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The utility vehicles (UV) segment sales, which has remained fairly insulated from the sluggish sales in the passenger car industry, is likely to see some tough times ahead in the coming quarters.
If initial reports from dealers is anything to go by, enquiries for utility vehicles has already started showing signs of slowdown, after the 3 per cent excise duty hike during the budget combined with the recent hike in diesel prices. Demand might shift to sedans, they say.
According to a city-based Mahindra & Mahindra dealer, which enjoys an over 40 per cent market share in the UV segment, "After the recent hike in excise duty announced in the budget, enquiries for the sports utility vehicles has dipped by around 10 per cent during March. People are perhaps postponing their decision to buy, expecting a roll-back in the excise duty." After growing at 20 per cent and 36 per cent in December and January, respectively, the company’s UV sales were up 14 per cent year-on-year but down 13 per cent month-on-month.
According to credit rating agency ICRA, Sales volumes in the UV segment have grown at 26 per cent CAGR over the last three years (2009-10 to 2012-13E), much higher than the growth of 11 per cent recorded by the domestic passenger vehicle (PV) industry during this period. In the last two years, the UV segment’s volume growth has been even faster with volume growth of 16.5 per cent recorded in 2011-12 (versus 4.7 per cent volume growth of the PV industry) and a still higher growth of 54.5 per cent recorded in 11 months of 2012-13 (versus 4.1 per cent volume growth of the PV industry)."
The growth story, however, is likely to hit a road-block, as demand is expected to shift to the sedan segment, say dealers. According to a Toyota dealership in the city, he has seen enquiries for the Etios sedan rise in the last few weeks by around 25 per cent, while in comparison, the demand growth for Toyota's popular UV model the Innova has remained relatively static. "The Innova comprises around 80 per cent of our overall sales, and is the most popular model. While we continue to sell over a 1500 Innovas in Gujarat per month, in recent times, there definitely has been a rise in enquiries for the sedan," he said.
A Maruti Suzuki dealer in the city too added that demand for the sedan Dzire has seen rise, while enquiries for its latest popular multi-purpose vehicle (MPV) Ertiga has remained static.
The market, however, is now looking forward to new launches reviving demand in the UV segment, the Ford Ecosport, is dubbed as one of the most eagerly awaited launches this year.
Another factor that might dent the growth of UVs and SUVs in the coming quarters, dealers say is the rising diesel prices. Off late, the automobile industry in the country has seen some traction in diesel vehicle sales.
"Within the passenger car segment, volume performance has been characterised by a wide dispersion in growth rates between petrol and diesel models. While diesel car volumes expanded by 37 per cent in 2011-12 and 27 per cent year-on-year (yoy) in 11 months of 2012-13, petrol car sales have stopped short of being cataclysmic – 14 per cent decline in 2011-12 and 17 per cent yoy decline in 11 months of 2012-13," a recent ICRA report points out.
Buoyed by the spurt in diesel vehicle sales, most carmakers have either lined up diesel models, or are working on adding capacity in the diesel segment.
Diesel vehicle sales have already started showing signs of decline, with diesel sales dipping by around 5 per cent during February, a month when the passenger car industry in the country declined by 25.71 per cent.
