Compacts may spell revival for SUV sales
Once a rage in the domestic market with high double-digit growth, long-waiting periods and manufacturers scrambling to offer new products, the craze for sports utility vehicles (SUVs) in India seems to be ebbing.
The main reasons are increasing parity between petrol and diesel fuel prices in the last two years, and lack of new launches since Ford's EcoSport in 2013.
Growth in SUV sales peaked in 2012-13, when the segment grew by almost 60%, aided largely by a ₹ 32-per-litre price differential between petrol and diesel.
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"Two years ago, the typical hatchback customer looking for an upgrade found it beneficial to buy a diesel SUV because the high price differential of ` 32 per litre skewed the economics in its favour," said Mayank Pareek, president (passenger vehicle business unit), Tata Motors. "The ratio of hatchbacks to SUVs had grown unnaturally. With price parity, that customer has disappeared."
The depression in the rural market due to unseasonal and inconsistent rains has also impacted the segment. Experts believe fullsized SUVs may have peaked somewhat, but the compact SUV space still offers significant opportunity. Moreoever, the entry of Hyundai Creta, Maruti S Cross and two other Mahindra offerings codenamed S101 and U215 in the run-up to this year's festive season could see a second round of mini SUV craze.
"The compact utility vehicle segment has good growth potential," said Wilfried Aulbur, managing partner, Roland Berger Strategy Consultants. "For the Indian consumer, it is the high-seating position and (the perceived) ability to navigate difficult roads that drives demand for these vehicles."