Sports utility vehicles, or SUVs, are popular in India. These cars were originally popular among off-roaders, but they have since adapted to city driving. And it's gotten to the point where even people who spend their days in an office tend to opt for SUVs over smaller vehicles. Even while the new SUVs, including so-called tiny SUVs, have lost some of the utility of traditional SUVs, it is the vehicles' aesthetic appeal that is driving the trend.
However, the rising popularity of SUVs may not be entirely attributable to the fact that Indians no longer purchase compact automobiles. As the market for compact cars struggles, automakers are shifting their attention to SUVs, making them more accessible financially even if it means reducing some of their features.
Increased purchases
While the Indian market has traditionally been dominated by compact automobiles, SUV sales have recently outpaced those of hatchbacks and sedans. According to ET, SUV sales in India have doubled in only five years, and now account for half of all passenger car sales. In September, a record 52 percent, or 363,733 automobiles, were SUVs, up from 43 percent, or roughly 363,733 vehicles, in September 2022.
In the first half of the current fiscal year, SUV sales accounted for 48.3% of the total, up from 41.5% in the first half of FY23. Dropping from 35.1% in H1FY23 to 30% this fiscal year, hatchbacks have lost market share. The proportion of sedans sold fell from 10.3% to 9.3% in the first half of the fiscal year, despite the introduction of several new models such the Hyundai Verna, Volkswagen Virtus, and Skoda Slavia.
The percentage of first-time buyers purchasing SUVs has increased by a factor of four over the past decade, as more and more Indians have been drawn to the higher-riding vehicles thanks to falling prices and a greater variety of options from automakers, as reported by ET.
Industry data shows that almost one-third of first-time automobile buyers in the Indian market take delivery of an SUV, up from fewer than one-tenth a decade ago, when hatchbacks dominated the country's roadways. In this time period, supplementary and replacement purchases make up a smaller percentage of total spending than they did in 2014 (92% vs. 69%).
The reasons Indians love their SUVs
SUVs are gaining popularity among those who formerly preferred hatchbacks and later upgraded to sedans due to their commanding on-road presence, high ground clearance, bulkier appearance, increased interior space, and plethora of extra options. SUVs are popular in Indian cities because they are able to withstand the rough terrain, frequent speed bumps, and unforeseen events, such as floods.
The design is perfect for the Indian market, and automakers have adapted their lines to meet the soaring demand. They've adapted SUVs for use in urban areas, keeping the basic shape unchanged to appeal to customers interested in prestige and ease of movement. The astute decision was made to reduce the price of this category of vehicles by eliminating most off-road capabilities.
Since cars in India often transport more passengers than in other nations, those with more interior space will find a receptive market there. As the number of cars on the road increases, the quality of the roads itself deteriorates, therefore a higher driving position and greater ground clearance are advantageous.
Overlapping price classes as SUVs downsize and lose their all-terrain or even crossover functionality aid the trend in consumer preference away from low-slung sedans. Due to increased costs caused by new safety regulations, even budget-friendly hatchbacks now demand a heftier financial outlay to satisfy the buyer's desire to make a statement on the road. To make room for more profitable compact and midsize sport utility vehicles (SUVs), automakers are shifting their focus away from premium hatchbacks and entry-level sedans. Most of these SUVs don't have the ladder-on-frame construction preferred by off-road aficionados. Adding larger hatchbacks and sedans to existing product lines is a simple process.
"With the arrival of more compact vehicles, there is a pricing overlap between basic SUVs, so it's not only that there's a greater affinity for the body style. Shashank Srivastava, senior executive officer (marketing and sales) at Maruti Suzuki, recently told ET that sales of entry-level SUVs accounted for 22% of the whole market (in 2022-23), up from 1% in 2014.
Are there any other possible explanations?
Is the dramatic shift in the Indian auto market simply the result of shifting consumer tastes?
The decline in sales of compact cars in India can't be attributed solely to the expectations of the country's young people. "Small cars are not selling not because people are upgrading," Shashank Srivastava, senior executive director (marketing and sales) at Maruti Suzuki, told ET. Customers' ability to spend is being tested by the rising cost of vehicles in the Rs 7–10 million range. As a result, "this has probably led to telescoping of the demand downward from this segment to used cars and even recently to two-wheelers," Srivastava added.
Madan Sabnavis, chief economist at Bank of Baroda, told ET that "with increased access to credit, consumers starting their careers are not going for vehicles priced below Rs 10 lakh." Sabnavis added, "Buyers migrating from two-wheelers to four-wheelers are seeing stress in disposable income, and also getting impacted by the hike in interest rates we have seen in the past one year."
Because of premiumization and easy loan availability in the middle consumer segment, automakers have shifted their attention away from producing compact vehicles and toward SUVs. This is why the Indian market only features roughly a dozen different hatchback models, compared to a dozen in the entry-level and mid-size SUV categories combined.
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