The world?s cheapest car from the Tata stable might have stolen the show at the 9th Auto Expo in New Delhi, but sports utility vehicles continue to catch the fancy of consumers and are seemingly the flavour of the season. No wonder, car makers are moving in top-gear to meet the rising demand of SUVs in the country. After all, SUVs return high profits, especially those sold in India as completely built units (CBUs).
?Profit margins on SUVs that are completely imported are huge, anything in a range of 7-10%, compared with a minuscule 2-3% margin on passenger cars. Hence, manufacturers actually depend on these SUVs to garner a substantial part of their overall profits,? says an auto analyst, adding that higher the price of the vehicle, greater is the profit margin.
The Indian automobile market has evolved over the last few years in terms of SUVs. Starting with Tata Motors, M&M and Maruti, the segment now has over 10 players and around 15 models.
Recently, General Motors India came up with the Chevrolet Captive, Mitsubishi Motors unveiled the Outlander and Hyundai Motor India Ltd showcased the Santa Fe. Besides, Volkswagen is planning to come up with the Tiguan. All these cars are to be sold in India as CBUs.
According to automobile industry estimates, about 7,420 premium SUVs were sold in the country in 2007 and the number is expected to touch 10,000 in 2008 and around 25,000 by 2010, a 3-fold growth over the next five years.
However, the largest-selling SUVs are undoubtedly the entry-level utility vehicles like the Mahindra Bolero and Tata Motors?s Sumo, which are mostly used in semi-urban and rural areas. This is in addition to the high-end models like the Ford Endeavour, Maruti?s Grand Vitara, the Mitsubishi Pajero and Montero, the Honda CR-V and the Toyota Innova that have lately emerged as fast-growing segment owing to the multiple uses these vehicles can be put to.
?For people in semi-urban or rural areas, it?s the utility of the vehicles that drives sales. The vehicles are used for transportation of both passengers and goods in rural areas. However, in urban areas, it is the macho image that the vehicle lends, which is creating a huge demand among car enthusiasts,? says Dilip Chneoy, director-general, Society of Indian Automobile Manufacturers (SIAM).
No wonder, Mahindra is constantly upgrading its largest-selling Scorpio and the Bolero in India. The company has recently launched a new HAWK engine in the Scorpio and had introduced a new Bolero in the second half of 2007. It is also planning to come up with its first hybrid model in India in 18 months. The car will be powered by a 2.2-liter diesel and electric engine. Even Tata Motors is following suit, unveiling as it did the Sumo Grande at the auto expo, expecting that the new vehicle would further add to the sales of the company.
Not just this, despite a comparatively low volume of CBUs, auto manufacturers prefer selling them in India to widen their product portfolio. ?India has a variety of customers and to be a successful auto manufacturer in the country, companies need to have products across all segments as it increases footfalls in their showrooms,? adds the auto analyst.
?With people getting greater exposure, there has been a rising desire to create an identity for oneself. And nothing other than the SUVs can help create that sporty look which youngsters aspire to have in the face of changing lifestyles,? says Ankush Arora, vice-president, General Motor India. The company has recently launched the Captiva and plans to sell around 1,000 units in 2008. The vehicle, fitted with a next-generation VCDi diesel engine, is being positioned as a contemporary diesel vehicle instead of traditional diesel ones like the Ford Endeavour and the Pajero, or the contemporary petrol vehicle like the CR-V.
Even the upcoming Volkswagen Tiguan, on display at the auto expo, is a multipurpose all-wheel-drive vehicle and exhibits van qualities. Its engine power ranges from 103 Kw to 147 kW. To be launched by the middle of 2008, the car will be priced around Rs 20 lakh.
Also the Santa Fe, unveiled at the auto expo, is all set to hit Indian roads. It will again be sold in India as a CBU, but is expected to be priced a little higher that its peer. ?The Santa Fe will be a premium sport utility vehicle and will be priced at around Rs 25 lakh,? says Arvind Saxena, senior vice-president, Hyundai Motor India Ltd.
This surge in demand is not without a reason. ?With sufficient power, good ground clearance, ease of handling and high fuel efficiency, these cars have emerged as an ideal proposition for people who often go off-roads or on an inter-city drive,? says an industry expert.