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

Recognising what appears to be an insatiable demand for sport utility vehicles in India, manufacturers are set to unveil a flock of dozen new models across price ranges in the run-up to the festive season. 

This includes revamped models, like the Maruti Brezza, to new launches like French carmaker Citroen’s C3. Incidentally, Mahindra & Mahindra launched its new Scorpio-N yesterday.  

There were seven launches in FY22, while the figure was five-six each for FY18, FY19, and FY20. Market leader Maruti Suzuki, which has been caught on the back foot amid changing buyer preferences regarding SUVs, saw its market share slip from 51.22% in FY19 to 43.38% in FY22.

To power its way back to 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.

Passenger vehicle dispatches rose 13% to 3.07 million units in FY22, recovering to 91% of the FY19 level. But this recovery was completely led by outsized growth in the sales of utility vehicles, which registered a 40% jump to 1.49 million units while passenger car sales dipped 4.8% to 1.46 million units.

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. 

SUVs reached a record market share of 45.5% in Europe last year, closing the gap on the 52.3% recorded in the US. Meanwhile, SUV sales accounted for almost 48% of the passenger car market in China.

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.

A taller driving stance, more upright and commanding road presence, larger tyres, flexibility and maximisation of space are some factors that explain the shift to SUVs.
 

The elevated driving position gives better control to the drivers while the higher ground clearance lets the driver negotiate Indian roads better.

Given the price overlap between premium hatchbacks, entry-level sedans, and compact or sub-4 metre SUVs, consumer preference has shifted towards SUV-type design as they see better value for money.

Compact SUVs are more suitable for Indian road and city conditions. They make parking or making U-turns less of an inconvenience while giving the perception of being a status symbol. The competitive intensity in the compact SUV segment has been increasing over the past few years. 

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.

With SUV body types available at affordable price ranges, and the packaging of such cars satisfying consumer preferences, this segment will continue to eat into the market share of sedans and hatchbacks. It will remain the fastest-growing PV segment for years to come.