Indian SUV market witnesses shifting consumer preferences

The Indian automotive industry is experiencing a notable shift in consumer preferences, particularly within the sport-utility vehicle (SUV) segment. Recent data suggests that buyer enthusiasm for larger, premium SUVs—those priced above INR 20 lakh—is waning. This trend is evidenced by an 18 per cent decline in sales for models such as the Hyundai Tucson, Toyota Fortuner, and Jeep Meridian during the first five months of the current fiscal year.

This development marks a significant change from the previous two fiscal years, during which the Indian car industry experienced robust post-pandemic growth. SUVs of various sizes were the primary drivers of this growth, propelling domestic passenger vehicle sales to an unprecedented 4.22 million units in FY24.

However, the automotive sector's growth has decelerated in the current fiscal year, with overall sales increasing by less than 2 per cent to reach 1.75 million units from April to August. While entry-level and midsize SUVs have shown growth rates of 65 per cent and 6.3 per cent respectively, sales of larger SUVs have contracted by nearly one-fifth. These segment-specific figures are sourced from Jato Dynamics.

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Industry executives attribute this shift to evolving consumer preferences in a maturing market, where buyers are increasingly seeking diverse options. The increased availability and new launches of midsize SUVs—such as the Hyundai Creta, Kia Seltos, and Maruti Suzuki Grand Vitara—have led some customers to opt for vehicles in the sub-INR 20 lakh category.

The top-end variants of some midsize SUVs, including the Tata Harrier and Safari, Hyundai Creta and Alcazar, and Mahindra Scorpio N and XUV700, do cross the INR 20-lakh threshold.

A senior industry expert explained the situation, "Previously, due to supply constraints and extended waiting periods, some customers were willing to move up price bands and purchase larger vehicles. Now that the post-Covid pent-up demand has dissipated, consumers are reassessing the value proposition of these products. Moreover, the sub-INR 20 lakh category now offers a much wider range of options, with all recent launches occurring in this space."

The local market currently features approximately 48 SUV models, but fewer than a dozen of these fall into the premium segment priced above INR 20 lakh. At the higher end of this market, newly introduced, feature-rich multipurpose vehicles (MPVs) are also attracting buyers away from larger SUVs.

Ravi Bhatia, president of automotive consultancy firm Jato Dynamics, commented on this trend, "As urban professionals return to offices and intercity travel for both business and leisure increases, we're observing a surge in demand for versatile, comfortable vehicles in the INR 20 lakh-plus category. This trend is particularly pronounced in the MPV segment, which offers an appealing combination of space, luxury, and practicality for discerning customers."

Sabari Manohar, vice-president of sales, service, and used car business at Toyota Kirloskar Motor (TKM), added insight, "The primary selling points of MPVs are space, design elements, and comfort. Changing travel styles are also a crucial factor; people are now spending more time travelling, which is driving demand for more spacious and comfortable MPVs."

Manohar noted that inquiries and demand for Toyota MPVs are not confined to major urban centres but extend into tier-II and tier-III markets as well. In August, the company reported a 39 per cent year-on-year increase in MPV sales.