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Utility vehicles: capturing western trends

Aug 11, 2001

Multi utility vehicles (MUVs) or Sports utility vehicles (SUVs), as they are popularly known in the western markets, have been slowly and steadily encroaching into the passenger car market in India. By definition, these are vehicles, which are larger in size than passenger cars and can carry around 7-10 persons. These are multi-purpose vehicles used for carrying tourists and for social occasions like marriages etc. They are also useful for out of town travel, and they double up for usage within the city. These MUVs not only provide a break from the traditional passenger cars that the Indian mass has been using, it also makes sense for a certain class of consumers to own one big car instead of having two to three cars due to inherent problems of parking charges.

Sales breakup
Multi Utility vehicles FY00 FY01 % change
Mahindra & Mahindra 69,683 56,095 -19%
Telco 29,796 29,140 -2%
Toyota Qualis 3,519 25,375 621%
MUL 8,276 4,092 -51%
Hindustan Motors 2,428 1,713 -29%
Bajaj Tempo 6,065 4,912 -19%

In the past year, this change has been more pronounced with the entry of Toyota’s Qualis, which has met the needs of style, comfort and space for the urban consumer. Infact, many car users have actually turned users of the Qualis in the past year. This has changed the face of the regular usage of MUVs, which earlier existed only in rural and semi-urban areas. The reason being these larger sized vehicles would be used in marriage processions, defence needs and meeting the needs of transporting people from place to another in semi-urban areas.

However, the percentage of MUVs in the total light vehicle market still accounts for a meager 17% as compared to say 51% in the US markets and 40% of the Asian markets. Hence, there still exists a large gap in demand for these vehicles in the context of above ratios. In the US markets, the MUV market is as big as the passenger car market.

UVs % of light vehicles (2000)
Korea 49
China 54
Thailand 67
Indonesia 80
Philipines 63
Asia average 40
India 17
USA 51

By the look of it, the Indian MUV market seems different in character too. It consists of hard tops, soft-tops and pick-ups, whereas in the western markets it is essentially hard tops, which dominate the market. However, on closer inspection, we find that hard tops dominate the Indian psyche too. In FY01, the domestic UV market grew by 2.8% YoY. However, the hard top market, grew by 30% YoY, whereas the soft-top market, fell by 40% YoY. The hard top market accounts for 71% of sales and soft-tops for 19% of sales.

There are 6 major players in the MUV market in India. 95% of MUVs manufactured in the country are used for domestic consumption while the rest are exported. In terms of market share, though Mahindra & Mahindra (M & M) dominates the market with a 45% market share, this has fallen by 1,212 basis points in the past year. The reason for this being that the company has over 80% market share in the soft-top market which fell by 30% YoY due to lower rural incomes, ban on soft-top permits and higher sales tax in certain states. The other leading players in this segment are Telco with a 24.4% market share and relatively new entrant, Toyota Qualis with a 20% market share.

M & M, the market leader has been slow to react to the changing needs of the customer in the urban hard top market, and thus it lost to Telco’s Sumo models and Toyota’s Qualis in the past year. M & M’s hard top volumes grew by only 5% YoY as compared to the industry growth of 30% during this period.

MUV market share FY01
Mahindra & Mahindra 44.9%
Telco 24.4%
Toyota Qualis 20.0%
MUL 4.9%
Hindustan Motors 1.9%
Bajaj Tempo 3.9%

In the soft-top MUV market, the major concern of players in that segment has been the ban on permits for soft-top vehicles in certain states. Companies are hopeful that the bans will be lifted and negotiations are on with state governments for the same.

Another trend emerging is that traditionally UVs in India were powered by diesel engines. However, now in the premium end, petrol models have entered this segment. As the price differential between petrol and diesel has been narrowing, those companies in the traditional diesel range are now losing market share. Another major concern for domestic players is that seeing Qualis success, other MNC majors may want to test the Indian waters. Given the Indian consumers new found appetite for multi-utility vehicles, the Indian domestic companies need to keep introducing new models, to keep up with the changing trend and needs of style, economy and comfort.

Hard top market size FY01
M & M 26,477
Toyota Qualis 25,375
Telco 28,141
Bajaj Tempo 4,175
MUL 2,046
Total 86,214

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