Carmakers offer bigger vehicles at lower prices as small size market slows

Roudra Bhattacharya New Delhi | Updated on March 12, 2018

Maruti is to launch the Ertiga MPV next year, which is modelled on its concept R3.


Carmakers are now looking to upsize customers to bigger vehicles by bringing down prices closer to small cars – a predominant yet crowded segment, where the growth rate has now slowed. Though India is now viewed as a small car hub, almost no launch or unveiling in that space is scheduled for 2012.

At starting prices closer to top-end hatchbacks – around Rs 6-7 lakh, a new segment of Compact Sports Utility Vehicles (SUVs) has emerged. Some manufacturers are also betting on the 7-8 seater Multi-Purpose Vehicle (MPV) segment, which caters to large families.

Compact SUVs

Maruti Suzuki and Hyundai are showcasing concept compact SUV versions at the Delhi Auto Expo next month, while Mahindra & Mahindra is gearing up to launch the mini-Xylo, Renault will launch the Duster and Ford is reportedly planning to roll out the Ecosport.

Maruti will also launch the Ertiga MPV next year, with Nissan/Ashok Leyland driving in their MPV models. General Motors is also rumoured to be eyeing the segment.

“They (compact SUVs) are not really SUVs, but MUVs in the shape of SUVs. This is peculiar to India that such models are available at such low prices. Globally, SUVs are available only with high-performance engines,” said a top industry executive.

Added Mr Abdul Majeed, partner and auto practice leader at PwC India, “People going for their second cars are now going for SUVs as opposed to bigger sedans. Companies are looking for the next logical segment for growth.”

Dual excise

Companies have also been encouraged by Government's dual excise structure on cars which puts a 10 per cent duty on cars below four metres length and with engines below 1.2 litre (petrol) and 1.5 litre (diesel). This has kept the pricing very competitive for these new segments of compact sedan and compact SUVs.

“The key remains pricing, which is close to higher-end hatchbacks, and styling, which caters to the rising aspirations that dream of big macho SUVs,” said an industry expert.

Small car slowdown

With a 78 per cent (9.47 lakh units, April-Nov 2011) share of the market, the small car space has seen a flurry of launches over the past two years. Now, about 25 models exist in the entry and premium hatch space from across nearly all carmakers.

However, small car sales in April-November 2011 fell seven per cent largely on market leader Maruti's labour troubles and overall market slowdown. This is while the other car segments together gained 13 per cent (2.71 lakh units) in sales, though the absolute volumes were much smaller.

“I won't say the small car market is saturated, but it's now become crowded and companies are seeking a market elsewhere. It's growing slowest as compared to the rest,” Mr Vishnu Mathur, DG, SIAM said.


Published on December 22, 2011

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