Robust SUV sales to boost passenger car market



Robust SUV sales to boost passenger car market Rohit Joshi and Siddharth Tak/Zee Research Group

Amid decade’s first car sales crash, the robust growth in sport-utility vehicles segment (SUVs) has emerged as a savior for Passenger Vehicles segment (PV). In FY13 (2012-13), SUV sales have been boosted by the introduction of new models such as Mahindra`s Quanto, Renault India’s Duster and Maruti Suzuki’s Ertiga.

During FY13, Mahindra & Mahindra, the market leader in SUV segment has reported 27 per cent growth in the PV segment (which includes the UVs and Verito) on yearly basis. The PV segment has sold 2.79 lakh units in FY13 as against 2.20 lakh units during FY12. Similarly, Utility Vehicles segment (which includes Gypsy, Grand Vitara, Ertiga) of Maruti Suzuki has reported a 12 times surge in its sales. Maruti has sold 79,192 UV units in FY13 as against 6,525 units during FY12 (2011-12).

This trend can be confirmed by the eight fold growth in sales figure of Renault India in March 2012. It has sold a total of 8,232 units against 1,005 units in March 2012. Duster contributed approximately 77 per cent to the total sales of Renault India.

In the eleven months of 2012-13, the domestic UV segment volumes grew by 54.5 per cent YoY, much higher than the 4.1 per cent YoY growth recorded by the domestic passenger vehicle (PV) industry.

Explaining the factors behind the robust growth witnessed in SUV segment, Jitin Makkar, senior analyst at ICRA, said, “One of the primary growth drivers for the UV segment in 2012-13 was the creation of the Compact UV segment, a segment hitherto non-existent. The launch of Compact UVs: Maruti Suzuki Ertiga in April 2012 and Renault Duster in July 2012 and their subsequent steady volume scale-up supported the UV segment`s strong growth in 2012-13. Even on excluding these two models, the UV segment`s volume growth in 11months of 2012-13 was healthy at around 22 per cent YoY, a pointer to the customers` growing preference for UVs/ SUVs vis-a-vis mid-size sedans. Had this new value segment in UVs not got created, we believe the Mid-Size Car Segment may have continued its strong run in 2012-13.”

Commenting on the outlook of UV segment, Makkar at ICRA, cautioned, “Growth in the UV segment is likely to begin leveling-off from Q2 2013-14 onwards due to the combined impact of a high base, rising diesel prices and higher excise duty on SUVs imposed in the Union Budget for 2013-14 (duty increased from 27% to 30%). However, this segment may still grow faster than the PV industry as a whole.”

In the eleven months of FY13, M&M lost overall 900 bps of share in UV segment to 46 per cent versus 55 per cent in FY12. Citing the reason for same, Makkar, said, “The decline in M&M`s market share in the UV segment in 11months of 2012-13 was attributable to its lack of presence in the Compact UV segment (which was an altogether new sub-segment which got created during the year). M&M launched the Quanto in September 2012 marking its entry into the compact UV segment. Considering the UV segment after excluding Compact UVs, M&M in fact gained market share in 11months of 2012-13.”

Several new models are scheduled to be launched in the UV space in the near term - Chevrolet Enjoy, Ford Ecosport, Ashok Leyland Stile – to take advantage of the rise in preference for UVs.