NEW DELHI: From mere 15% market share 2 decades ago to accounting for over 40% of the total domestic passenger vehicle (PV) sales, demand for sports utility vehicles (SUVs) continues to outpace other segments by a big margin.
A change in consumer preferences to opt for an upright driving stance and high ground clearance vehicle that got complemented with multiple options available at an affordable price point played a big role in mainstreaming SUVs, which a decade back were mostly associated with big, bulkier, diesel-powered vehicles that had off-roading capabilities.
Mitul Shah, head of research at Reliance Securities, said the launch of budget compact SUVs 7-8 years ago led to the beginning of the current trend of preferring SUVs to small cars. Significant lower pricing compared to conventional large SUV and increasing first-time buyers in lower age groups who prefer stylish sporty SUVs are key driving factors behind the rising contribution of SUVs in overall PVs, he added. Shashank Srivastava, Maruti Suzuki’s senior executive director (marketing and sales), said SUVs currently account for 40% of all passenger vehicles sold in India.
"We expect the SUV segment to grow at a CAGR of 9-10% in the next 3-5 years and going by the vehicle-buying trends in other countries, which have seen a surge in SUV sales, this segment should comprise 49-50% of the domestic market in future," added Srivastava.
At present, there are about 50 vehicles in India that come in SUV body type while the number of hatchbacks has seen a steady decline over the last few years.
Cut Throat Competition
Three big launches from 3 top auto-makers and a brand new unveiling by Toyota highlights that demand for SUVs will remain robust. Hyundai recently launched the facelift of its sub compact SUV Venue to maintain its market leading position in the segment while Maruti Suzuki launched the all-new Brezza in what is seen as the first major launch to increase its share.
Home-grown auto-major Mahindra & Mahindra launched Scorpio N, the modern version of its highly popular Scorpio SUV, while Fortuner & Innova maker Toyota unveiled new Urban Cruiser Hyryder to challenge the likes of Hyundai Creta, Kia Seltos and other mid-size SUVs. Currently, Hyundai, with nearly 2.5 lakh SUV sales last fiscal, had a market share of 22% and leads the SUV segment, while its closest competitor Tata Motors had a market share of 18% in FY22 as it sold about 2.05 lakh SUVs.
Mahindra & Mahindra, which till last decade was the undisputed SUV champion with over 50% market share, had a 15% share last fiscal while Maruti Suzuki, with only two options, had nearly 12% share in the SUV market.
“Competition in the segment would further intensify with numerous launches planned by all the key players for the coming period, which may put some pressure on pricing and margins of the companies, going ahead, though overall margins of SUVs are better than small cars in general,” said Shah.
Not only the established automakers, new carmakers and those who are trying to revive their fortune in India are banking heavily on SUVs. For example, Kia Motors, in less than three years has become a serious player in the Indian PV space by having an all-SUV portfolio (except for Carnival UV) while Volkswagen (including Skoda) has seen a big surge in sales in recent months after launching a mid-size SUV.
Maruti’s Big Come Back
The country’s largest carmaker Maruti Suzuki is betting big on SUVs to conquer a 50% market share in the PV market, which now has come down to around 42-43%. Besides Brezza, MSIL is launching a fresh product in the mid-size SUV segment.
“The All-New Brezza is an important step in this direction. This model is the first offering in our upcoming vibrant SUV portfolio,” said Hisashi Takeuchi, Managing Director and CEO of MSIL. He added that the company’s new model will be high on design, technology and features. Currently, the carmaker has only two SUVs in its long line-up and has a share of about 20% in the compact SUV segment.
Srivastava of MSIL said that its first midsize SUV 'hatchling' (the rebadged Toyota Hyryder) will be a hybrid vehicle in two variants - mild and strong hybrid. The SUV will be unveiled this month and mass production will begin from August.
Commenting on Maruti Brezza , analysts at Kotak Institutional Equity said that going by Google Trends data, they expect only a marginal increase in market share for the company in the compact SUV segment. It added that It will be challenging for Maruti Suzuki to enjoy the success of FY2017 when it used to have >40% market share in the compact SUV segment.
On Maruti's entry in the mid-size segment, Kotak noted that the company has only 5% market share.
"The company will soon be launching a mid-size SUV along with Toyota in order to address its product gap. While we expect the company to gain market share gain (+8-12%), we remain concerned on lack of diesel offering by the company (~60% of the sales in mid-size SUV is pertaining to diesel powertrain) given consumers preference for higher torque," the Kotak report said.