New Delhi: Asmee Arora had been dreaming of owning a SUV ever since she started working as a Chartered Accountant. Earlier this month, Arora (29) bought home a stylish and tech-laden beast.
“How time flies!,” her father, a retired Banker, exclaimed, recalling that it was in his 40s when he was a father of two that he bought his first small car.
The compact SUVs, with their bold style statement and distinct body features and shape have become iconic on Indian metro roads. With varieties of models readily available in the market, fans like Arora are a spoilt lot for choices of features and price range.
Shashank Srivastava, Senior Executive Director (Sales & Marketing), Maruti Suzuki, believes that the SUV momentum is expected to continue in the country and a similar trend is also observed in the global markets.
“In the Indian demography, demand from younger consumers keeps increasing year after year. A lot of them are first-time car buyers. The median age of a car buyer is between 24 and 35 years and about 65% of car owners are below their 30s”, he said.
India has been a small car market, dominated by hatchbacks for several decades. Times began to change in the current decade and the SUV volumes began to spurt in the last 4-5 years.
In 2015, the SUV segment contributed only 13.5% to the overall passenger vehicle sales in India. It was about 26% in 2019, 29% in 2020, and today SUVs have 40% share in the PV segment.
The average price of an Indian car has doubled to INR 9 lakh from INR 4.5 lakh in 2014. India now has a larger number of younger buyers who are also richer. They want vehicles not just to commute but for a whole new experience.
The slip of the small cars
While the current trend does not sweep away the class of car buyers who want entry-level hatchbacks by upgrading from two-wheelers, the rise in total cost of ownership (TCO) of even a small car dashes their car dreams. OEMs keep jacking up car prices to withstand the sharp increase in the prices of essential inputs like commodities and precious metals, compliance with the regulatory requirements and upcoming safety norms.
Entry-level car demand is directly proportionate to the real value of entry-level monthly income of the salaried class and small business owners. The recent macro and micro economic upheavals in the country has led to a skewed development pattern victimising the lower income groups, the potential buyers of entry-level small cars. Here the rich become richer while the not- so-rich have to struggle to survive and make both ends meet. One of the first casualty is their car dream.
This was also one of the reasons for Hyundai to discontinue its popular Santro hatchback, the car which marked its entry into the Indian market in 1998.
Even the available small cars (Alto, S-Presso, and Kwid) occupy less than 10% of the passenger vehicle market in India.
| Domestic Sales (in units) | Mini cars | Total PV Volumes | % share |
| FY22 | 2,38,297 | 30,69,499 | 8 |
| FY21 | 2,66,994 | 27,11,457 | 10 |
Source: SIAM
Globally, China remains at an unassailable number one spot in passenger vehicle sales volume, followed by the US. India is pegged to be the world’s third-largest car market by 2030, overtaking Japan, now at the third place. In this drive SUVs are expected to dominate the sales chart with the entry-level small cars having little share.
According to Puneet Gupta, Director, S&P Global Mobility, SUV-style vehicles are driving the demand as consumers are very aspirational today and want to experience the vehicle which are safe, spacious and bold in style. The sales is also driven by car manufacturers who are offering multiple options within SUV segments to strengthen their market share.
However, he believes that the mini cars will continue to find a buyer in a market like India as “currently about 50%-55% consumers in India are first-time car buyers.”
According to Gupta, the potential is immense as even today India’s car penetration is just 25 units per 1000 people, compared to the developed markets where it is 600-700 per 1000. “This reflects that still there are multiple potential consumers and the market is not saturated.”
The largest maker of small cars in India, Maruti Suzuki, will introduce the new model of its popular Alto this week.
Industry veterans also believe that even though small cars may not contribute as much as SUVs now, by 2030 onwards, this segment will find space in the market via EVs. “This segment is expected to get a new life as electric cars would become more affordable in the next 5-10 years. Also, anyone would prefer a small car in a metro city due to space, parking and traffic constraints,” one of them said.
Meanwhile, if one begins to look at the new breed of SUV vehicles in the market, most of these are SUV look-alikes, being sub-4 meter vehicles with the latest technology features that no one would have expected at these price points, even 5 years ago. But consumers want it, OEMs bring it. Competition is the way forward.
Fancy for sedans also dim
Interestingly, not everyone shares Aasmee Arora’s love for SUVs. Vivek Das, who owns a Skoda Rapid now wants to upgrade to a Slavia. “Everyone out there owns a SUV, I don’t want to be a part of the herd. Sedans are class apart.”
But brand and segment loyalists like Das are very few. Experts suggest that the diminishing fancy for bigger vehicles, technology upgrades, parking space crunch, lesser chauffeur-driven consumers and the lack of fresh product launches in the segment are among the many reasons for this disinterest. After three years it was only this year that new sedan models like Skoda Slavia and Volkswagen Virtus were launched in the mass market. Honda also introduced its City hybrid this year.
In FY17, the sedan segment contributed 19% to the domestic PV sales in India. This has come down to less than 10% today.
According to Srivastava of Maruti Suzuki, the decline for sedan cars has been a lot more than the hatchbacks. Going forward, the demand in this segment is expected to drift lower. “At the price point of sedans, consumers are going for a lot of cross consideration in the SUV segment now.”
The Indian car industry is pursuing an interesting growth track. Consumer demand and preferences are changing. The OEMs are ramping up for the future which is more connected and electric. The immediate future is uncertain but steady. It would be interesting to look back at this evolution after 25 years, when India will rally to its centenary of Independence in style and hopefully emerge as a global super power in all sectors, including automotive.
Jai Hind!
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