Mumbai: After a series of flops in India, Renault SA hit pay dirt in 2012 with the Duster, a small sport utility vehicle (SUV) that lured buyers upgrading from hatchbacks. Other car makers are coming out with their own.
Suzuki Motor Corp. and Hyundai Motor Co. this month plan to introduce their first models in the compact SUV segment, posing a threat to the French car maker in India because the Duster accounted for 90% of its local sales. Also watching the developments will be Ford Motor Co., whose EcoSport made up 69% of its domestic deliveries.
Rising demand for compact SUVs is attracting the nation’s top two sellers as price-sensitive Indians upgrade from hatchbacks to the relatively bigger, but still fuel-efficient vehicles. The entry of Suzuki and Hyundai means smaller auto makers like Renault need to start their quest for the next bestseller to help protect their local revenue.
“Competition is going to be extremely intense because this segment is growing much faster than the rest of the market," said Abdul Majid, head of the automotive sector for India at PricewaterhouseCoopers in Chennai. “Product strategy, perceived value and distribution network become key."
In an auto industry struggling to recover from the worst sales slump in a decade in the year ended March 2014, compact SUVs have been the silver lining.
Ideal for potholes
Sales of the vehicles grew 11% in the year ended March, outpacing all other segments, and, according to estimates by Emerging Markets Automobile Advisors, are set to quadruple to 1.18 million units by 2024. The overall market is expected to triple in the same period.
Buyers are upgrading from hatchbacks to the relatively new segment known for a higher ground clearance, ideal for potholed roads, according to Kaushik Madhavan, the head of Frost and Sullivan’s automotive and transportation business.
“There haven’t been a large number of models to choose in this space, so there’s a lot of pent up demand," Madhavan said on the telephone from Chennai. “Growth will be far greater once the two biggest manufacturers enter this market."
Maruti Suzuki India Ltd, the local unit of the Japanese company, offered media test drives of the S-Cross last week ahead of the model’s introduction, while Hyundai began a teaser advertising campaign for its Creta SUV.
S-Cross offers a 1.3 litre and 1.6 litre diesel engines that put out 89bhp and 118 bhp respectively. The Creta comes with a choice of one gasoline and two diesel engines, and also the segment’s first diesel automatic, Hyundai said in a statement.
For Renault and Ford, the challenge may be in their market reach. Maruti has about nine sales outlets for each of Renault’s across the country, and also outnumbers Ford by a ratio of four to one. Hyundai has a wider network as well.
About 63% of the cars sold in India are small hatchbacks, a segment dominated by Suzuki and Hyundai with their Altos and i10s. Indians also find small vehicles ideal for narrow streets gridlocked by traffic.
Hyundai, which entered India with the Santro hatchback in 1998, has grown to become India’s second-biggest car maker with a 16% market share. Renault’s Pulse, Scala and Fluence have struggled to make inroads in the country. Ford has found some limited success with its Ikon and Fiesta models, but not enough to threaten the top two makers.
Renault said in an e-mail that the Duster was the first in the segment to carve a niche for itself and the increased competition would only benefit Indian customers. Ford did not respond to e-mails seeking comment.
Competition from the bigger rivals may also hurt Renault and Ford at a time their deliveries have been sliding. Duster deliveries have been declining since February while EcoSport sales slipped for three straight months through May.
“With Maruti and Hyundai entering this segment, they’ve filled a big hole in their portfolio," said London-based Deepesh Rathore, director of Emerging Markets Automotive Advisors. “The customer will gain from the wide choice in the segment even as carmakers battle it out for dominance." Bloomberg