Why are utility vehicles outdoing hatchbacks?

For a long time, small and entry level cars drove sales for the automobile industry. But that is changing; in the last few years, buyer preferences have shifted towards better space, good looks and safety. That’s the reason buyers are opting for SUVs in place of hatchbacks, and we might soon be seeing utility vehicle (UVs) sales overtaking hatchback sales in 2020. In fact, young first-time buyers are also choosing SUVs to up their style quotient.  

As per IHS Markit, a market forecasting firm, the gap between the two segments are expected to narrow by two percentage points till the end of this year — utility vehicles taking 38 per cent and hatchbacks at 40 per cent.

Car makers are re-positioning the hatchbacks as Mini-SUV's to generate demand. Cars such as the Renault Kwid and Maruti S-Presso are perfect examples. There are numerous small-to-micro SUVs lined up for launch in the five to seven lakh bracket from Hyundai, Tata Motors, Renault-Nissan and PSA. Mahindra & Mahindra sold 17,723 utility vehicles in June 2019, a growth of 8 per cent over June 2018.

As per media reports, Volkswagen recently said, it will now focus its attention on developing only such cars for its customers here, given the demand for SUVs in India, even in the midst of a critical sales slowdown.

The director of an automotive company, who did not wish to be quoted, defines the reasons, “SUVs are matching the current Indian needs, safety, design, driving position. More so, SUVs are looked at as an upgrade and novelty. If we compare Sept ’19 vs Sept '18 for sub 4 million BSUVs, there is a 6 per cent growth, but BSUV and CSUV is down by -18 per cent and -7 per cent.”

We reached out to industry experts to understand the main driving force behind the rising sales numbers of UVs in India and why people are preferring UVs over hatchbacks.

Brand expert, N. Chandramouli, chief executive officer, TRA Research believes, “UVs are a segment that represent more ruggedness and space, and showcases more 'adventure and thrill' than hatchbacks or sedans. A product/brand represents the personality of the owner and today's working millennials seek these aspects in their vehicle/s. You even find more women opting for UVs.”

“The 'affordable' UV segment is yet to open up fully and once this happens the 'Buying Propensity' of UVs will rise dramatically,” he adds.

According to Anup Sharma, independent communications consultant, “Led by rise in demand for inter-city travel and increased acceptance by personal buyers, the boxy MPV (multi-purpose-vehicle) segment, which had lost out to the attractive SUV (sports utility vehicles) segment over the past few years, showed good come back with 14 per cent growth in FY19. This double-digit growth in MPVs, helped the overall sales growth of the utility vehicle segment, which would have also slipped into negative territory. A lot of auto-buyers will leap straight into the four-wheeler segment, and there would be many who will upgrade from two- to four-wheelers.

He further adds, "One of the likely drivers behind these changes is the pace of urbanisation. In India, the purchase of a vehicle is triggered both by rational and emotional needs and is still considered as one of the most visible marks of social progress. With an increased number of younger people in a position to afford a vehicle, purchase decisions are likely to be influenced by the growing family, loans and offers by the auto makers".

As the penetration of UVs is still very low as compared to hatchbacks, we asked the experts how much growth potential they see in the UV segment in the next 2-3 years.

Auto expert, Tutu Dhawan opines, "Car manufacturers are now targetting this segment for the future and tie-ups such as Suzuki with Toyota will, by 2022, launch with a new with an all new platform for UV's from their joint combination.”

"It is actually the manufacturers who do some hard-core research on customer thinking and perceptions to strike the right chord with the consumer and start off a new trend/segment. Hence if the customer finds a vehicle that can fit into his lifestyle it becomes everybody's favorite,” Dhawan concludes.

What does this say about people's lifestyle today, we wonder. Titus Upputuru, national creative director, Dentsu One and creative head,Taproot Dentsu, believes, “A few years back, people found hatchbacks very practical and useful. Now with the new offerings in the utility segment, consumers are getting swayed. It is true that consumers, especially younger mindsets, tend to get carried away. People are becoming more open to experimenting with newer products, newer brands and newer experiences.”

"While the current auto mobile sentiment is low, now more than ever, most manufacturers are trying hard to sell cars like candies. There’s a new flavour at almost every price point today. We must wait and watch to see that this may just be a trend. I believe, those cars that have good build quality and good engines will sustain and overcome this temporary excitement,” he concludes.