For the first time, the Indian passenger vehicle market has seen domestic sales of one million in the July-September quarter. According to data released by the Society of Indian Automobile Manufacturers (SIAM), passenger vehicles saw domestic sales of 1,026,309 units in the quarter, compared to 741,442 units last year. The data also shows that utility vehicles—which include SUVs and MPVs—continue to pip passenger cars, which include hatchbacks and sedans. In the quarter, 517,898 units of utility vehicles were sold in the domestic market, whereas passenger cars did sales of 468,513 units.
These numbers imply that utility vehicles now make up 50% of the entire passenger vehicle market—the largest segment in terms of volumes. The rise in market share of utility vehicles has come at the expense of the mini segment—which SIAM classifies as entry-level hatchbacks less than 3.6 metres in length, with an engine displacement of up to one litre. The segment saw cumulative sales of 272,463 units between April and September in FY19. It has now halved to 132,236 units in FY23. The sub-segment has also seen many original equipment manufacturers (OEMs) moving out of it. In FY19, the sub-segment had four OEMs with eight models, whereas in FY23, it only had two OEMs with three models.
Implementing the more stringent BSVI emission norms, along with the spike in commodity prices—passed on to the car buyer—has put pressure on first-time car buyers, the ideal customer base for these vehicles, and recovery in demand of this segment has been disproportionate post-pandemic. “There were multiple challenges, including the sluggish growth of incomes of those buying entry-level cars; an increase in commodity prices; stringent emission and regulatory changes, and the premiumisation of vehicles with features and technologies, even if it’s not mandatory. This caused the segment to degrow because these factors took its toll on affordability,” explains Shashank Srivastava, senior executive officer, of marketing and sales, at Maruti Suzuki India Limited.
On the other hand, the sale of utility vehicles has seen a complete reversal of fortunes. Between April and September in FY19, 464,393 units of utility vehicles were sold, whereas 1,169,497 units of passenger cars were sold. In FY23, with OEMs migrating to the utility vehicles segment and new OEMs directly foraying in this segment, the sales have buoyed to 982,456 units between April and September, whereas passenger cars plummeted to 879,954 units. The perceptible demand for bigger, taller utility vehicles—with higher ground clearance than passenger vehicles—which was subdued for two years because of the pandemic, is now yielding with economic revival.
While Rajeev Chaba, president and MD, MG Motor India, claims that the uptake in utility vehicles is a lagged alignment with the global trend of uptake in SUVs, other executives, including Rajesh Jejurikar, sector head, of auto and farm sectors, Mahindra and Mahindra, and Hardeep Singh Brar, vice president, head of sales and marketing, Kia India, concur that the consumer behaviour has changed drastically. “Earlier consumers used to be conservative when they were buying a car. Then they slowly evolved into looking for a value proposition. Now, they have evolved into becoming aspirational car buyers,” says Brar. Jejurikar adds that the advent of crossovers and SUVs adopting car-based platforms like monocoque has furthered the uptake of SUVs.
The improvement of the supply of semiconductors has also come to the rescue of OEMs like Mahindra, which hitherto was seeing an interminable waiting period for its SUVs, especially the XUV700. However, some analysts are of the view that the ease of the supply of semiconductors has happened because the global demand for passenger vehicles has slowed down. “The semiconductor demand has eased down because globally, the auto industry has entered a slowdown, especially the major markets. Globally, the automobile industry produced 100 million units. We are just 3.7 million units, as of last year. We are just 3% of the global market. Even if the slowdown is about 5%, it would mean easier availability of chips for us,” explains Hemal Thakkar, director, of transport, logistics and mobility, CRISIL.