BackAuto makers to launch more utility vehicles than small cars over next two years
As many as 13 new models are being launched in the utility vehicle segment over this year and next
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New Delhi: In a first for India, auto makers will introduce more utility vehicles in the market than small cars. The reason—they expect consumers to graduate to bigger vehicles.
According to data gathered by Mint, as many as 13 new models are being launched in the utility vehicle segment over two fiscal years—the current and the next—while only eight new products will be introduced in the small-car segment in the same period, suggesting Indian consumers with increasing aspirations and rising incomes will opt for bigger vehicles in the future. Manufactures will also introduce three sedans during the period.
Among the proposed utility vehicle launches are two from Mahindra and Mahindra Ltd, codenamed U-301 and S-101; two from Maruti Suzuki India Ltd, a crossover and a compact sports utility vehicle (SUV) iM-4; and Hyundai Motor India Ltd’s Creta and the already introduced i20 Active; General Motors India Pvt. Ltd’s Adra, Spin and Trailblazer; Renault India Pvt. Ltd’s Lodgy (already introduced); Ssangyong Motor Co.’s X-100; Tata Motors Ltd’s new Safari, and Ford India Pvt. Ltd’s new Endeavour.
The shift is triggered by a strong demand in the compact SUV segment in the past two years. The contribution of compact SUVs to overall sales has gone up from 10% to 17%.
Besides, sales of utility vehicles added up to 550,000 units in the fiscal ended 31 March, up 5.3% from the year-ago period. In the same period, the small-car segment, which includes cars that are up to 4m in length, and with engine sizes of up to 1.4 litres, grew a mere 3.4% over the previous fiscal, at 1.6 million units.
With Renault-Nissan Alliance chairman Carlos Ghosn calling his forthcoming Kwid “SUVish" and Mahindra aiming to breach the ₹ 5 lakh barrier with its two compact SUVs, industry experts believe customers with a ₹ 4-5 lakh budget may soon have the option of buying an SUV.
“I won’t say ₹ 4 lakh, but certainly the two products that we have talked about will be in a price point which is lower than the price point that we have today," said Pawan Goenka, director and president of Mahindra’s automotive and farm equipment division. Currently, Mahindra’s cheapest compact SUV, the Quanto, starts at ₹ 5.5 lakh (ex-showroom, Delhi)
As for small cars, the new line-up includes Tata Motors’ Kite hatchback and the next-generation Nano (already launched); Maruti Suzuki’s small car code-named IK-2; Fiat India Pvt. Ltd’s Abrath 500; Honda Cars India Ltd’s new Jazz; Ford’s new Figo and compact sedan Aspire, and Nissan India Pvt. Ltd’s Datsun Redi-Go.
To be sure, the action in the utility space is unlikely to impact the small-car market even though sales in the segment have slowed. With vehicle penetration levels still low—only 15 out of every 1,000 Indians own a car—the potential for small cars is immense.
Goenka pointed out that the passenger car segment is also headed into a higher price bracket. “If you look at the average price of a car, it is going up and not coming down. There have been launches in the low-price category, but not every low-priced vehicle necessarily succeeds," he said.
Goenka is of the view that customers do not differentiate between a hatchback, sedan or an SUV if the products are offered at the right price point.
According to Anil Sharma, principal analyst, IHS Automotive, a consulting and forecasting firm, small car sales are projected to grow from 1.6 million in the current year to 2.7 million by 2020, while utility vehicle sales will double to one million units during the period.
A Maruti Suzuki executive, who spoke on condition of anonymity as he is not authorized to speak with the media, ruled out the momentum shifting in favour of utility vehicles and attributed the growth in launches to the absence of an adequate number products in the segment. “A lot of companies did not have an offering in the segment. So that’s natural," he said.
The executive added that with the government’s decision to link fuel prices to market rates, the price differential between diesel and petrol vehicles had narrowed and manufacturers of diesel vehicles did not have the advantage of cheaper fuel any more.
“So, I have a slightly different take on this. It is difficult to say if the same kind of growth will continue in the SUV segment," the executive said.
Between 2010-11 and 2012-13, when petrol was at least 30% costlier than diesel, the SUV segment—where most vehicles run on diesel—exploded from 324,000 units to 553,000 units. However, it slowed down to 525,000 units in 2013-14, growing once again to 553,000 units in 2014-15.
Hyundai on Tuesday said it will introduce the compact SUV Creta during the second half of the year. “It is in line with our product philosophy…stylish, feature-rich and made for India," said Rakesh Srivastava, senior vice-president (sales and marketing), Hyundai India, in an interview.
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