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India: A-segment cars biggest market share loser, compact SUVs leading gainer

14 June 2016 IHS Markit Automotive Expert

Reduction in buying power of rural India, stemming from deficit rainfalls in the last couple of years, behind the poor show of A-segment vehicles.

IHS Automotive Perspective

  • Significance: A-segment cars have emerged as the top market share loser in India's light vehicle market during the first five months while the B sport utility vehicle (SUV) segment was the biggest gainer.
  • Implications: The trend of A-segment vehicles losing market share to B-segment counterparts has become prominent as the effects of deficit rainfalls in the last couple of years are becoming visible now.
  • Outlook: We forecast the B-SUV segment is likely to gain even more traction in future as more models are launched in the segment, which was practically non-existent two years ago.

A-segment cars have emerged as the top market share loser in India's light vehicle market during the first five months while the B sport utility vehicle (SUV) segment was the biggest gainer. According to data available with IHS Automotive, the A-Car segment's market share stood at 30.1% in the first five months this year, down from 32.2% in the same period of 2015. Nevertheless, the segment continued to remain the biggest category in the country's light vehicle market, defined as the collection of automobiles less than 6 tonnes in gross vehicle weight (GVW). A total of 408,886 vehicles belonging to the segment were sold in the timeframe.

A-Van - populated by models such as Maruti Suzuki's Omni and Eeco - also registered a market share decline of 1.1 percentage points. As seen in the accompanying table, the segment also sustained lower sales and as a result, its market share came down to single digits.

Sales in A-segment MPVs such as Maruti-Suzuki Wagon R and Tata Magic Iris also came down during the period and the category's market share was reduced by 0.9 percentage points to 6.5%.

Meanwhile, the B SUV segment emerged as the biggest winner of the changing market dynamics. With sales of 124,112 units, the segment emerged as the biggest gainer in market share in the timeframe. The segment accounted for 9.1% of the light vehicles sold in the country in the first five months, up massively from just 1.9% in the corresponding period last year.

The B-Car segment was another area which recorded growth in sales and market share. A total of 321,302 B-segment cars were sold during the five months, resulting in a market share of 23.6. This reflects an improvement of 0.6 percentage points over similar timeframe last year.

D-segment SUVs saw a decline in sales and as a result, registered a 0.7 percentage point slip in light vehicle market share.

Outlook and implications

Of all the segment variations, two important trends stand apart. While sales of A-segment cars were on top in losing market share, other sub-segments with the realm of A-segment also witnessed declines. This dataset points to the industry-wide trend of A-segment losing sales to B-segment vehicles. Better sales of B-segment cars in comparison with their smaller counterparts contrast with the situation last year when the latter category was preferred by buyers. The contrast is particular this time as the effects of rural stress - stemming from deficit rainfalls in the last couple of years - are becoming visible now. Most of rural India still depends on monsoon rains for irrigation. In recent years, inexpensive A-segment cars have made inroads in smaller towns and rural parts of the country and the deterioration in income levels in these markets is hampering sales of these vehicles.

Another prominent trend is the emergence of B-segment SUVs. The segment's success points to availability of new models as well as changing consumer preferences. As many as seven nameplates in the B-SUV segment pulled the sales in the first five months while the number was limited to just four during comparable timeframe last year. New additions to the segment are Hyundai Creta, Maruti Suzuki Vitara Brezza, Mahindra KUV100, and Honda BR-V. The growth in the B-SUV segment primarily stems from strong consumption in urban areas, where buyers are gradually moving away from hatchback and sedan bodystyles and embracing SUVs. In terms of price points, B-segment SUVs are closer to C-segment sedans than C-segment SUVs. As a result, compact SUVs are attracting buyers from traditional bodystyles such as hatchbacks and sedans. Several of these compact SUVs qualify for lower excise rates, which make them even more competitive than C-segment sedans while offering the benefits of a higher seating position and better maneuverability.

We forecast the second trend is likely to gain even more traction in future as more models are launched in the B-SUV segment, which was practically non-existent two years ago. IHS Automotive forecasts sales in the segment to touch nearly 364,900 units this year, up from around 107,600 units last year. Following the trebling of volumes this year, growth rates are likely to moderate in 2017 but should still see a spurt of 29.8% to take the segment's sales to nearly 473,700 units.

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.

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