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

Powered by a surge of consumer confidence, attractive driving options embedded with latest technology and backed by proactive marketing, advertisement campaigns as well as spread of social media platforms, sport utility vehicles (SUVs) are forcing India to shed its small-car skew and embrace these with a vengeance amid rising fuel prices, according to industry trends, data from the Society of Indian Automobile Manufacturers and expert analysis.

In the first nine months of fiscal 2022, the share of utility vehicles (UVs) in the overall domestic passenger vehicle (PV) segment increased to a whopping 48 per cent from 15 per cent about two decades ago in fiscal 2002 -- a 3,300 basis points (bps) jump -- according to a Crisil March 2022 report. This despite a challenging year, disruption by two waves of Covid, semi-conductor crisis and steep increase in commodity prices.

The share of small cars declined from 65 per cent in FY12 to 45 per cent in the first nine months of FY22. The number of models in this space increased to 68 in fiscal 2020 from 42 in fiscal 2013. In contrast, the small car segment models declined to 26 in the first nine months of fiscal 2022 from 42 in fiscal 2017. It is also evident that the number of UVs in the top 25 bestselling models increased to 13 in the first nine months of fiscal 2022 from just three models in fiscal 2012, Crisil data shows.

According to SIAM, Indian auto makers produced 133,246 units of UVs in February 2022 as compared to 129,373 units in February 2021 and sold 120,122 units of UVs in the domestic market in in February 2022 as compared to 114,350 units in February 2021.

Kia Motors registered 22,622 unit sales in March 2022 with a y-o-y growth of 18.44 per cent with Seltos remaining the company’s best-seller with 8,415 unit sales, while the newly launched Carens picked pace, registering 7,008 unit dispatches. The preference has accentuated more in FY 2021 and FY 2022 as income sentiments of entry level car buyers has been impacted due to Covid-19 which has also led to a spurt in UV sales share.

“Tata Motors ended the financial year with the highest ever monthly sales of 42,293 units, a growth of 43 per cent vs. March’21 and highest ever SUV sales of 29,559 units," says Shailesh Chandra, managing director, Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility.

Sensing the opportunity between SUVs costing Rs 20 lakh and above manufactured by global players and those priced Rs 6-10 lakh by Indian companies, original equipment manufacturers (OEMs) have sharpened their focus on SUVs to cater to the fascination and growing appetite of India’s still largely underpenetrated PV consumption segment with 24 vehicles per 1,000 people.

The country’s growing middle class, fast rising aspirations and appetite for innovative technology buoyed by rising per capita income which make for a preferred target market for auto players, a tangible shift are shifting gears for an industry which has for long fed people’s contentment with small car segments — including micro, mini and compact vehicles whose lengths vary from 3,200 mm to 4,000 mm.

Between fiscals 2009 and 2019, the small car segment logged a compound annual growth rate (CAGR) of 7 per cent, while UVs having off-road capability and lengths of 3,800 mm to 5,100 mm — logged a CAGR of 16 per cent, says Crisil.

The arithmetic has changed significantly with entry of new players and launch of new models which have pushed the change in consumer bent. In fiscal 2002 when the UV market had a modest six players and 11 models for sale in this segment — Maruti Suzuki (Gypsy), Mahindra & Mahindra (Bolero and Scorpio), Toyota (Qualis, Innova and Prado), Tata Motors (Sumo and Safari), Force Motors (Trax) and Hindustan Motors (Pajero and Trekker).

By 2010 they were joined by a host of new models including Tavera, Endeavour, Terracan, CR- V, Xylo and Fortuner but the segment did not get much traction as these vehicles were primarily used for intercity travel in the commercial segment and in rural areas due to poor road conditions. Even then, the segment’s share of PVs remained stagnant at 14-17 per cent in fiscal 2012.

What changed the UV market dynamics since 2011 are Duster, Ertiga and XUV500 which set the stage for a prolonged and passionate courtship of SUVs by the Indian populace, Mahindra XUV charted a success story with sales of 45,000 and 30,000 units in FY 2013 and 2014, respectively.

Renault’s Duster launched after nearly 41 modifications to the European variant, broke into the top-10 bestselling UVs in the first month of its launch in July 2012. Maruti Suzuki, which was largely absent in this segment, launched Ertiga which broke into the top-three bestselling UVs within the second month of its launch. It has been followed by Maruti Suzuki’s Vitara Brezza which became the all-time best-selling UV in fiscals 2017 and 2018 with sales of more than a lakh each fiscal.

The entry of Hyundai’s Creta and new players like Kia, MG and Jeep have only added fuel to the market for SUVs, with their emphasis on offering the best in the class package of power, comfort and sophistication has also turned the tide for manufacturers. Hyundai entered the compact SUV party with Creta in June 2015 and an impact that led to taking over the leadership position in this category.

Models such as Venue (launched in May 2019; share of 10 per cent in fiscal 2020). Kia Seltos, launched in August 2019 and promoted as ‘connected SUV’ and ‘internet SUV’ became the top-selling SUV in October and November and went on to grab a share of 8 per cent in fiscal 2021 as the fourth-bestselling UV. Kia’s compact SUV, Sonet has showed incredible resonance in the domestic market with sales of 9,266 units in the first month of its launch and a share of 9 per cent in the UV segment. This model recorded sales of 63,000 and 54,000 units in fiscal 2021 and first half of fiscal 2022, respectively.

Renault Triber and MG Hector launched in 2019 increased the share of UVs in the PV industry to 34 per cent in fiscal 2020 from 28 per cent in fiscal 2019. Further, models such as Urban Cruiser and Magnite launched in 2020, Kiger in February 2021 along with the continued traction of UV models launched from fiscals 2016 and 2017 onwards have increased the share of UVs in the PV industry from 34 per cent in fiscal 2020 to 39 per cent in fiscal 2021.

The first nine months of fiscal 2022 saw several UV models launches such as Tata Punch, Mahindra XUV700, Skoda Kushaq, and Volkswagen Taigun raising the share of UVs further to 48 per cent.

The race for market share is pushing companies to expand capacity and the boundaries of product exclusivity. Kia India, the country’s fastest growing carmaker has started the third shift at its state-of-the-art Anantapur plant in light of the increasing demand for Kia cars in the country and ramp up its production to full capacity of 3 lakh cars annually.

Jeep India promises to revolutionise the premium SUV segment with the Jeep Meridian, a three-row SUV that is "Made in India" and "Made for India". The idea, as Roland Bouchara, CEO and MD, Stellantis India puts it, is to cater to an Indian market with unique demands. The deliveries of the all-new Jeep Meridian will start by June 2022.

The road is getting exciting and the auto industry is all set for the long haul with ambitious plans for India’s SUV market.

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