Is the SUV era of India over? Not really

Posted on: Mar 4, 2013 - 7:28pm IST

Dacia DusterThe 2013 Union budget was expected to perform miracles for the Indian automotive sector. However it turned out to be a shocker for most automakers. The finance minister’s decision to increase the excise duty from 27% to 30% has caught most automakers off guard.

Just a few days ago, we were going gaga over the growth of SUVs in India and how it is the next revolution for the Indian market. Clearly, the FM decided to cash-in on the boom by raising taxes. But is it really going to affect the SUV growth in India?

You see, the SUV boom was instigated by the Mahindra XUV500 and taken to a whole new level by the Renault Duster. The soon-to-be-launched Ford EcoSport is ready to make it an awesome trio.

It is unfortunate that the Renault Duster falls prey to the duty hike. In spite of having an engine that displaces less than 1.5L, the Duster looses out on the length (exceeds 4 metre) and ground clearance (exceeds 170mm) criteria. This is bound to impact Duster’s phenomenal run especially when the EcoSport arrives.

Ford EcoSport is a lucky candidate which will evade the tax hike because it is a sub 4 meter SUV, which means it doesn’t meet the first criteria. Even the Mahindra Quanto manages to evade the duties because of its small car classification. Future compact SUVs such as the XA Alpha will be developed specifically to evade the tax hikes.

The biggest hit of the tax hike is borne by full sized SUVs such as Mahindra XUV500, Tata Safari Storme, SsangYong Rexton and the likes. These SUVs meet both the criteria and we expect their respective makers to make price hike announcement soon. Fortunately, most of these SUV do not qualify as ‘budget SUVs’ such as the Duster or the EcoSport. People wanting to buy these SUVs are affluent families that can afford a price hike of Rs 20,000-50,000.

The UVs like the Bolero, the Sumo and the Scorpio and other such people movers which are still a price sensitive market will take a hit. But the SUV boom was not really driven by this segment, they always sold in decent numbers.

In conclusion, the SUV boom will continue to enthrall India, well at least till the next budget!

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8 thoughts on “Is the SUV era of India over? Not really

  1. vishal says:

    Dear FM,

    1.people buy suv (specific to entry level ,
    duster bolero,sumo etc ) because roads are
    bad. 🙂

    2. BUllet( i love bullet, no offence to owner’s ) makes more noise ,gives less average..sales more no. than duster, mostly brought by rich people 🙂 🙂 ..y dont u put tax on that ? instead mass puller like sumo,bolero..

    Reply
  2. Winfred says:

    All the SUV makers are riding on the SUV wave in India. They are all making a huge margin.

    Look at thier launch price and the currnet premiums they are taking… easily they are all making a 10% percentage points additional margin than what they originally planned.(if original was 30% now they are making 40%)

    Govt is smart to ask for 30% of this increase what auto makers are making. Which is not bad.(30% of the roughly 10% additional margin)

    Hope the automakers absorb this tax and dont passon the same to customers. As its only a premium reduction and not margin cut.

    Reply
  3. Jay Shankar says:

    What about Ertiga, Xylo, Innova and likes?
    Do they come under SUV, as per our FM?

    IAB, do you have any insight into this segment?

    Reply
  4. Auto Analyst says:

    Ford Eco Sport though it is 4m in length and <1500CC engine, but the ground clearance is 200mm. So does it get the excise duty benefit ?

    Reply
  5. sandy says:

    Now thats the confusion. In today’s TOI business page, they informed that Ertiga and Duster managed to stay out of higher tax bracket. But as per your information, Duster is affected, but what about Ertiga, Linea, SX4 diesel, new Fiesta; since their gc>=170mm and length>4meter. What about Verna, Vento n Rapid?
    For what I think, these product continues to be taxed as before; exception being SX4 Petrol for being fully exposed to new guideline for 30% excise.
    But I see would be no dent to new kind of segment, which we call as miniSUV. So its not over.

    Reply
  6. Rajat says:

    please post the link of your mobile webpage.

    Reply
  7. Kashish Sharma says:

    AFAIK Only the Duster PETROL will be affected by the price hike and as it is it does not sell at all. So the Duster’s run will continue till the Ecosport is launched. All 3 criteria should be met to fall in the SUV bracket,
    > 4000 mm length
    > 1500 cc engine
    > 170 mm ground clearance.

    Reply

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Kaustubh
Kaustubh Shinde

They say sooner or later your passion finds you. Sometime in late 2009, I started writing for IAB and ever since then it has been a roller coaster ride for me. An amazing experience that has taught me a lot, taken me to new places, driven some great cars and met some amazing people. When you don't find me on IAB (very rarely), you will find me either at a coffee shop or an eatery or at the nearest gadget store.Hope you enjoy IAB as much as we do!