Size matters: Compact SUVs emerge the new force disruptor

Automakers think big as mini sport utility vehicles find a sweet spot in the domestic UV segment

Compact sport utility vehicles (SUVs), which started four years ago as a sub-segment of utility vehicles (UV), have grown to become a dominant segment. The bulk of UV sales now come from this fast-growing segment to which most automakers have latched on. Four carmakers — Maruti Suzuki, Hyundai, Honda and Mahindra & Mahindra (M&M) — have entered this space in the past year.

A compact SUV is loosely defined as a five-seater vehicle with engine capacity of less than 2,000cc, with an entry-level price of Rs 7-8 lakh. Some are less than four metres in length, while some exceed it. With its modern style, features and attractive pricing, this segment has started appealing to a wider segment of buyers, compared to the bigger traditional SUV.

The rising popularity of this segment is evident in numbers. Four compact SUVs — Hyundai Creta, M&M’s KUV100 and TUV300 and Maruti Suzuki Brezza — launched in FY16 clocked sales of 108,000 units. Of these, KUV100 and Brezza were launched in the last quarter of the year and full-year impact will be seen in FY17.

Compact SUV sales at 30,000 units in April were nearly half of the 62,000 UVs sold in the same month. All the growth in UVs over last April’s 43,526 units has come from compact SUVs.

Creta alone sold nearly 64,000 units in the domestic market in FY16 and became the second-most sold UV after M&M’s Bolero. When it launched its first compact SUV Creta in July 2015, the South Korean carmaker Hyundai had planned to produce 5,500 units of the Creta a month. It was surprised at the surge in bookings and had to increase production a number of times to bring down the waiting period. It now produces 8,000 units, which will soon be raised to 10,000 units a month.

Rakesh Srivastava, senior vice-president (sales & marketing) at Hyundai, says compact SUV is now a full-fledged segment and is growing at a faster rate than the sedan and hatchback ones.

“It is emerging as a highly disruptive segment and is appealing to both sedan and hatchback users. In comparison to earlier SUVs, which were basic in features and rugged in looks, compact SUVs are more stylish and loaded with better features. Buyers are even willing to pay a premium over sedans and hatchbacks for compact SUVs,” he said.

Another element of the compact SUV is a petrol option, which the earlier SUVs never had. Vehicles such as the Creta, KUV100, Ford EcoSport and Renault Duster are available in both petrol and diesel variants.

Japanese automaker Honda recently launched its first compact SUV in India, BR-V, in both fuel options.

India’s largest carmaker Maruti Suzuki also entered the compact SUV space with Brezza in March this year. Since then, it has sold close to 20,000 units and has a total booking of 75,000 units. “Compact SUVs have changed the automobile landscape in India. Instead of big, bulky, people-mover UVs that are tough to manoeuvre in city conditions, customers are opting for compact SUVs that offer good road presence, great styling and ease of driving,” said a Maruti spokesperson.

The company said Brezza was being liked for its bold, masculine character and dynamic styling. It said around 80 per cent of Brezza sales have come from additional and replacement buyers, who were hatch or sedan owners and have upgraded to a compact SUV now.

Existing compact SUVs, however, came under pressure with the entry of new players. The sales of Renault Duster and Nissan Terrano have halved, while Ford EcoSport declined 23 per cent to about 40,000 units last year. Barely three days after the Brezza launch, American carmaker Ford cut the prices of EcoSport by up to Rs 1,12,300. The price cut has been announced on both diesel and petrol variants.

Bigger SUVs have also come under pressure. Fortuner, the SUV from Toyota, has been impacted due to a ban on sales of 2,000cc diesel vehicles in the national capital region and will be further impacted due to a similar ban by the National Green Tribunal in Kerala. Ford came up with a new Endeavour in January 2016 and 541 units were sold in April. General Motors’ Trailblazer, which was launched last year, sold only 13 units in April this year.