In the year 2023, SUVs (sports utility vehicles), though downsized from their original forms, emerged as dominant players in India’s automotive market. This calendar year witnessed an unprecedented surge in SUV launches, reaching a notable milestone of 108—a first in breaching the three-figure mark.
The enthusiasm for SUVs became evident as they surpassed all other car types. According to data compiled by automotive market research firm Jato Dynamics, the overall passenger vehicle segment experienced fewer launches in 2023 compared to the pre-pandemic year of 2019, notably in the hatchback and sedan categories. Only 47 new sedan models hit the roads this year (as of October end), a decrease from 62 in 2019, while the number of hatchback launches more than halved, dropping to 21 from 48. October marked the tenth consecutive month of record-breaking monthly sales of passenger vehicles, driven predominantly by SUV demand, constituting half of all passenger vehicles sold in the country.
The SUV’s ascendancy in the Indian automotive landscape has been remarkable, with a doubling of market share within five years. Reports indicate a four-fold rise in SUV market share among first-time car buyers in the past decade. This surge is attributed to growing affordability, improved choice from manufacturers, and the appeal of four-wheelers with higher ground clearance.
Surprisingly, more Indians are now opting for SUVs over hatchbacks and sedans, a trend that was not anticipated a few years ago in a market historically dominated by small cars. SUVs have effectively doubled their market share in just five years.
SUVs have witnessed a four-fold increase in market share among first-time buyers over the past decade, reflecting a shifting preference toward four-wheelers with higher ground clearance. According to industry data, about one-third of first-time car buyers in the Indian market now choose an SUV, compared to less than a tenth a decade ago when hatchbacks were more prevalent.
This preference for SUVs can be attributed to their commanding road presence, high ground clearance, spacious interiors, and additional features. The challenging conditions of Indian roads, with potholes, speed-breakers, and occasional floods, make SUVs a preferred choice. As a response to this growing demand, automobile manufacturers have adapted their product portfolios to offer SUVs tailored for urban mobility while maintaining the appeal of comfort and stature.
The roomier design of SUVs addresses the specific needs of the Indian market, where cars often carry more passengers than in other countries. The higher driving position and increased ground clearance also prove advantageous on roads facing deterioration due to the rising vehicle population.
The shift in consumer preference away from low-slung sedans is influenced by overlapping price segments as SUVs become more compact and lose some of their all-terrain functionality. New safety requirements have made entry-level hatchbacks more expensive, prompting buyers to stretch their budgets for the perceived benefits of SUVs. Car manufacturers are reevaluating their priorities, with a decrease in emphasis on premium hatchbacks and entry-level sedans, especially as it is relatively straightforward to adapt engines and drivetrains from these segments to compact and mid-sized SUVs.
The rise of the SUV and the decline of the small car segment reflect not only the changing aspirations of young Indian consumers but also market dynamics. Economic pressures at the lower end of the customer spectrum, the trend towards premiumization, and easy access to credit in the middle customer segment have collectively steered carmakers toward a heightened focus on SUVs rather than smaller cars. Currently, there are approximately 13 hatchback models available in the Indian market, compared to 12 SUVs each in the entry and midsize segments.