In demand race, big cars outpace other segments

Mumbai: Full-sized utility and multi-purpose vehicles are grabbing a disproportionate share of Indian roads, reflecting persistent upward mobility in personal-transport choices underpinned by higher disposable incomes and increasing availability of premium variants.

Sales of sports utility vehicles (SUVs) and multi-purpose vehicles (MPVs) exceeding 4 metres in length now make up at least 10% in volume terms even at compact-car makers such as Maruti Suzuki. The share of sub-4 metre compact vehicles, which enjoy policy preference from a taxation standpoint to encourage car ownership, has shrunk 6 percentage points in three years to 72%.

By contrast, premium vehicles — usually large-sized SUVs and MPVs exceeding 4,500 mm in length — now account for 11% of the industry, up from 6% three years ago. The 4-4.5 metre passenger vehicle segment has seen its share stagnate at 16-17%.
Carmakers, therefore, are harnessing the rising affordability quotient to introduce new models in the above 4.5-metre mid- and upper-SUV and MPV segments. Previously, this segment was dominated — both in volume and value terms — by the likes of Mercedes, BMW, Jaguar-Land Rover and Audi.

Luxury carmakers continue value domination in this segment, but mass market players such as Maruti Suzuki, Mahindra and Mahindra, Honda, Hyundai, Kia, VW and Toyota are also increasing volume presence.

Lifestyle Choices
India's largest car maker Maruti Suzuki, known world over as the king of compact cars, said there is a trend toward bigger and lifestyle products.

“That explains why there is traction for three-row MPVs and SUVs. These vehicles support varied lifestyle needs of a modern, urban consumer, and also allow larger family groups or friends to travel together on occasions,” said Shashank Srivastava, Senior Executive Director, Maruti Suzuki.

Urban incomes in India have remained resilient through the Covid pandemic, with the country cementing its credentials as the global growth engine by contributing about an eighth to incremental GDP expansion worldwide last year. Higher incomes have supported the upward mobility in car and body-type choices.

“The exponential increase in the Indian SUV market, which has almost doubled in the past five years (from 24% to 47%), showcases the rising aspiration of the Indian consumers,” said Hardeep Singh Brar, National Head of Sales & Marketing, Kia India.

Controlled inflation and easy financing options are aiding the premiumisation trend among new-age buyers.

“From smartphones and housing to cars, new-age buyers are prioritising experiences, pushing this megatrend. When we combine these trends, we are witnessing a premium SUV market boom,” said Brar at Kia, which last year launched the top-end EV6, and mid-market Carens.

Compact-Car Policy Support
In 2006, a policy was implemented in India that incentivised the production of cars with a length of less than 4 meters. Since then, small cars have become increasingly popular in the Indian market, with an average of 72% of cars sold falling into this category. Various manufacturers offer a range of sub-4 meter SUVs and cars that fit perfectly with the economic situation where car buyers prefer smaller EMIs.

“Generating high profits on these cars can be challenging, and the dominance of small cars is one reason why some OEMs have been forced to exit the market,” said Ravi Bhatia, president, Jato Dynamics.

Designing small cars presents unique challenges due to safety and fuel economy regulations, packaging limitations, and the need to keep prices low.

However, now there is a shift toward longer cars as a segment that allows space, technology, safety, and advanced features, said Bhatia.

The hatchback segment, comprising cars below 4 metre in size, is likely to decline in FY24 in a market that is otherwise expected to expand 8%.