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Slowdown fails to halt premium SUVs’ run

The premium SUV market in India has bucked the trend in the overall passenger vehicle sales, growing by a third in the past year as consumers upgraded to large, feature-rich products like the MG Hector and Tata Harrier.

, ET Bureau|
Last Updated: Jan 06, 2020, 07.21 AM IST
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NEW DELHI: The premium SUV market in India has bucked the trend in the overall passenger vehicle sales, growing by a third in the past year as consumers upgraded to large, feature-rich products like the MG Hector and Tata Harrier.

As many as 61,336 premium SUVs were sold in the local market in 2019, compared with 46,107 units the previous year. Passenger vehicle sales are estimated to have dropped by around 13% to 2.95 million units in the same period — the sharpest fall since the industry started reporting sales data in 1997.

Premium SUVs account for around 2% of India’s passenger vehicles market, but given the growing consumer interest towards this segment, industry executives estimate it to grow fivefold in the next four to five years.

Mayank Pareek, the president of PV business unit at Tata Motors, told ET: “Consumers who opted for compact sports utility vehicles 7-8 years back are now looking at bigger, better products. These are high net worth individuals, with strong credit ratings, unaffected by interest rates hikes and the financing tightening in the market.”

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Pareek called the premium SUV an emerging segment that he said should account for 8-10% of passenger vehicle sales in the next few years.

In 2019, Tata Motors sold 15,269 units of the Harrier, which it started selling early last year. It recorded the highest monthly sales for the model in December. “Customers purchasing C-SUVs are not majorly first-time buyers,” said Gaurav Vangaal, the country lead (automotive LVP forecasting) at IHS Markit.

“India has for long remained a small-car market, and now with disposable income increasing … consumers are upgrading from hatches, sedans and smaller sports utility vehicles to more premium products. This is the next major upcoming segment with every carmaker studying and planning models here.”

In fact, the compact SUV segment — it comprises 16-17% of passenger vehicle sales — has carved out a wide base of prospective buyers for more premium products. With the sub-Rs. 10 lakh SUV segment getting crowded, more product interventions are expected from companies in the Rs 10-20 lakh premium SUV space in the coming years, Vangaal said. The MG Hector and Tata Harrier, both launched in 2019, have together cornered half the sales in the segment in the past year.

“New products are launched by companies every year, but what differentiated some of the sports utility vehicles launched last year was the technological disruption they brought in to the market,” said MG Motor India president Rajeev Chaba. “A lot of consumers who were earlier considering buying a hatchback or a notchback opted for these models, which came in with Internet and connected features.”

MG Motor India, which started selling Hector in July, retailed 15,930 units of the vehicle in the past year, accounting for 26% of the market in the segment. As much as 90% of the sales came in from the top-end version, the company said, indicating consumer preference for feature-rich products. The company has said it was sitting on orders for another 20,000 units.

Sales in this segment have mostly grown on account of the “newness” of the launches, despite the overall slowdown in the market, Honda Cars India senior vicepresident and director of sales & marketing Rajesh Goel said. “Additionally, in terms of price points, the C-SUV segments offer a wide range of products right from Rs. 15 lakh to 32 lakh, and thus is able to cater to requirements of a broad array of customers.”

Mahindra XUV500’s sales declined 32% to 17,175 units in 2019, but it remained the top selling model in the category. For the Jeep Compass, volume fell 40% to 10,935 units.
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