Features | Business

Mini SUVs: Rush Hour

Mini SUVs are crowding Indian roads

Madhavankutty Pillai Madhavankutty Pillai | 06 Sep, 2024

(Graphic: Saurabh Singh)

FOR A QUARTER OF a century, the Wagon R had been a bestselling car of India’s largest automobile company Maruti. Recently, when sales figures for the first half of the year came out, it was found that the Punch, belonging to Tata Motors, had overtaken Wagon R. The publication Autocar, quoting a report by JATO Dynamics, said that it had sold 1.26 lakh units to

Wagon R’s 1.16 lakh units, and added, “It should be noted that the Wagon R has been India’s top-selling passenger car for three consecutive fiscal years, which makes it an even more commendable feat for the Punch.” In third place was the Hyundai Creta. Both Punch and Creta are pegged as sports utility vehicles (SUVs). The former is termed sub-compact, which means small and also less expensive; the latter mid-size. In August, came another piece of news that Maruti’s own SUV, Brezza, had clocked the most sales in its history. All such data reinforces the phenomenon of the shift among Indian car owners towards SUVs.

Indian passenger vehicle categories can be divided into hatchbacks and sedans at one end; and SUVs and multi-purpose vehicles (MPVs) at the other. Smaller SUVs priced between ₹6 lakh and ₹15 lakh are termed compact, between ₹10 and ₹25 lakh go by the label mid-size, and large SUVs are upwards of ₹15 lakh. A June 2024 report by CRISIL on the passenger vehicle industry in India gives a short history of the SUV boom. It says: “Launch of Ford EcoSport provided a real thrust to the compact SUV subsegment in India around fiscal 2014. Over the years, introduction of vehicles like Maruti Suzuki Brezza (fiscal 2016) and Tata Nexon (fiscal 2018) aided the growth of the entire SUV segment as well as helped compact SUVs gain sizeable share within the SUV segment, reaching 58% by fiscal 2019 from 48% in fiscal 2014. Moreover, launch of Hyundai Venue (fiscal 2020), Kia Sonet (fiscal 2021), Tata Punch (fiscal 2022), Maruti Suzuki Fronx (fiscal 2024) over and above the launch of facelifts of other popular models backed the healthy growth of the compact SUV subsegment. Introduction of Hyundai Creta in fiscal 2016 has propelled the mid-size SUVs (length 4-4.4m) segment.”

Vivek Srivatsa, Chief Commercial Officer, Tata Passenger Electric Mobility Ltd, says that the trend became evident from around 2015 but the rate of growth began to really accelerate after Covid. Tata Motors has in the last five years been a turnaround story and a lot of it was driven by the tapping into it. “Nexon has been doing phenomenally well. For a very long time, it was the No 1 selling SUV in the country. Now, Punch also has picked up extremely well. We have three SUV nameplates which are really raking in the volumes,” he says. All leading automakers are riding this wave in India because of demand. For instance, take Kia, an auto company that ventured into India and immediately got a slice of the market because of SUVs. In 2019, it launched its first vehicle, the Seltos. In four years, it had clocked sales of five lakh. Its press release last year said, “Seltos has played an important role in Kia India’s success by contributing 55% of the company’s net sales including exports and domestic sales consumption.” In May this year, consultancy firm Primus Partners came out with their ‘Automobile Industry Value Report’ which found that the volume of UVs and SUVs had increased by 23 per cent and this was also accompanied by a rise in price. On the other hand, traditional passenger vehicle volumes had gone down by a little under 10 per cent.

A NUMBER OF REASONS are adduced for this shift. There is the correlation to the India growth story. Small cars were the aspiration in a population whose car ownership was extremely limited. But people now earn more and can afford convenience and comfort. Deloitte does a Global Consumer Automotive Survey annually where they consistently find people moving towards a higher price point in buying cars. Rajeev Singh, partner and consumer industry leader at Deloitte Asia Pacific, says, “Over the last 7-8 years, the number of people who have shown an intent to buy a vehicle which is higher in price has gone up. To an extent, in 2021-2022 when we did the survey, over 50 per cent said that their intent was to buy a vehicle more than ₹10 lakh. Come 2023-24, if you saw the numbers for the calendar year, or the first half of this year, average car price has already gone beyond ₹10 lakh. Which means that more than 50 per cent of the cars are sold above the ₹10-12 lakh price bracket.”

The demand for SUVs has led to a greater mix in the biggest selling models. Earlier, among the top 10, Maruti’s products would be overwhelmingly dominant but that has changed. “Look at the trend over the last 10 years. You find that now in the top 10 you have more variety. In the top 5 [models] you have not just one, but maybe two at least, sometimes three [of different automakers]. That trend is an indication that things in the country are changing,” says Singh.

Look at the trend over the last 10 years. You find that now in the top 10 you have more variety. In the top 5 models you have maybe two, sometimes three different automakers. That trend is an indication that things in the country are changing,” says Rajeev Singh, Partner and Consumer Industry Leader, Deloitte Asia Pacific

An interesting element in the trend is that the definition of an SUV is somewhat fuzzy in India. Traditionally, SUVs were considered passenger vehicles which could also be used for off-road terrains. They would have high ground clearance and features like four-wheel drives. The government, for GST purposes, defines an SUV as vehicles having more than 1,500cc of engine capacity, more than 170mm of ground clearance, and with a length greater than 4,000mm. But neither buyers nor sellers go by this definition in the market. If a vehicle has a higher ground clearance, a form factor that loosely resembles an SUV, has relatively more interior and cargo space then even smaller vehicles like the Punch fit into the category using a term like sub-compact.

Srivatsa says what SUVs mean for customers are cars with relatively high ground clearance, a little bit of an upright seating, and more importantly, better visibility around—rather than sitting too low, they sit upright and a little high. The shift to SUVs, according to him, is happening not just in India but across the world. “Even in advanced markets like Europe or the US, where road conditions are pretty good, the preference is strongly moving from sedans to SUVs. In India, obviously, if you go back 10 to 12 years, the main category was hatchbacks. But now, over a period of time, people’s spending power has increased and they are driving much more, both within the city and outside. The need for safety, the need for an ability to manage really bad roads or monsoons, is becoming more and more challenging. It’s pointing customers towards vehicles which are known as SUVs,” he says.

People are driving much more both within the city and outside. The need for safety, the need for an ability to manage really bad roads or monsoons, is becoming more and more challenging. It’s pointing customers towards SUVs,” says Vivek Srivatsa, Chief Commercial Officer, Tata Passenger Electric Mobility

Just this week, Tata Motors launched a new model called the Curvv. This was billed as an SUV coupe. The company wanted to get more entrenched in the mid-size segment. Srivatsa says, “That segment has grown very rapidly post- 2020. In fact, it is the largest subcategory in the market. And there are more than 10, 12 players in this category. Fastest growing, largest size category, and we were absent from there. So Curvv, which is our SUV coupe, is our entry into this very attractive category.”

THE SUV BOOM comes with its concerns. For one, with the decline of smaller cars, the load on the environment will increase because less the size and power less the fuel consumed and emissions. On the other hand, with the recognition that electric vehicles (EVs) are the future, there is synergy happening between them and SUVs. Srivatsa says, “Electric mobility is ideally suited for SUVs because of the kind of torque and driving pleasure it gives. Normally, they are heavier, and you need far more engine power. With larger engines, SUVs deliver less fuel efficiency. And then cost of operation really goes up. Whereas if you have an electric SUV, you get all the power and torque that you need. At the same time, it is friendly on the pocket. A combination of the driving requirements as well as cost of operation will make electric SUVs popular.”

Tata Motors have EV versions of their line-up. Hyundai is planning to launch an EV version of their bestseller Creta. China is at present the largest player when it comes to EVs; however, Singh says they do not call it EVs but new energy vehicles (NEVs), which are hybrid with a smaller battery as well as the use of regular fuel. “We have seen significant growth in SUV segments in NEVs in China. I think that a similar thing will happen in India. But what we need to do is not just think about EVs alone. Think about PHEVs as well, plug-in electric hybrids,” he says.

Despite the crowded space, automakers continue to focus on the segment because they have to. In its conference call with investors in April after the quarterly results, Maruti was asked about its plans for the SUV segment and the reply was: “We have to adapt ourselves to the new realities of the market. If more than 50% of the cars in the market are SUVs, it has to find a similar share in our new model launches also. So, we have to keep increasing the models in that segment.”

automakers automobiles business cars Indian roads Mini SUVs