 61 months in 2002 to 53 months in 2005. This is great news for carmakers and the auto industry, since demand for cars is sure to increase as a greater number of car owners replace their vehicles sooner rather than later.
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In addition, this trend looks like it will continue to accelerate in the future, which means even shorter replacement cycles and consequently, greater growth opportunities for the industry. Another trend is the growth in multiple car households, as more members of the same family purchase their own cars. In fact, the number of such households in India is up quite significantly from 51 percent in 2002 to 65 percent in 2005. This is also likely to drive demand for higher-end and premium segment models, since many new car buyers show a marked preference to buy their additional cars from segments above those of their existing vehicle. This is affirmed by the fact that many car owners have higher budgets for their new or additional car purchase; buyers with a budget of over Rs 6 lakh for their next car have increased from 44 percent in 2002 to 58 percent in 2005. The factors responsible for this are easy availability of finance at cheaper rates, increasing disposable incomes, and greater aspirations among buyers to own bigger cars. All this means that segments like the upper premium compact and midsize segments will grow at a rate much faster than the overall industry in the next few years as buyers graduate to bigger cars.
Another interesting observation from the studies conducted over the past years shows that increasing numbers of prospective buyers consider more than one model at the time of purchase. The TNS studies from 2002 to 2005 indicate that car owners in 2005 are shopping around much more than in earlier years and this generally leads to increased expectations as these owners tend to be much better informed. While this trend of shopping around has increased across all segments, the biggest increase is in mid-sizers. This segment has become the focus of attention of many manufacturers, who recognise that there is a vast pool of hatchback owners looking to upgrade to midsize sedans in the coming years.
While first-time buyers, as a proportion of total buyers, have dropped in percentage terms from 48 percent in 2002 to 36 percent in 2005, in terms of actual sales, they still remain a very huge part of the market. The driver for these sales is the huge number of two-wheeler owners looking to upgrade as their purchasing power catches up with their aspirations. In fact a recent TNS study on the motorcycle industry revealed that 14 percent of bike owners plan to purchase a car in the Rs 2.5 lakh to Rs 4.5 lakh bracket in the future. Other insights which the study has thrown up include the reasons why people buy a particular model. These vary greatly from segment to segment and as you would expect, more rational reasons like fuel economy, reliability and cost dominate the lower segments. However, this is not to say that other aspects like styling are unimportant for small car buyers. They rate this as the most important reason for purchase. On the other hand, attributes like styling, comfort, brand image and features are the major drivers for purchasing a luxury car.
Undoubtedly, fuel economy is an extremely important factor and this year, two models have emerged joint winners. Both the Indica Diesel and the Maruti 800 have owner-reported mileages of 16 kilometres per litre, which helps explain why they remain at the top of the sales chart, month after month. Many Maruti and Tata models have done well in this respect and in the case of the latter, it continues to dominate, since it is the only carmaker that offers a diesel engine option in the B-segment. Another model that stands out is the Skoda Octavia, which has registered an impressive 13.8kpl among owners, thanks to its super-efficient 1.9-litre diesel engine, making it the only luxury car near the top of the fuel efficiency rankings.
The overall picture that emerges from TNS' latest TCS study is that while auto companies are getting better at understanding the needs of car owners, the scope for improvement is quite substantial.