SUV demand soars as new launches flood market

The passenger car segment, in comparison, remained sluggish and grew a modest 1.9 per cent to 162,566 units in April

Demand for utility vehicles, especially sport utility ones (SUVs), have soared after a string of launches of the compact type by manufacturers, despite increased activism against their primary fuel, diesel.

According to data from the Society of Indian Automobile Manufacturers, utility vehicle (UV) sales rose nearly 43 per cent last month (including multi-utility ones), the best growth in a little more than three years.

UV volumes closed at 62,170 units in April, first month of financial year 2016-17, as against 43,526 units in the same month last year.

The growth was significantly higher as compared to the segment's average growth of 6.25 per cent in FY16 to 586,664 units, as against 552,135 units in 2014-15. UV growth in April was fuelled by high demand for the newly launched Vitara Brezza from Maruti Suzuki and the Creta from Hyundai, both with waiting periods.

The Brezza and Mahindra Nuvosport, a compact SUV, which debuted last month, are sold only with diesel engines. Mahindra's KUV100 and TUV300, with its all-diesel variants, contributed to the record growth.

Honda also debuted in this space with the launch of the BR-V last Friday, with a diesel engine option.

The Supreme Court observed on Monday that its earlier ban on large diesel vehicles (of 2,000cc and above) would continue in the National Capital Region for the time being. An environmental cess on all diesel vehicles must also be considered, said the judges.

Meanwhile, Maruti Suzuki (the car market leader), Hyundai and Mahindra have expanded SUV production to meet the demand. The growth is coming from small SUVs and not impacted by the SC ban in the NCR.

The passenger car segment, in comparison, remained sluggish and grew a modest 1.9 per cent to 162,566 units in April as against 159,588 units in the same month last year. Production constraints are proving a bigger challenge for some car makers than retail demand.

For Maruti and Renault, the backlog of unserviced orders for their Baleno and Kwid, respectively, stretch up to six months. The rest of the car market, however, grapples with subdued demand.

Domestic volume growth of Maruti Suzuki, which has about half the car market, beat that of the industry by 2.7 percentage points. The firm is already running its plants to full capacity and hopes to get more through de-bottlenecking.

Beside UVs, vans also grew at a much better rate of 16 per cent in April at 17,324 units, as compared to 14,875 in the same month a year before.

Two-wheeler sales bounced back in April, growing 21 per cent to 1.56 million from 1.28 mn in April 2015.

Urban demand continued to drive motorcycle sales, at 1.02 million units a growth of 16 per cent over the 881,743 units sold in the same month last year. Scooters, 30 per cent in the two-wheeler space, grew at double the pace, at 36 per cent.