In role reversal, car makers lead growth in utility vehicle segment

Tata Motors, Mahindra seen playing catch-up with Maruti Suzuki and Hyundai, which have registering bumper sales with Brezza and Creta models

Maruti Suzuki sold 91,959 units of its UV models, including the Vitara Brezza (in photo), Ertiga and S-Cross, in first six months of 2016-17. Photo: HT
Maruti Suzuki sold 91,959 units of its UV models, including the Vitara Brezza (in photo), Ertiga and S-Cross, in first six months of 2016-17. Photo: HT

Car makers have crossed into the utility-vehicle territory, eating into a market long dominated by specialist manufacturers.

India’s largest car maker Maruti Suzuki India Ltd sold 91,959 units of its UVs, such as Vitara Brezza, Ertiga and S-Cross, in the first six months of 2016-17, thrice what it sold a year ago.

In the same period, sales of UVs more than doubled at Hyundai Motor India Ltd, led by the Creta, while at Honda Cars India Ltd, UV sales trebled.

That is in contrast to UV sales in the first six months of 2012-13. UV sales then grew 55% from a year earlier, led by Mahindra and Mahindra Ltd with 121,367 units. It was followed by Toyota Kirloskar Motor Pvt. Ltd, Maruti Suzuki India Ltd and Tata Motors Ltd at 46,950 units, 40,366 units, and 23,008 units, respectively.

Of course, Mahindra continues to be India’s largest UV maker. During the first six months of this fiscal, its sales—led by the Scorpio and the TUV 3OO models—grew 14.39% to 108,194 units.

But what should worry the leader is the pace at which Maruti Suzuki is registering sales.

“UV companies will be the first ones to lose out,” said Avik Chattopadhyay, who runs Expereal India, a brand consulting firm. “They had a bull run. The car companies have managed to stop that,” said Chattopadhaya, who previously led marketing and product planning at Volkswagen India Pvt. Ltd.

Their UV play has paid off, but car makers are struggling with their bread-and-butter business of passenger cars. In the April-September period, car sales at Maruti were flat. Hyundai saw a marginal decline while at Honda, car sales fell a sharp 35%.

In the same time period, UV sales at Tata Motors Ltd fell 22% and at Renault, 18.5%.

“Let me put it this way: those who are gaining UV market share are gaining at the cost of their own passenger car market share,” said Pawan Goenka, executive director at Mahindra and Mahindra.

In the meantime, those who primarily make utility vehicles have tried to raid the car segment. Mint on 4 October reported that Mahindra plans to introduce the specifications of a car into its sports utility vehicle (SUV) line-up, in an overhaul of its design philosophy. However, barring Renault India Pvt. Ltd, which has had a dramatic success with its small car Kwid, others have fallen behind.

“What’s happening is that customers at the same price band are opting for a different body style that matches his/her personality better,” Chattopadhaya of Experal said. “These are signs of a maturing market but what is worrisome is that despite these trends, the size of the market has not grown (significantly),” he added.

Between 2012-13 and 2015-16, the domestic overall passenger vehicle industry has expanded from 2.68 million to 2.78 million.

Rakesh Srivastava, senior vice-president (marketing and sales), Hyundai Motor India, said the market will continue to be defined by newer and safer features.

“In SUVs, there is a new order being defined by the new-age customer seeking beautifully designed vehicles, class-leading features and safety standards,” Srivastava said. “This has been observed in the case of the Creta, which is the largest selling SUV in India.” Creta sold 47,923 units in the first six months of this fiscal as compared with 23,117 units over a year-ago period.

But, nobody knows which segment—cars or UVs—have greater potential in the medium term.

“I wish I knew the answer,” said Jnaneswar Sen, senior vice-president, Honda Cars India Ltd.

“Nobody knows which way the market is going. Only time will tell. A lot of it will depend upon the kind of products that comes,” Sen said, adding that if crude prices again go up to $120 a barrel, that may impact UV sales and people may reconsider the smaller cars because of their fuel efficiency.