Compact SUVs Driving Indian Auto Market Growth, Gaining Share from Hatchbacks

The Indian automobile market is witnessing a strong shift in consumer preference towards compact sports utility vehicles (SUVs), which are increasingly 'cannibalising' the market share of traditional hatchbacks and small cars. Monthly sales of SUVs have grown to approximately one lakh units in October, up from 86,000 units last year. Consequently, hatchbacks' contribution to overall passenger vehicle sales has dropped from 22.4% to 20.4% in the same period.

SUV demand has seen consistent growth over the past seven years and is projected to grow at a Compound Annual Growth Rate (CAGR) of 11% between 2022 and 2026. Compact SUVs have emerged as a primary growth driver, now accounting for 41% of all SUV sales and contributing 57% to the total passenger vehicle sales.

Hyundai Motor India, a key player, reported that SUVs currently constitute 71% of its total sales, with expectations to exceed 80% by 2030, including multi-purpose vehicles (MPVs). The company recently launched the all-new Venue compact SUV, priced between ₹8 lakh and ₹15.51 lakh, following a ₹1,500 crore investment in its development. The new Venue will be produced at their Pune facility, which is set to increase its annual capacity.

According to the Society of Indian Automobile Manufacturers (SIAM), total SUV wholesales in India grew by over 13% year-on-year in September-October, with the compact SUV segment showing a 14% increase.

Impact This trend significantly impacts the Indian automobile sector by shifting consumer preferences and production focus. Companies must adapt their product portfolios to cater to SUV demand, potentially affecting sales and profitability of manufacturers focused on smaller cars. Investment in new models and production facilities, like Hyundai's, indicates strategic bets on the SUV segment's future growth. The increased sales volumes can positively influence overall automotive sector revenue and employment. Rating: 8/10.

Difficult Terms: CAGR: Compound Annual Growth Rate, the average annual growth rate over a period longer than one year. Cannibalising: When a company's new product reduces the sales of its existing products. Wholesales: Sales volume from manufacturers to dealers. Dispatches to dealers: The process of sending vehicles from the manufacturing plant to dealerships. Ex-showroom: The price of a vehicle at the showroom before additional charges like taxes and insurance.