Why Are Made in India Cars Not Affordable to Most People in India?
India, with its rich cultural heritage and vast demography, faces significant challenges in its automobile market. Despite impressive growth in both car sales and per capita income, the gap between these improvements and affordability remains a critical issue. This article explores the underlying reasons why made in India cars are not affordable to the majority of the Indian population and provides insights into potential solutions.
The State of the Indian Car Market
Between 2001 and 2019, India witnessed a dramatic increase in car sales, with the market growing fivefold. Simultaneously, per capita income also surged by a similar proportion, translating to a significant improvement in purchasing power. However, the affordability of cars continues to be a concern, highlighting the need for a more nuanced understanding of the factors at play.
Limited Affordability Despite Income Growth
Despite the significant rise in per capita income, many Indians find it challenging to afford cars. This disparity can be attributed to several interrelated factors. For instance, the cost of living in India is higher compared to countries such as Indonesia or the UAE, making even similar-priced cars expensive for many Indian families.
Highest Taxes on Cars
One of the primary reasons for the unaffordability of cars in India is the high taxes levied on them. Cars are often taxed as luxury goods rather than essential commodities. This luxury classification significantly increases the overall cost of a vehicle. Additionally, there are state-level registration taxes that come into play, further inflating the final price. These taxes are particularly burdensome for middle and low-income individuals, who form the largest segment of the population.
Refinement and Hardware Differences
Another factor contributing to the unaffordability of Indian-made cars is the quality difference. Many Indian consumers perceive cars manufactured within the country as less refined and equipped with inferior hardware compared to their global counterparts. This perception is often influenced by the lack of high-end features, superior materials, and advanced technology that are commonly found in international brands. As a result, buyers are often drawn towards more cost-effective alternatives, such as 150cc motorcycles, which can be purchased at a more affordable price point.
Employment and Economic Stability
The state of the economy plays a crucial role in the affordability of cars. Despite steady income growth, unemployment and underemployment continue to be significant concerns in the country. Additionally, the breakdown in the economy, particularly the lack of job opportunities for well-educated individuals, exacerbates the affordability issue. Higher unemployment rates mean fewer disposable income sources, making it even more difficult for people to afford expensive luxury items like cars.
Conclusion and Way Forward
To make cars more affordable for the majority of Indians, a multi-pronged approach is necessary. This includes reducing the high taxes on car purchases, improving the quality and refinement of Indian-made vehicles, and addressing the unemployment and economic stability issues. By focusing on these areas, India can bridge the gap between income growth and car affordability, promoting the ownership of automobiles among its citizens and driving economic growth.