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The increasing number of Utility Vehicles – Bigger, Better and Stronger

The increasing number of Utility Vehicles – Bigger, Better and Stronger

Published on 13 October 2022 .Views 13 .Comments 0
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The market mix of the entry-level segment is decreasing. CY2020 was the year when 70.7% market share belonged to entry-level cars, hatchbacks, and sedans. The entry SUV segment had a market mix of 15.8% whereas the mid/premium SUV had a market mix of 13.5%. In CY2021, this market mix shifted to 22.5% for entry SUVs. From CY22 till August, the entry-level SUVs market mix has increased to 24.7%. This shows healthy growth in the market mix of this segment. Vehicles belonging to this segment are Maruti Suzuki’s Brezza, Tata Motors Nexon, Tata Punch, Kia Sonet and Hyundai Venue have been a good success. The mid/premium SUV segment which has vehicle models like Maruti Suzuki S-Cross, Tata Harrier, Hyundai Creta and Kia Seltos has also increased its market shares in the segment. In CY2020 it was 13.5%, in CY21 it was 15.7% and In CY22 till August it is 16.3%.

Entry-level segment, sedans and hatchbacks are clearly losing their market share. Companies like Mahindra & Mahindra and Tata Motors which have focused on the SUV segments are doing well. Maruti Suzuki which has more focus on other segments has faced some impact on sales. They have come up with a new SUV with Grand Vitara. Maruti Suzuki still has no movement in the EV segment as they have said they will launch EVs during 2025.

The entry SUVs are also seeing a good increase in the mix in the SUV segment itself. It was 53.9% during CY2020 and from CY21 till August it increased to 60.2%. FY19 was a big year for passenger vehicles as there were 33.9 lakh vehicles sold in that year. The same decreased in the following two years but recovery can be seen in FY22. In the same period, the SUV segment has consistently increased. The UV market share has increased from 21.3% in FY16 to 53.7% in FY22. Hence, the focus on utility vehicles by Tata Motors and Mahindra & Mahindra can be seen in the stock prices of the above-mentioned companies.

Reasons for growth in the UV segment:

  • Better Specs: Entry of big players in the segment-leading to higher competition and significant investments in R&D.
  • Higher Clearance from the Ground: Adaptable to Indian roads and offer more driving comfort.
  • More room: Soft suspensions and higher headroom.
  • Sporty Looks
  • New models launched: According to a report by Jato Dynamics India, from 2018 to 2021, there 24 Hatchbacks models and 16 Sedans models were launched. In the same period, 46 models of SUVs were launched. SUVs is available in various brands and price points.

Challenges

  • No significant discount offers are expected this festive season due to a demand-supply mismatch.
  • While the segment is seeing strong demand, the semiconductor shortage impacts the production of vehicles.
  • Higher customer waiting periods can also lead to the cancellation of vehicle bookings.
  • Higher commodity prices are also proving to be a challenge.
  • A more powerful engine (more than 1.5-litre petrol) for SUVs can lead to a GST slab of 43%. (less than 1.2-litre petrol engines attract a GST rate of 29%).
  • Having entry-segment SUVs with the higher specification can lead to higher prices which are almost similar to the mid-SUVs, this can also lead to moving away from the segment.
 

Outlook

  • Maruti Suzuki: Entry SUVs growing strong – Response for hybrid technology is a key monitorable.
  • Mahindra & Mahindra: Continue to see strong demand in sub-4-meter brands in the festive season
  • Tata Motors: SUVs contributed to more than 66% of the overall portfolio in FY23. Punch is the leader in the segment. The vehicles account for 15% of overall sales in the segment.
  • In the last 12 years – the UV segment had 87 launches while the small car category had 37 launches.

Originally Published On:https://blog.investyadnya.in/the-increasing-number-of-utility-vehicles-bigger-better-and-stronger/

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