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Customers look at a car in a showroom (Bloomberg)
Customers look at a car in a showroom (Bloomberg)

Covid fails to dampen demand for premium SUVs, hatchbacks

Firms were expecting a decline in sales of such products because of the prevailing economic slowdown

Sale of high-end, mass-market hatchbacks and sport-utility vehicles (SUVs) continue to grow in the domestic market, despite the record contraction in economic activity because of disruptions caused by the coronavirus outbreak, as customers are preferring products higher up the price point with more features.

Sale of Hyundai’s midsize SUV, Creta, touched 10,000 units over the past couple of months, while retail of MG Motor’s Hector, a premium SUV, peaked in November-December clocking 3,500 units. There was also robust demand for other products in the segment, such as Kia Motors’ mid-size and compact SUVs, Seltos and Sonet, and Maruti’s premium multi-purpose vehicle, XL-6.

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In the hatchback segment, premium products, such as Maruti’s Baleno and Swift, and Hyundai’s new i20, are the ones that have a long waiting period because of increased demand.

Executives at automobile manufacturing companies have been positively surprised at the current trend as most of them were expecting a sharp decline in sales of such products because of the prevailing economic slowdown, which could have adversely impacted the purchasing power of prospective customers.

Some of these companies are also witnessing good demand for the diesel engine variants, which are more expensive than the petrol engine variants after the introduction of the Bharat Stage (BS)-VI emission standards.

Customers are looking at products with good features, irrespective of the price point, despite the covid-19 pandemic and the consequent economic downturn, said Tarun Garg, director, sales and marketing, Hyundai Motor India. Hence, sales of top-end variants of popular products such as the Creta, Venue, and the new i20 are in high demand.

“In 2020, Hyundai has ended the year as the leader of the utility vehicle segment for the first time in its history. Creta is now the highest selling SUV in the country. The diesel engine variants are almost 60% of the total sales of Creta. It is more than 30% in vehicles such as Venue and Verna" he said. “In hatchbacks also there is increased demand for premium vehicles whose share has gone up from 12.3% to 13% last year. Hence, there is higher demand for our new i20," Garg added.

During the recent festive season as well, dealers of leading automakers were overwhelmed with demand for SUVs and premium hatchbacks, and did not have enough inventory. Hence, vehicle stocks across dealers, at the beginning of December, were at a record low.

Consumers with high purchasing power have been less impacted by the economic slowdown than the ones with lower income, and these are people buying such vehicles with the help of affordable finance schemes from banks, said Avik Chattopadhyay, founder, Expereal.

“Somebody who was aiming to buy a vehicle in the range of 25 lakh may have come down one notch below to 15-20 lakh. However, a two-wheeler owner who planned to upgrade to an Alto has been more impacted and that’s the reason for the growing demand for these SUVs. The market has not recovered properly as the two-wheeler customers are not upgrading. It is only certain segments that are doing well," said Chattopadhyay.

MG Motor India, a passenger car manufacturer with products in the 12 lakh and above price points, has been witnessing steady growth in retail sales since September. Retail sales and bookings for its premium SUV, Hector, peaked in December.

“In 2019 we sold around 16,000 vehicles and, in 2020, we are likely to close with 30,000 units. Over the last three-four months, there is positive demand in the domestic market and it seems demand during the January to March quarter will be fine," Rajeev Chaba, president, MG Motor, had said in an interview in December.

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