Mumbai: Utility vehicles, and not small cars, are set to dominate the automobile market in India, judging from the lineup of models due to hit the roads in 2013.
At least a dozen new automobile models (excluding new variants) are expected to be launched in the next 12 months, and most are utility vehicles, according to company executives, auto part suppliers and dealers. These include the Ford EcoSport, Jeep Grand Cherokee, Chevrolet Enjoy, Nissan Stile and the Honda Amaze sedan
Ford Motor Co.’s EcoSport, the US carmaker’s first offering in the so-called compact sports utility vehicle segment, will be a critical launch. Expected to be priced at Rs.6-8 lakh(ex-showroom, Delhi) in its petrol version, the EcoSport is likely to be available by March, said a Ford India Pvt. Ltd dealer in Mumbai.
Fiat India plans to launch the sports utility vehicle Grand Cherokee from the Jeep stable by the end of 2013, Mike Manley chief operating officer for Asia and president and chief executive of the Jeep brand, said during his India visit in early December. This will be one among the nine models Fiat plans to introduce in the next three to four years.
General Motors India Pvt. Ltd, which has been at the fringe of the Indian car market with a less than 5% market share, has a lot riding on the launch of the Chevrolet Enjoy, the multi-purpose vehicle it plans to pit against the Toyota Innova, Mahindra Xylo and Maruti Suzuki Ertiga. It is expected to be launched before March.
Manufacturers have been emboldened by the brisk sales of newly launched utility vehicles like the Ertiga, Mahindra Quanto and Renault Duster, among others.
The launches gave a boost to the utility vehicle segment, which expanded 62% to 357,852 units in the eight months to November, compared to the year ago-period. The segment outpaced the passenger car market, which advanced only 8% to 1,240,688 units in the same period, according to data from the Society of Indian Automobile Manufacturers (Siam). The Indian automobile market, which until recently was driven by small cars, is seeing a shift in buyers’ preferences. Higher petrol prices and the launch of affordable utility vehicles. most of which are diesel-run, has dented demand for small cars. The share of passenger cars as a percentage of overall passenger vehicle sales has declined from 61% in the fiscal ended March 2010 to 51% in the quarter ended September 2012, according to Siam.
Deregulation of petrol prices, supply disruptions at India’s No. 1 car maker Maruti Suzuki India Ltd, a narrowing price differential between compact and mid-size cars and the launch of affordable utility vehicles has led to structural changes in the passenger vehicle industry during the last two years, said a 26 December report by Care Research.
The share of diesel vehicles as a proportion of overall passenger vehicle sales jumped to 43-45% in fiscal 2012 from 25% in fiscal 2009, said the research arm of rating agency Care Ltd.
Tarandeep Ghai, principal (auto sector) at Boston Consulting Group, said the average car buyer is shelling out 15-20% more than what he or she had been until three years ago. A change in the product mix at the automakers, which in turn has been prompted by the price gap between diesel and petrol, and the absence of an entry-level car has fuelled demand for bigger compact cars and utility vehicles.
Analysts expect utility vehicles to continue outpacing their passenger car rivals even as high borrowing costs and slower economic growth hurt auto sales in the year ahead. With the overall economic scenario showing no signs of improvement, sales would remain muted, said Joseph George, an analyst at domestic brokerage IIFL Ltd. He is, however, optimistic about utility vehicle sales. “A strong order book for models like Ertiga, Quanto and Duster means that UVs would continue to outpace the passenger car sales,” he said, adding 2013 ‘will be light’ on sedan and small car launches, as has been the case in 2012.
Pravin Shah, chief executive of the automotive sector at utility vehicle market leader Mahindra and Mahindra Ltd, said new model launches has helped the company maintain its leadership position in the segment.
Mahindra has sold close to 6,000 units of the Quanto—the compact sports utility vehicle introduced in October—and had 12,000 bookings for the model until November-end, said Shah, adding that even a premium model like the Mahindra SsangYong Rexton had received encouraging response.
Mahindra has received 1,300 orders for the Rexton, priced at Rs.17,67,557 (ex-showroom, Mumbai)—the first launch from the stable of its Korean subsidiary.
Renault India Pvt. Ltd has sold 25,000 units of the compact SUV Duster, launched in July, according to Sumit Sawhney, executive director, sales and marketing, at the local arm of the French auto maker. Maruti has sold 60,000 units of Ertiga since its launch in April, an average of 7,000 units per month, 65% of which were diesel-run. Aggressive pricing has been one of the key factors propelling the utility vehicle segment, according to Care Research. Automakers have been able to bring down the price either by using the new generation of highly efficient lower power engines or through sharing of platforms with existing car models. Deficient public transport systems in satellite towns and cities also contributed to growing sales of utility vehicles, said Kumar Kandaswamy, senior director and country manufacturing industry leader at Deloitte Touché Tohmatsu India Pvt. Ltd.