Small town boom, first-time buyers driving Hyundai’s SUV sales

IPO-bound South Korean carmaker Hyundai Motor India is witnessing a sharp rise in rural and first-time buyers for its SUV lineup, even as overall passenger vehicle sales for the industry flatline.

With rural buyers now accounting for over 21% of its total sales—the highest in the company's history—Hyundai sees growing aspirations in small-town India fuelling its SUV (sports utility vehicle) sales. In fact, SUVs accounted for 67% of Hyundai's total sales in August, a top company official said on Monday.

Also, diesel continues to be the dominant fuel choice for Hyundai's mid- to large-sized SUVs, with models like the Alcazar and Tucson clocking nearly 60% of diesel sales, highlighting a clear preference for fuel efficiency in these segments, Tarun Garg, chief operating officer and whole-time director, Hyundai Motor India, said.

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Hyundai launched a refreshed variant of the 7-seater SUV Alcazar on Monday, with new variants at the lower end. The SUV comes with a starting price of ₹14.99 lakhs ex-showroom for the petrol variant and ₹15.99 lakh for the base diesel variant.

The surge in rural buyers comes as India’s road networks expand, creating new opportunities for automakers to tap into previously underserved regions. “Road connectivity has improved dramatically in rural India, and we’re seeing an increasing number of buyers from small towns and villages opting for SUVs,” Garg said. This growing demand is also being driven by rising aspirations among first-time buyers, particularly in the mid-sized SUV segment, where Hyundai’s Creta continues to be a top performer, he added.

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For Hyundai, rural markets have become critical growth engines. In August, rural sales climbed to 21% of its total sales, while the region accounted for 20% of sales for the January to August period — both a record for the company. First-time buyers, too, have contributed to the brand’s flagship SUV sales. As many as 28% of buyers of Creta are first-time customers, while 43% buyers of Venue are buying a four-wheeler for the first time, up from 13% and 29% of first-time buyers.

Diesel dominates mid-large SUV segments

While electric vehicles are gaining popularity in urban centres due to a policy push for green technologies, Hyundai’s data shows that in the mid- to large-sized SUV segment, diesel continues to reign supreme. Models like the Alcazar and Tucson still see more than half their sales coming from diesel variants, reflecting a strong consumer preference for long-range fuel efficiency.

"Diesel accounts for 57% of our sales in the mid- to large-size SUV segment," Garg said. “The trend is clear: Customers in these segments prioritize efficiency and range, which diesel continues to offer," Garg said.

Despite the rise in sales of diesel-powered larger SUVs, Hyundai has been preparing for an electric future, particularly in the urban segments where EV adoption is expected to accelerate. However, for the foreseeable future, diesel remains crucial for Hyundai’s success in key markets.

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Starting with the Creta EV next year, Hyundai is slated to launch five locally-made electric vehicles by 2030. While Hyundai didn't share a guidance for where it sees its electric vehicle penetration to be positioned in its future powertrain mix, it continued to emphasize that its present mix of 17.5% diesel vehicles and 12% CNG vehicles, with CNG and gasoline dominating its entry models, is a “good” strategic mix for its portfolio.