The Indian automotive sector has faced tough times but is showing signs of recovery, moving towards the pre-pandemic levels of sales volume. Despite temporary setbacks like soaring crude prices, semiconductor shortage and supply chain disruptions, the sector has exhibited resilience. Backed by supportive policies such as the Automotive Mission Plan 2026, scrappage policy and the Production-Linked Incentive scheme, the auto sector is expected to show growth.
Certain trends have been sweeping the sector, such as digitalisation, direct sales, increased focus on customer experience, increased vehicle connectivity, new powertrains like hybrid and electric, rising demand for CNG vehicles, etc.
There is also increased customer preference towards sport utility vehicles (SUVs); the SUV segment has become fragmented, and compact SUVs are leading this fragmentation in terms of volumes and market share. It is expected that SUV sales will grow at a CAGR of 9 per cent over the next seven years and exceed 2.16 million units by 2028.
Buyers prefer compact SUVs because these offer upright driving stance and high ground clearance, making these more suitable to drive than other body types on Indian road conditions. But the most significant factor is the price point—compact SUVs are priced in the same range as some premium hatchbacks and sedans, and offer good ride, comfort and road presence.
Compact SUVs have become the largest segment within the passenger vehicle (PV) space, constituting almost 22 per cent sales share, from a meagre 5 per cent in FY16. The compact SUV segment has overtaken the premium hatchback segment, which was the largest at around 24 per cent of the market in FY21, but came down to 21 per cent in FY22. Noticeably, the overall SUV segment has grown from about 17 per cent of the market in FY16 to almost 40 per cent in FY22.
Buyers have also evolved and become more affluent and younger, and their aspirational needs have become bespoke in terms of the value proposition they seek. At present, almost 50 per cent buyers in this category are less than 35 years of age. Other trends the compact SUV segment has witnessed include a shift in the preference towards petrol. In FY16, almost 80 per cent compact SUVs sold were diesel and 20 per cent petrol. Now, 79 per cent sales are of petrol and 21 per cent of diesel.
In FY22, as many as 664,000 compact SUVs were sold, and these made overall SUVs a bigger segment than overall hatchback cars—the overall SUV segment has grown from 32 per cent of the PV space in FY21 to 40 per cent in FY22, while the overall hatchback segment has reduced from 45 per cent to about 38 per cent during the same time.
As per demographic profiling, the new breed of consumer is from metropolitan markets (tier-1 and tier-2 cities), is smart, progressive and modern, is in the 25-35 year age group, and is either a first-time buyer or is seeking an upgrade from hatchbacks. This new breed of customer is aspirational, earns around Rs 80-90,000 per month, and is either salaried individual or small- to mid-level businessperson.
There is also a shift in the buying criteria, which until recently was more focused on design, brand and mileage. That is now changing, with customers focusing on technology, features, ergonomics and functionality. Also, design elements that juxtapose sophistication, elegance and paramount safety are key factors influencing buyer behaviour.
It is clear that SUVs are becoming the vehicle of choice across consumer classes, demographics and geographies, ultimately representing a lucrative business potential for manufacturers. We, at Maruti Suzuki, will soon introduce multiple SUVs across segments to match the changing aspirations of Indian customers.
The author is senior executive director, Marketing & Sales, Maruti Suzuki India Ltd
Twitter: @ShashankDrives
