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© 2018 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Executive summary
India has emerged as one of the world’s largest and
fastest growing automobile markets over the years,
with production of 29 million vehicles in FY18 and an
estimated production of about 60 million vehicles by
2022
1
. It is also the leading manufacturer of two-
wheelers in the world and a global hub for small cars,
contributing approximately 30 per cent of the global
small cars sales.
2
Low vehicle penetration (20 vehicles per 1,000
people
3
) and growth of Indian middle class with
increasing purchasing power along with strong growth
of the Indian economy over the past few years have
inspired major OEMs around the globe to turn their
attention towards the Indian market. At the other end
of the spectrum, cab service providers and automobile
rental models are already shifting consumers’
perception of automobile from an asset to a service.
Environment-friendly mobility technologies — such as
hybrid and electric vehicles — are becoming
commercial realities. Such shifts in business models
and technologies around mobility could also compel
automobile marketers to re-evaluate their marketing
strategies.
Automobile purchase, by its very nature, is a high
involvement process, and is usually pre-planned with
near certainty of completion. Therefore, loss of a
potential lead by a brand could be a gain for another.
In such a competitive market, it is critical for brands to
understand consumer preferences at different media
touch points and grab their attention.
The report aims to understand the reasons that lead to
dropouts in the path to purchase of an automobile,
referred to as ‘friction’, which may lead to potential
loss of revenue for brands. The study focusses on
B2C purchases of four-wheelers and two-wheelers.
The sales of commercial vehicles and enterprise sales
of four-wheelers and two-wheelers are not included in
the study.
The study revealed that more than two-thirds of four-
wheeler addressable market does not even enter the
purchase funnel. It is because of the high investment
nature that renders the purchase cycle of automobile
significantly longer than one year. However, these
non-decision-makers of today could be influencers or
buyers of tomorrow. Further, nearly four in every five
four-wheeler and two in three two-wheeler aware
decision-makers do not complete their purchase
journey after initiating it. To understand the
peculiarities of the automobile purchase journey and
associated friction at its different stages, a survey was
conducted by Nielsen India among 987 respondents in
the automotive category across varied demographic
and socio–economic groups. KPMG in India, also
interacted with industry experts to obtain their
perspective on the possible approaches to reduce
friction and improve upon the conversion rates.
Following are the report findings:
• In the four-wheeler category, friction accounts
for 26 per cent of consumer dropouts, and one-
third of this friction is caused by media
• In the two-wheeler category, friction accounts
for 34 per cent of consumer dropouts, and
nearly half of this friction is caused by media
• Mobile is expected to influence 8 out of 10 four-
wheeler, and 7 out of 10 two-wheeler purchases
by 2022
• Facebook is expected to influence nearly one in
two purchases of both four-wheelers and two-
wheelers by 2022
• Mobile could reduce media friction by 1.2 per
cent for four-wheelers, allowing the brands to
tap into about 1 million units sales opportunity
• Mobile could reduce media friction by 1.6 per
cent for two-wheelers, allowing the brands to
tap into 2.6 million units sales opportunity.
Sources:
1. Automobile sector report, IBEF , April 2017
2. SIAM Automotive mission plan 2026, SIAM
3. India Turns Tesla’s Business Model on Its Head, Bloomberg, January 2018
© 2018 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.