India's Auto Market For Sedans And Hatchbacks Shrink As SUVs Dominate

The market share of sedans in total car sales increased from 17 per cent in 2010 to 24 per cent in 2015. However, the segment has been on a downtrend over the last seven years as the share of sedans has continued to decline. In 2021, sedans accounted for just 10 per cent of the total car sales in India.

Similarly, the share of hatchback cars that were quite popular in India has fallen from 29 per cent of sales in 2012 to 9 per cent in 2021. The decline in both these segments was the result of the increasing penetration of sports utility vehicles (SUVs) in India.

In 2021, SUVs contributed to 38 per cent of the total passenger vehicle sales, more than tripling their share from 11 per cent in 2012. Utility vehicles in total, today command around 50 per cent of the total market.

Increasing Market Share for SUVs

While mass-market car makers such as Maruti, Hyundai, and Tata Motors still see some demand for hatchback cars, foreign carmakers have opted to move out of the segment altogether. Cars such as Nissan’s Datsun, Volkswagen’s Polo, and Honda Jazz are likely to move out of the Indian market in the near future.

Compact utility vehicles account for 81 per cent of the total utility vehicle space, up from 62 per cent in FY16. Even Maruti, which has depended on the high demand for its hatchbacks over the years, had launched S-Presso in order to ride the rising SUV wave.

The cut is clearly visible from the fact that there were 29 hatchbacks in existence in FY18, while the number fell down to 19 in FY21. IN contrast, the number of car models in the utility vehicle space has gone up from 41 in FY15 to around 60 in FY20, before falling to 54 in FY21.

The change in customer preference has caused the compact SUV segment to become a competitive area for carmakers. Apart from Maruti, companies such as Renault, Mahindra, Kia, Hyundai, Tata, Citroen, Skoda, Honda and MG have entered or are said to be looking to enter the segment.

Kia has already declared its plans to roll out an entry-level electric SUVs in the Indian market. Until then, it plans to sell its highly successful EV6 in India.

According to industry experts, SUVs are likely to remain in vogue as consumer preferences change in favour of UVs, and compact SUVs are likely to be the biggest beneficiaries given India’s obsession with price.

Experts have attributed the growing popularity of SUVs to aesthetics, an aspirational product, off-road capabilities, high seating and suitability for Indian roads. The growth in SUVs is in sharp contrast to the decline in the passenger vehicle segment as consumers delay purchasing decisions.

Some compact SUVs such as Punch, Magnite, and Kiger fall in a similar price bracket as hatchbacks such as Baleno and Swift – incentivising a shift to SUVs. In addition, other compact SUVs such as XUV300 or Kia’s Sonet fall in a similar price bracket as some high-end small cars. Increasing affordability and a price overlap with small cars, tilt the scale in favour of SUVs.

The PV market continues to remain underpenetrated – a rise in disposable income levels and the propensity to increase purchases would catalyse higher growth in the Indian market.

Despite the positives, the trend remains worrisome for players like Maruti who are heavily focused on the shrinking pie of small cars. While Maruti has launched its S-Presso, the high competition from players across the board would mean that the company would have to launch new vehicles to cater to the growing market for UVs. Maruti’s stock has been a laggard as the company continues to go slow on electrification and SUV initiatives.

The move away from small cars has allowed India to shed the “small car market” tag as consumers look for premium products with better features. Further, allied industries continue to benefit from the shift to premium products leading to a quick growth in revenues and margins.

The growth of SUV in India is in line with the growth in SUVs globally, as sedans and trucks continue to shed market share. Globally, experts are expecting SUVs and crossovers to account for more than 50 per cent of total car sales, setting record volumes for the segments.

Also Read: SUVs Making Inroads Into India’s Passenger Vehicle Market As Share Of Small Cars Slips