Saturday, September 30, 2023

How midsize SUVs can be the next growth trigger in the Indian car industry?


Midsize SUVs have been finding an increasing number of takers in the Indian car market. Several factors have been playing key roles in this growth story. Also, this segment has a great potential to become the next growth booster of the country’s car market.

The story so far

Half of all SUVs sold in 2021 till November have been 4-meter SUVs and another 24% have been the mid-sized SUVs. The midsize SUVs are SUVs that are longer than 4 meters but smaller than 4.5 meters. Together the two hold almost three-quarters of the very promising SUV market.

The former is growing at an astounding pace of around 34% CAGR over the last 5 years with this year’s growth so far at 83% overall of 2020 sales. The latter is the less attractive but equally promising dark horse, which has seen average monthly sales double from around 12.5k in 2017 to 25k in 2021 (The four-meter SUVs went up by 2.5 times from 20k to 50k in the same time period.)

The % numbers are the growth rates and the totals at the top are the total number of units sold in the mid-sized SUV market.

Segment history

This segment was ignited first by Renault in 2012 when it introduced the Duster. The Duster with its 110 BHP diesel K9K engine ruled the roost for around 3 years selling over 130k cars till 2015 when Hyundai took the cue and brought in the Creta with a much more powerful 126 BHP diesel/121 BHP petrol, plusher interiors and automatics in both the diesel and the petrol.

The Duster did respond with some updates here and there as well as an AMT but it did not help its cause, and today sells a paltry 200-300 numbers per month across the nation compared to the 5-digit number that Creta manages month on month. Even the launch of the Duster with a 156 BHP turbo petrol engine with a CVT has not been able to stem the tide. This segment attracted interest from Maruti in 2015 which brought in the S-Cross with limited success as well as models from Renault and Nissan such as the Captur and the Kicks, both of which failed badly.

Midsize SUV

The latest

The real competition came in late 2019 in the form of the Kia Seltos which set the markets ablaze with their multiple engines (Naturally Aspirated Petrol, Turbo Direct Injection Petrol and Turbo Diesel) and auto gearbox options (Intelligent Manual Transmission IMT with no clutch, CVT, Torque Convertor and Dual Clutch DSG) coupled with features such as ventilated seats, sunroof, 10.25-inch touchscreen, electric driver seat adjusters, all-disc brakes, Bose entertainment system, 360-degree camera with a blind view monitor, front parking sensors, head-up display, air purifier etc. that were never seen in this segment before.

Despite stiff pricing where top-end models crossed the 20-lakh mark for the consumer, the Seltos quickly marched to the top in this segment for some time (see Rank chart). The new-gen Hyundai Creta released in 2020 shared the brilliant features and engine/gearbox combinations of its sibling the Kia Seltos in most part along with a panoramic sunroof and has been able to top the charts in this segment ever since its launch pipping the Kia Seltos to the post. Sharing the platform along with engines and transmissions, the Korean twins ruled this segment with over 90% of the market till the beginning of the year 2021.

Midsize SUV

Smaller numbers were also contributed to by VW and Skoda through their CBU (Completely Built-Up) imports of the T-ROC and the Karoq, though of little consequence due to their very high pricing, thanks to India’s over 110% duty on CBUs. To further buttress their claim to this segment, Hyundai introduced the Alcazar, a Creta with the third row of seats, in May 2021. It has captured roughly 10% of the segment since its launch and till date is helping in ensuring that the Korean twins retain around 75% of the market. This is in spite of the brilliant German offerings coming in from VW in the form of the Taigun and Skoda in the form of the Kushaq.

The number at the top for each segment in a year is the market share of the segment and the second number is the cumulative annual growth rate or CAGR.

One can see how the share of the 10-15 lakhs and 15-20 lakhs price brackets are increasing with time along with hugely positive CAGR. The share of sub 10 lakh cars that were over 80% in 2011 is today at 53% and the share of cars in the 10-20 lakh range has increased from 16% to 40%.

The number at the top for each segment in a year is the market share of the segment and the second number is the cumulative annual growth rate or CAGR.

We can see how the share of the ever-popular Hatch is decreasing with time from over 60% in 2011 to 36% in 2021 and that of the SUV is increasing from less than 5% in 2011 to over 40% in 2021. Today it is “the top” selling body type of form factor in the Indian car markets with over 40%.

This combined change in customer choice caused by both an increase in prosperity as well as the choice of form factor to the SUVs caused by issues such as the poor condition of roads and the feeling of safety has resulted in a serious change in the contours of the Indian car industry.

At the beginning of this calendar year, there were only 5 models selling actively in this segment.

Hyundai Creta, Kia Seltos, Renault Duster, Nissan Kicks and Maruti S-Cross.

Over this year we have seen additional players such as the VW Taigun, Skoda Kushaq, Hyundai Alcazar, and the MG Astor coming in. This has reduced the share of the Koreans from over 90% of this segment in January 2021 to around 75% by November.

Expected entrants

The following are the new entrants expected this year and in the coming years into this segment

  1. Honda SUV RS whose details are yet to be released
  2. New Hyundai Creta with the same engine and gear box combinations but a new face that will resemble the Hyundai Tucson
  3. Kia Carens with the same engine and gear box combinations offered in the Seltos
  4. New Maruti S-Cross with a 1.4 L turbo charged petrol engine making 127 BHP and around 220 NM of torque
  5. The New Renault Duster with 1.3-liter turbo charged petrol engine developing 156 BHP and 254 NM of torque
  6. Tata Nexon Coupe with turbo charged 1.5-liter petrol engine that was initially developed for the Harrier.

Also Read: Tata Motors’ turnaround: A brilliant story to inspire many

(Niranjan N Prabhu is an auto industry analyst with vast experience in BI and data analytics for over 22 years.)

(Disclaimer: The views expressed in the article above are those of the author’s and do not necessarily represent or reflect the views of Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.)


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