India a sub-4 metre paradise as compact cars form 70% of market

Traffic congestion in cities, preference for small cars drives volumes; manufacturers too to roll out more launches in the segment

The Indian automobile industry, currently, seems to be driven largely by the compact segment, be it sedans, utility vehicles (UVs) or otherwise. Industry players say about 70 per cent of the volumes are coming from such sub-four metre long cars.  

Nine years ago, this segment opened up in India after the government lowered the excise duty to 12 per cent, compared to 30 per cent for bigger cars, a spokesperson for Maruti Suzuki India (MSIL) said. The number of sub-four metre models is increasing by the day. From 34 models in FY12 to 47 models in FY16, in five years, the industry has added thirteen new models — clearly pointing to shifting consumer preference from big cars to smaller cars.

During the current fiancial year, the segment saw around five big launches, including the Maruti Suzuki Baleno (over 28,000 units sold till date), Renault Kwid (around 18,000 units sold), new Honda Jazz (29,500 units sold till date), the Ford Aspire (around 16,500 units sold till date) and the Mahindra TUV300 (16,000 so far).

Analysts feel that the reason behind the popularity of the segment is primarily traffic congestion in big cities, as well as increasing consumer preference for stylish vehicles.

Abdul Majeed, partner, PwC India said, “Compact cars are going to be the order of the day, and future launches would see more of sub-four metre vehicles. OEMs too want to play on volumes and keep their prices competitive; hence the focus on the segment would remain.”

For example, MSIL plans to launch its compact SUV Vitara Brezza in the upcoming Auto Expo.

Majeed, however, also felt that this is more of an urban phenomenon where people have space issues related to parking etc.  MSIL, which owns the Maruti Suzuki Dzire, India's best selling compact sedan for the last three years, feels that the share of compact cars, compact sedans is high in rural belts too.

Since its launch in March 2008, the Dzire has already sold around 1.1 million units in India cumulatively and the company launched a refreshed Dzire diesel variant in February last year. Compact sedans, in fact, account for nearly 18 per cent of the company's sales.

Another leading OEM in the Indian market, Hyundai Motor too has come up with compact SUVs in the recent times.

A company spokesperson said, “While Creta is the SUV, compact category is made up of i10 and Grand i10. The premium compact category comprises Elite i20 and Active i20. Both Elite and Active i20 are market leaders with approximately 58 per cent market share in their categories.”

The Grand i10 has been the highest selling model in the compact category for HMIL, selling 386,588 units last year till December.

Model	2011-12	2012-13	2013-14	2014-15	2015-16
Total Modes sub 4-metre	34	37	42	43	47
Total Industry Sales	2605182	2657904	2503814	2601174	2066507
Overall Models	98	106	107	106	110
Sub 4 metre sales	1933189	1827562	1811083	1844903	1479090
% of sub-4 metre contribution of sales in industry	74%	69%	72%	71%	72%
% of sub 4 metre models in industry	35%	35%	39%	41%	43%

Source: Industry