Fuel price hike takes away speed from SUVs; growth of domestic sales slows

Fuel price hike takes away speed from SUVs; growth of domestic sales slows
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New Delhi, Oct 15: Sports Utility Vehicles (SUVs) have been the flavour of the Indian car market for the last couple of years. They grew at a strong double-digit and were the fastest growing segment in the domestic passenger vehicle (cars, utility vehicles and vans) market for the last two years. Things are no longer the same. UVs or utility vehicles are now the slowest growing segment of the PV market, visibly impacted by a sharp surge in fuel prices. Most of the UVs run on diesel where the price hike has been sharper to petrol.
In the first half (H1) of the financial year 2019, UVs have grown by just 5.4 per cent compared to 6.8 per cent growth in cars and 14.5 per cent growth in vans. In the comparable period of FY18, SUV had surged 18 per cent while cars and vans had grown at 6.6 and 2.5 per cent, respectively. SUVs and multi-purpose vehicles (MPV) are the two sub-segments of UVs. The emergence of more affordable compact SUVs in recent years helped expand the total UV market.
A total of 1.16 million cars have been sold in the domestic market during H1. The volume of UVs, the second biggest sub-segment of the PV market, stood at 464,419 units. A total of 110,389 vans were sold in the same period.
“When fuel prices rise the SUVs are impacted. People were upgrading from hatches to compact SUV but these buyers now realise that fuel price is an issue. Compact SUV segment is seeing a muted growth now,” said Mayank Pareek, president of passenger vehicle business at Tata Motors.
Petrol price has climbed more than 18 per cent since January this year to Rs 82.72 per litre in the capital. However, the price increase in diesel has been steeper at 26 per cent to Rs 75.38 litre. About 84 per cent of the current UV sales are in diesel variants and therefore the impact on driving cost of these vehicles is higher than the petrol run cars. In cars, only 23 per cent of sales are in diesel variants. Take the case of Maruti Suzuki Vitara Brezza, the most sold SUV in domestic market. Brezza’s sales expanded six per cent to 64,612 units in April-August period of FY19. In April-August of FY18, the volume had surged 47 per cent to 60,960 units.
The company said Brezza continues to grow at a healthy pace even on a large base of last year. “Maruti Suzuki’s foray into the popular UV segment began with Vitara Brezza and S-Cross. These products created disruption in the compact SUV market. Vitara Brezza continues to be the most loved SUV despite several new entrants into the segment. The testimony to it is the double-digit growth in its average monthly sales in consecutive years,” said R S Kalsi, senior executive director at Maruti Suzuki.