Sonet heats up competition in the compact SUV segment2 min read . Updated: 21 Sep 2020, 10:28 PM IST
Curbs on public transport and preference for personal transportation is holding Maruti in good stead
Kia Motors India Inc.’s new compact sports utility vehicle (SUV) Sonet has got a good initial response, with more than 25,000 bookings. This means there will be heightened competition for existing products in this segment. “Competition is going to intensify. The product (Sonet) is highly rated (by customers and reviewers) and received a large number of bookings in a lean period," said an analyst on the condition of anonymity.
The sub-four-metre utility vehicle (UV) segment is a focus area for automakers. According to the Society of Indian Automobile Manufacturers, the sub-four-metre segment in India saw average monthly sales of 32,906 in April-August 2019. Vehicles in this segment attract lower tax. Moreover demand for the vehicles is quite strong. The segment is growing much faster than the passenger vehicles industry and now constitutes 13% of total industry volumes, said Elara Securities (India) Pvt. Ltd.
Sonet competes with Maruti Suzuki India’s Brezza, Hyundai Motor India’s Venue, Mahindra and Mahindra’s (M&M) XUV300, Ford EcoSport, and Tata Motors’ Nexon. Of them, Maruti Suzuki, Hyundai and M&M generate a bulk of the compact SUV segment’s volumes and now face greater competition.
“The Sonet could be an additional challenger to Maruti and M&M. This comes on the heels of the Hyundai Venue eating into Maruti’s share in the UV1 segment and Kia surpassing M&M to become the third largest player in the segment," Motilal Oswal Financial Services Ltd analysts said in a note.
Some analysts said Sonet may also undercut the demand for its group company vehicle, Venue. Both Sonet and Venue are built on the same platform.
Utility vehicles, including Gypsy, Eritga, S-Cross and XL6, generated about 16% of Maruti’s domestic passenger vehicle sales in the last fiscal year. While Brezza’s contribution to Maruti’s overall sales will be lower compared to total UVs, the model generates sizeable sales for the company.
Still, restrictions on public transport and consumers’ preference for personal transportation is holding Maruti in good stead. This is reflective in the 25.6% rise in passenger car sales in August. The entry level vehicles saw strong growth, and channel checks by analysts indicate waiting lists for some car models in certain parts of the country.
“As per our channel checks, Maruti has bookings in excess of one month worth of production. This is partially due to lower production in the preceding months. Incentives have also turned materially lower," PhillipCapital (India) Pvt. Ltd analysts said in a note.