Indicating a clear shift in consumer preference, the share of utility vehicles (UVs) in the overall domestic passenger vehicle (PV) segment increased to 48% in the first nine months of fiscal 2022 from 15% about two decades ago (fiscal 2002) — a whopping 3,300 basis points (bps) jump. This contradicts the long-held view that India is a small car market.
In its latest study, Crisil Research found that the share of small cars declined from 65% in fiscal 2012 to 45% in the first nine months of fiscal 2022. This shift was felt more so in fiscals 2021 and 2022 as income sentiments of entry-level car buyers has been impacted due to Covid-19, which has also led to a spurt in UV sales share.
“Between fiscals 2021 and 2026, we expect UVs to outperform other segments and log a CAGR of 14-18% compared with just 4-6% in small cars. We also expect the share of the UV market to increase gradually to 51-53% in fiscal 2026,” it said. The first nine months of fiscal 2022 saw several UV model launches such as Tata Punch, Mahindra XUV700, Skoda Kushaq, and Volkswagen Taigun.
For a long, the market has been skewed towards small car segments — including micro, mini and compact vehicles whose lengths vary from 3,200 mm to 4,000 mm — which have predictably drawn the most action from OEMs.
Recent years, however, have seen a major shift in consumer preference, especially in urban areas. Between fiscals 2009 and 2019, the small car segment logged a compound annual growth rate (CAGR) of 7%, while UVs — defined as either four-wheel-drive (4WD) or two-wheel-drive (2WD) vehicles having off-road capability and lengths of 3,800 mm to 5,100 mm — logged a CAGR of 16%. While a part of this growth is due to the low base effect, the entry of new players and the launch of new models have also pushed the change, Crisil Research said.
In fiscal 2002, the UV market had a modest six players and 11 models for sale in this segment — Maruti Suzuki (Gypsy), Mahindra & Mahindra (Bolero and Scorpio), Toyota (Qualis, Innova and Prado), Tata Motors (Sumo and Safari), Force Motors (Trax) and Hindustan Motors (Pajero and Trekker). By 2010, a host of new models, including Tavera (fiscal 2003), Endeavour (fiscal 2004), Terracan (fiscal 2004), CR-V (fiscal 2005), Xylo (fiscal 2009), and Fortuner (fiscal 2010) had entered the fray.
Mahindra XUV 500, which was launched in September 2011, backed by marketing, advertisement campaigns, and interactive social media platforms, was M&M’s success story of fiscal 2012. It sold 45,000 (8% share in the UV segment and fifth-bestselling UV model) and 30,000 (6% share in the UV segment and seventh-bestselling UV model) units in fiscals 2013 and 2014, respectively.
Maruti Suzuki, which was largely absent in this segment, launched Ertiga (Mach 2012) at an introductory price range of `5.89-8.45 lakh (ex-showroom Delhi). This model was well accepted by the Indian consumers and broke into the top-three bestselling UVs within the second month of its launch and was the second-bestselling UV in its third month with a share of 17% (in May 2012), behind only Bolero. Ertiga sold 76,000 (14% share in the UV segment and third-bestselling UV model) and 60,000 (11% share in the UV segment and second-bestselling UV model) units in fiscals 2013 and 2014, respectively. In fiscal 2013, Renault sensed an opportunity between sport utility vehicles (SUVs) costing `20 lakh and above manufactured by global players and those priced `6-10 lakh by the Indian companies. It launched Duster at `7.78-11.79 lakh (ex-showroom Delhi), after nearly 41 modifications to the European variant. Duster broke into the top-10 bestselling UVs in the first month of its launch (July 2012) and into the top-three in its fifth month, with a share of 11% (in November 2012). It sold 39,000 ( 7% share in the UV segment; sixth-bestselling UV model) and 47,000 (9% share in the UV segment; fifth-bestselling UV model) units in fiscals 2013 and 2014, respectively.
According to the study, following the trend set by Renault with Duster, Ford launched Ecosport in June 2013 starting at `5.59 lakh (ex-showroom Delhi). This model sold 45,000 (9% share in the UV segment – sixth-bestselling UV model) and 52,000 (~9% share in the UV segment – fourth bestselling) units in fiscals 2014 and 2015, respectively.
Hyundai, though a little late in the day, entered the compact SUV party with a bang. It launched Creta in June 2015 for `8.59-13.6 lakh (ex-showroom Delhi). The impact was such that it displaced Bolero, India’s largest-selling SUV for almost a decade, in the second month of its entry (in July 2015), taking over the leadership position in this category.
On similar lines, in March 2016, Maruti Suzuki launched Vitara Brezza in the sub-4 metre SUV category for `6.99-9.68 lakh (ex-showroom Delhi). This model became the all-time best-selling UV in fiscals 2017 (14% share in the UV segment), 2018 (16% share in the UV segment), and 2019 (17% share in the UV segment) with sales of more than a lakh each fiscal.
Among the new players Kia Seltos, launched in August 2019 at a starting price of `9.95 lakh (ex-showroom Delhi), was promoted as ‘connected SUV’ and ‘internet SUV’. Its impact was such that it became the fourth-bestselling UV with a share of ~8% in the UV segment in the first month of its launch and the top-selling UV in October and November consecutively, with shares of 13% and 15%, respectively. This model went on to grab a share of 9% in fiscal 2020 (fourth-bestselling UV) and ~8% in fiscal 2021 (fourth-bestselling UV), the study said.
Crisil said that the share of UVs in the PV market has risen steadily over the past decade, riding on new launches at attractive price points, GST differential leading to increased sales of sub 4m compact UV and changing consumer preferences. Lately, the semiconductor shortage that has impacted the production of small car market leader Maruti Suzuki has also led to an optical decrease in the share of small cars. The uptick in the UV segment is expected to continue in the near term, given all the major upcoming launches are in this segment, it added.