Supported by several new launches, the utility vehicle (UV) segment has been one of the fastest growing passenger vehicle segments presently. However, the growth was primarily driven by the compact UV segment whereas sales of larger UVs have declined for the third consecutive year in FY2016.
The share of the compact UV segment has increased from 34 per cent in FY12 to 67 per cent as on date. Some original equipment manufacturers (OEMs) also launched sub-4 metre UVs, which also helped them to price them competitively owing to lower excise duty.
New models such as Maruti Suzuki Ertiga, the S Cross and Brezza, Renault Duster, M&M TUV & KUV, Nissan Terrano, Ford Ecosport and Hyundai Creta that were launched since April 2012 created a new segment called compact UVs between mid-size cars and the conventional UVs.
Some of the major launches in FY2016 included the Creta, the TUV 3OO, the S-Cross and Brezza and the KUV 1OO in the compact UV segment. A majority of these launches were towards the second half of the fiscal, which will result in a relatively stronger growth during H1 FY2017 due to the low base effect. With proposed launch of Maruti Ignis, the compact UV segment is likely to remain the shining star in the near term though growth velocity will moderate due to a high-base effect.
Changing customer preference towards compact UV in India is in line with the trends across various developed markets, wherein sedan (in China) and pickups (US, Thailand) are preferred over smaller cars. Unlike earlier chassis-built UVs, a majority of the new launches in compact UVs are monocoque vehicles providing car-like driving dynamics and better manoeuvrability.
These compact UVs are generally priced in the Rs 7-12 lakh bracket and have a price overlap with mid-size cars. This, coupled with the new offerings in the compact UV segment, has been putting pressure on the mid-size segment.
Ray is senior group vice president of ICRA
