Better roads, travel bug, flexible workspace drive up lifestyle SUV segment

The SUV market is the fastest growing market, accounting for about 51 per cent of total sales passenger vehicles (PVs) in India

A young population keen to drive down to offbeat destinations that now boast better roads and are in the lap of nature, flexible workspace policies, and rising disposable incomes are giving a boost to lifestyle sport utility vehicles (SUVs). The segment, which includes models such as Mahindra Thar, Force Gurkha and Isuzu D-Max V-Cross, has the latest entrant in the Maruti Jimny.

SUVs are the fastest-growing market, accounting for about 51 per cent of the total sales of passenger vehicles (PVs) in India. It has sub-segments such as entry SUVs, crossover and urban SUVs, and lifestyle SUVs. Now, the SUVs that are used for adventure and exploration have 4X4 driving ability, and are heavily customisable to suit buyers’ preferences. They typically fall under the category of lifestyle SUVs.

Saket Mehra, partner, Grant Thornton Bharat, called lifestyle SUVs in India a “niche” segment with total sales of around 60,000 units in 2022, according to Society of Indian Automobile Manufacturers data. Sales in this segment, he said, are expected to go up to Rs 150,000 units this year. It makes up for about two per cent of total PV sales.

Thar comprises 90-95 per cent of sales in this segment. Thar’s prices start from Rs 13.87 lakh (ex-showroom). India’s largest carmaker, Maruti Suzuki India Ltd (MSIL), on Wednesday launched the Jimny at prices starting from Rs 12.74 lakh (ex-showroom). Shashank Srivastava, senior executive officer-marketing and sales, MSIL, said that Jimny may potentially double the current size of the lifestyle SUV segment.

Puneet Gupta, director - mobility, S&P Global, told Business Standard that lifestyle SUVs have an element of boldness, ruggedness and adventure and are preferred by consumers who are young or young at heart. “In India, lifestyle SUVs have gotten attention in the last three-four years. This can be attributed to multiple reasons like rising incomes and improved road infrastructure that has made offbeat locations accessible. Work-from-home and flexibility in the workplace have led to savings, which is also a reason for consumers to look out for such models,” he said.

People have more disposable income now and after the pandemic a shift in mindset to spend rather than save money is acting as a catalyst, Gupta added.

Mahindra & Mahindra, Force and Isuzu did not respond to queries sent by Business Standard.

According to Mehra, the addressable market for lifestyle SUVs is on a growth trajectory, as urban customers in the age group of 26-45 years are developing an affinity towards the segment. “The hybrid work model, which has gradually evolved into ‘work from anywhere’, coupled with a plethora of affordable stay options, has immensely increased short-distance trips, especially among the millennial and Gen-Z groups.”

A Ministry of Tourism report pointed out that India saw around 677 million domestic tourist visits in 2021 (an 11 per cent increase from 2020), which is expected to grow in the near future as the world leaves the pandemic behind. “The buyer behaviour has also substantially shifted with a sharp focus on technology, features and functionalities that a vehicle has to offer. These factors make the customers gravitate more towards UVs, and lifestyle SUVs by extension,” Mehra said.

The entry of Maruti Suzuki, with its vast dealership network, is expected to boost the segment, according to experts.

Gupta said, “With prices starting from Rs 12.74 lakh, Jimny is still targeting a bit premium end. The company has about 31,000 bookings but there could be a certain number of cancellations after yesterday’s price announcement by those consumers who were expecting a lower price range, of less than Rs 10 lakh.”

With Jimny’s inclusion, lifestyle SUVs could see sales of about 10,000 units per month in FY24. In the next five years, if Maruti launches lower-priced variants of Jimny, the segment could reach about 25,000 units per month, Gupta said. He explained that if Maruti launches cheaper variants, consumers may end up buying them instead of similarly priced hatchbacks.

Maruti will also be cautious about boosting production greatly as the demand may evaporate with a section of consumers likely to compare it with mass-market SUVs. “This is a niche segment that runs on impulse buying instead of needs-based buying. So, it has to be accordingly marketed and sold,” Gupta said.

Mehra pointed out that buyers in the 26-45 age bracket mostly gravitate towards the segment for purchasing an additional vehicle. “However, as the vehicle designs within the lifestyle SUV segment are evolving to include the needs of a typical family, the addressable market is expected to expand for the first vehicle’s purchase as well,” he added.

The two major automakers — Maruti Suzuki and Mahindra & Mahindra — will be in intense competition in the coming months over lifestyle SUVs.

Gupta said that Mahindra & Mahindra’s brand equity is much higher for rugged SUVs, as the company has been in the segment for long. “Thar looks bold, big and beats Jimny in those respects. Even right now, it has a waiting period of six months.”

However, Maruti has two advantages: a much wider dealership network and Jimny comes with just a petrol-run engine.

“If one thinks in volume terms, Maruti may overtake Thar but the latter will hold on to a strong brand value. In Thar, diesel engine is more popular whereas Jimny comes with just a petrol-run engine. This may also assist the latter’s sales as states like Delhi are bringing stricter regulations for diesel-run vehicles,” said Gupta.

What experts say

·        Lifestyle SUV sales expected to go up to Rs 150,000 units this year, from around 60,000 units in 2022; the segment makes up for 2% of total PV sales

·        The addressable market for lifestyle SUVs is on a growth trajectory, as urban customers aged 26-45 years are developing an affinity

·        The entry of Maruti Suzuki, with its vast dealership network, is expected to boost the segment

·         With Jimny’s inclusion, lifestyle SUVs could see sales of 10,000 units a month in FY24; in the next 5 years, if Maruti launches lower-priced variants sales could reach about 25,000 per month