After beating Europe & China, where is India’s SUV market headed?

The SUV market in India has grown phenomenally, from 18% in 2016 to 48% in 2022.

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After beating Europe & China

Manufacturers plan to introduce dozens of new models in a variety of pricing ranges in the lead-up to the festive season, recognising what seems to be an insatiable demand for sport utility vehicles in India.

This includes updated models like the Maruti Brezza and brand-new launches like the C3 from French automaker Citroen. Mahindra & Mahindra yesterday launched the new Scorpio-N.

In comparison to FY18, FY19, and FY20, which each had five to six launches, FY22 had seven launches. Market leader Maruti Suzuki witnessed its market share decline from 51.22 % to 43.38 % in FY22 as a result of shifting consumer preferences towards SUVs.

To power its way back to a 50% share in the domestic PV market, it has lined up new SUV launches including a hybrid SUV jointly developed with Toyota as part of a broader partnership formed between the two Japanese automakers in 2017.

In FY22, dispatches of passenger vehicles rose 13% to 3.07 million units, returning to 91 % of the FY19 level. But despite a decline in passenger car sales of 4.8 % to 1.46 million units, utility vehicle sales saw a 40 % increase to 1.49 million units, driving this rebound.

The share of UVs made up mostly of SUVs, in the overall domestic passenger vehicle (PV) market increased to 48.5% the last fiscal from 15% about two decades ago.

The rising share of UVs in the Indian PV market mirrors the trend in international markets, while also indicating a clear shift in consumer preferences.

Last year, the SUV market share in Europe hit a record of 45.5 %, narrowing the gap from the 52.3 % seen in the US. In China, sales of SUVs made up over 48% of the market for passenger vehicles.

With increasing personal mobility amid safety concerns due to Covid-19, more trips via own vehicles rather than buses have resulted in aspirational buyers opting for a UV as it offers better off-roading capability. Some of the reasons for the change to SUVs include a taller driving position, a more upright and commanding road presence, larger tyres, flexibility, and space optimization. Because of the higher ground clearance and elevated driving position, drivers have more control when navigating Indian roadways.

Consumer choice has shifted toward SUV-type design as consumers see greater value for money given the price overlap between premium hatchbacks, entry-level sedans, and compact or sub-4 metre SUVs.

Compact SUVs are better suited to the city and road conditions in India. They give the impression of being a status symbol while making parking or U-turns less of a hassle. Over the past few years, the compact SUV market has seen an increase in the level of competition.

GST differential among different sub-segments has led to increased model launches and sales of sub-4 metre SUVs. Rating agency CRISIL expects UVs to outperform other segments and log average annual growth of 14-18% compared with just 4-6% in small cars till FY26. It expects the share of the UV market to increase gradually to 51-53% by then.

Due to the low price ranges of SUV body styles and the packaging that appeals to customer preferences, this segment will continue to take market share away from sedans and hatchbacks. For many years to come, it will continue to be the PV segment with the fastest growth.

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