Demand for vans falls off, compact SUVs, rural slump to blame

Domestic demand for multi-purpose vehicles (MPVs, better known as vans), which many automakers thought had potential as the market moves towards the US way of development, has seen a disappointing start.

 

Companies like Renault, Tata Motors, Honda, General Motors, Ashok Leyland and Nissan have struggled to retail van models despite in India despite the perception of the market being in favour of mass movement of people.

 

Volumes of the Renault Lodgy, Chevrolet Enjoy, Ashok Leyland Stile and Nissan Evalia have been disappointing. Honda which hoped to get an upstart in this space with the Mobilio is being forced to offer huge discounts to gain volumes. 

 

According to Abdul Majeed, Partner, Price Waterhouse, one of the reasons for the failure of the MPV segment to take off are the launches of multiple compact SUVs which have eaten into what could have been MPV market share in urban centres.

 

Another reason, he pointed out, was “sub optimal growth in the rural economy due to poor monsoon, moderate increase in minimum support prices, and target subsidy etc”.

According to data from industry body Society of Indian Automobile Manufacturers (Siam), van sales grew by a mere 1.12% in the April-November period, most of it driven by low-cost models like Maruti Suzuki Eeco and Omni that are often used as commercial taxis.

 

Considering the slack demand, Korean carmaker Hyundai may have decided to put off the launch of its Hexa Space. The company had showcased this MPV concept in the 2014 Auto Expo and had said at the time that there would be a model perhaps in 2016.

 

However, Rakesh Srivastava, senior vice president, Hyundai Motor India said “In the world market compact SUV are the current favourites with customer are increased preference. On similar lines India too is seeing a heightened preference for compact SUVs over MPVs.”

 

Customers for MPVs seem to have moved towards utility vehicles, a segment that has seen a lot of action in the last two years and is likely to continue doing so for at least another couple of years. 


Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel