In a remarkable shift in consumer preferences, first-time car buyers in India are increasingly turning their attention to Sport Utility Vehicles (SUVs). This burgeoning trend has been analyzed in a recent Economic Times report, shedding light on the factors fueling this change and its profound impact on the automotive market.
A Decade of Transformation
Over the last decade, SUVs have witnessed an unprecedented surge in popularity among first-time car buyers across India. The reasons behind this remarkable shift are multifaceted, with affordability and a wider range of choices from automakers playing a pivotal role. This surge has led to a remarkable four-fold increase in SUVs’ market share within this demographic.
A Noteworthy Shift
The data from the industry paints a clear picture of this evolving landscape. In what can only be described as a seismic shift, nearly one-third of first-time car buyers in India are now opting for SUVs. This marks a significant rise from less than one-tenth a decade ago when hatchbacks were the undisputed rulers of the roads. Simultaneously, the demand for additional or replacement cars within this category has dwindled, declining from a staggering 92 percent in 2014 to a more modest 69 percent today.
Shashank Srivastava, Senior Executive Officer (Marketing & Sales) at Maruti Suzuki Ltd, offered insights into this trend, saying, “There is not only an increased preference for the SUV body type but with the introduction of more compact models, there is now a price overlap between entry-level SUVs. Entry-level SUVs accounted for 22 percent of sales in the overall market (in 2022-23), up from 1 percent in 2014.”
The Allure of Compact SUVs
Compact SUVs, such as the Hyundai Venue, have emerged as stars in this new landscape. They attract a whopping 40 percent of their sales from first-time car buyers. Mid-sized SUVs like the Maruti Suzuki Grand Vitara and Hyundai Creta also hold their own, capturing 21 percent and 26 percent of the market, respectively. The Maruti Suzuki Brezza claims a 23 percent share of first-time buyers, while the newly launched Fronx takes the lead with an impressive 30 percent.
Evolution of Design
This shift in consumer behavior can be attributed, in part, to the evolution of SUV design. What were once rugged, off-road vehicles have transformed into models better suited for city driving. This combination of stature and performance resonates with car buyers’ self-image, as noted by Santosh Desai, CEO of Futurebrands: “The higher road presence psychologically signals value.”
The Appeal of SUVs
SUVs have become increasingly appealing to consumers due to their affordability, city-friendly features, and widespread appeal. Across the broader automotive industry, the popularity of SUVs has been steadily climbing, experiencing a sharp increase in demand over the past three years. In the first quarter of this fiscal year, SUVs accounted for an impressive 47 percent of total passenger vehicle sales, up from a mere 22 percent in the same period of 2018-19. By July, this figure had risen to 49 percent, surpassing hatchbacks (32 percent) and sedans (9 percent) in terms of market share.
For some manufacturers, SUVs now constitute more than half of their business. Tarun Garg, COO of Hyundai Motor India, emphasized this trend, stating, “SUVs continue to be an extremely strong growth driver for the company, contributing to nearly 60 percent of our total sales against the industry contribution of 46-47 percent. The percentage of first-time buyers preferring SUVs continues to rise, and now close to 40 percent of our Venue customers are first-time buyers. For Creta, first-time buyers account for a healthy 26 percent.”
The Road Ahead
The growing popularity of SUVs is unmistakable, with Hyundai’s recently launched SUV, Exter, already garnering a staggering 60,000 bookings from eager customers. Projections indicate that SUV sales in India are poised to increase by an impressive 19 percent, reaching a total of 1.9 million in this fiscal year, up from 1.67 million in 2022-23.
In conclusion, the Indian automotive market is witnessing a remarkable transformation as first-time car buyers increasingly favor SUVs over traditional hatchbacks and sedans. This shift is driven by affordability, design evolution, and the changing preferences of consumers. As SUVs continue to dominate the market, automakers are poised to adapt to this new reality, offering a wider array of options to cater to the growing demand for these versatile vehicles.