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Customer LoginsB-segment vehicles biggest gainers in first 10 months in India as minicars' popularity wanes
Compact SUVs gained market share in India over the first 10 months of 2016 amid price increases and judicial action against bigger vehicles.
IHS Markit Perspective
- Significance: In the first 10 months of 2016, B-segment vehicles emerged as the biggest gainers in India's light vehicle market, according to IHS Markit data. The market share of entry-level A-segment vehicles declined the most during the period.
- Implications: Apart from the availability of options in B-segment and participation by market leader Maruti Suzuki, the trends were driven by regulatory and judicial interventions that significantly enhanced the attractiveness of B-segment vehicles.
- Outlook: IHS Markit expects B-segment SUVs to continue to win market share from other categories next year, accounting for 12.9% of the light vehicle market, followed by 13.8% in 2018.
In the first 10 months of 2016, B-segment vehicles emerged as the biggest gainers in India's light-vehicle market, data available with IHS Markit indicate. During this timeframe, the market share of entry-level A-segment vehicles declined the most. IHS Markit classifies all vehicles with gross weight of less than 6 tonnes as light vehicles, which typically includes passenger vehicles - cars, sport utility vehicles (SUVs), vans - as well as some light commercial vehicles (LCVs).
India's light-vehicle market continues to be led by A-segment cars, although their sales in the 10-month period increased at an anemic 1.2% year on year (y/y) to 847,081 units. As a result, the category's share in the light vehicle market dropped 2.2 percentage points to 29.9%.
B-segment cars - the second most popular category - managed to slightly outperform the light-vehicle market with sales up 10% y/y to 669,467 units. The category's market share nudged up to 23.7%, up from 23.4% in the 10 months of 2015.
However, the biggest gains were observed for B-segment SUVs, whose market share jumped to almost double-digits from a low of 3.2% in last year's comparable timeframe. A total of 280,637 S-segment SUVs were sold in the latest 10 months, putting them ahead of A-segment vans.
A-segment vans are widely used in commercial applications such as taxis so are less susceptible to changing customer preferences. The category's sales slipped 2.4% y/y to 265,003 units, eroding its market share by 1 percentage point to 9.4%.
D-segment SUVs lost 1.3 percentage points in market share to 7.3% and A-segment MPVs shed 1 point to 6.3%.
All other vehicle category, except C-segment SUVs, lost market share.
Outlook and implications
During the first 10 months of 2016, India's light vehicle market grew 8.6% in a broad indication of the market's improving situation. Sales volumes were entirely driven by passenger vehicles, which climbed 12.5%, while LCV sales shrunk 5.1%. These divergent paths point to the transformation under way in the Indian automotive market, especially in the passenger vehicle domain.
Unsurprisingly, the leading market shift is for B-segment SUVs, as several market developments propelled consumers to buy these compact SUVs. Wider options in this domain and participation by market leader Maruti Suzuki obviously played an important role. But regulatory and judicial intervention provided additional tailwinds. Early this year, the cash-strapped Indian government sidelined the automotive industry's demands for a scrappage policy and instead made passenger vehicles more expensive through tax increases. Following the imposition of infrastructure tax, larger vehicles became subject to a disproportionately high price increase, dulling their appeal. Additionally, a 1% luxury vehicle tax was imposed on vehicles priced north of INR1 million (USD14,521), mostly affecting vehicles in the C-segment and above.
Indian courts also acted against vehicles powered by diesel engines larger than 2,000 cc. Although their campaign only affected specific regions, such as national capital region (NCR), and restrictions were lifted later in the year, it played a crucial role in shifting customer preferences, especially regarding SUVs, towards the B-segment.
IHS Markit forecasts the trend for B-segment SUVs to win market share from other categories will continue next year, when the segment is expected to account for 12.9% of the light-vehicle market, followed by 13.8% in 2018.
About this article
The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.