Indian carmakers count on SUV sales to ride out slowdown – Go Health Pro

Stay informed with free updates

Simply sign up to the Indian business & finance myFT Digest — delivered directly to your inbox.

Indian carmakers are relying on buoyant sales of high-end sport utility vehicles to help them through a slowdown in the world’s fifth-largest economy and third-largest passenger car market, according to two leading brands. 

Top executives from Mahindra Group, which makes only SUVs in the passenger vehicle category, and Tata Motors told the Financial Times in separate interviews that their highest-priced offerings were outperforming an otherwise flat car market — an indication that only India’s most affluent are in the mood to spend.

SUV sales grew 14 per cent in 2024, more than double the overall passenger vehicle market’s 5 per cent, according to GlobalData. They accounted for 56 per cent of the car market, up from 51 per cent the previous year.

“The preference has been towards SUVs,” said Mahindra chief Anish Shah. “We also do see a K-shaped recovery, where we see premium products growing faster than products that are at a lower price point.”

“The small car segment has not been growing,” he added.

Tata Motors’ Jaguar Land Rover portfolio is “doing extremely well”, said PB Balaji, Tata Motors’ chief financial officer. 

“It feels like that part of the market, the sort of top end, is a bit impervious to anything else going on,” he said. “Or they’re in a good mood and they’re just spending it.”

Demand for goods and services among middle-class urban Indians — traditionally a key driver of the overall economy — has slowed in recent months amid stagnating wages and weak investment. In the third quarter of 2024, GDP growth was 5.4 per cent, the slowest year-on-year rate in nearly two years.

The Reserve Bank of India this month cut the benchmark repo rate by 0.25 percentage points to 6.25 per cent — the first rate cut in five years — and Narendra Modi’s government announced a round of tax cuts meant to benefit India’s middle class in the 2025-26 budget.

India’s car market overtook Japan’s in 2022 to become the world’s third largest, but it is on track to remain roughly flat this year at about 4.2mn vehicles sold, according to industry forecasts and executives.

Indian drivers’ increased preference for SUVs in recent years mirrors a broader global trend among consumers to buy cars that are higher off the ground and typically cost more than conventional vehicles. SUVs make up about half of worldwide car sales.

“You see the traffic here,” said Mahindra chief Shah. “It’s much better to be in a slightly larger car and a slightly elevated car as well, because it gives you a little more presence in traffic and the ability to navigate.”

Ammar Master, south Asia automotive director at GlobalData, said the trend towards SUVs was being driven by increased affordability, the launch of new models and carmakers “not offering enough choices” in their smaller line-ups.

“The buyer profile has come down to a younger generation who are more tech-savvy” and willing to pay for features such as advanced driver assistance, he said.

On the move to greener cars, Mahindra’s CEO said he expected electric vehicles to gain a 30 per cent market share in India by 2027, ahead of a 2030 goal set by Modi’s government for the same level of uptake.

Yet India’s EV market is tiny so far, accounting for just 2 per cent of car sales last year and hobbled by patchy charging infrastructure and widespread anxiety over the range of such cars in a country with improving but traffic-clogged roads.

Industry data suggests EV sales growth has to nearly double every year to reach the 2030 target, and while public charging stations across India had expanded to more than 25,000 in December from about 7,500 a year earlier, that compares with more than 3mn in China, the world’s leading EV market and producer.

Still, Tata’s Balaji said last month’s Bharat Mobility Global Expo, a motor show in New Delhi, was where “EVs went mainstream”. Most Indian carmakers, including Maruti Suzuki and Mahindra — along with foreign competitors BYD and VinFast — showcased major new ranges of sleek, high-end EV vehicles for release this coming year.

“What happens is, as more and more cars start coming in, more and more players start coming in,” said Balaji. “Everybody’s investing in the charging network.”