India SUV Market Outlook to 2028

India SUV Market Overview

The India SUV market is valued at USD 200 million, based on a five-year historical analysis. This growth is driven by several factors including increasing disposable income, a rising preference for larger vehicles with better safety features, and the growing demand for family-oriented cars with ample storage space. Additionally, the shift towards electric and hybrid SUVs, supported by government initiatives such as the FAME II Scheme, is contributing to the market's expansion.

Major cities such as Delhi, Mumbai, and Bengaluru dominate the India SUV market. The dominance of these urban hubs is driven by their higher purchasing power, robust infrastructure, and the increasing availability of premium SUV brands. These cities have also witnessed significant investments in electric vehicle infrastructure, which further boosts SUV sales, particularly for electric and hybrid models. Additionally, the urban population's preference for luxurious and status-symbol vehicles has played a significant role in driving SUV sales.

The Production Linked Incentive (PLI) scheme for the automobile sector, with an allocation of 25,938 crores, has boosted domestic manufacturing of electric SUVs. In 2024, SUV manufacturers such as Tata Motors and Mahindra received substantial incentives under this scheme to scale up electric vehicle production. This initiative is expected to reduce dependency on imports and lower production costs over time.

India SUV Market Segmentation

By Fuel Type: The India SUV market is segmented by fuel type into Diesel, Petrol, Electric, and Hybrid SUVs. Diesel SUVs have traditionally dominated the market due to their better mileage and suitability for long-distance travel. However, recent government regulations and the shift toward greener alternatives have reduced their share, with Petrol SUVs gaining momentum due to advancements in fuel efficiency. The Electric and Hybrid segments are rapidly emerging, driven by growing environmental awareness and government incentives under the FAME II scheme.

By Body Type: The market is segmented by body type into Compact SUVs, Full-Size SUVs, and Luxury SUVs. Compact SUVs dominate the market share, accounting for the largest portion due to their affordability and versatility, making them ideal for both city and rural driving. Full-Size SUVs are popular among large families and off-road enthusiasts, while Luxury SUVs cater to high-end consumers looking for premium features and performance. The rise of compact models like the Maruti Suzuki Brezza and Hyundai Venue has solidified this segments dominance.

India SUV Market Competitive Landscape

The India SUV market is dominated by key players who leverage their brand strength, manufacturing capabilities, and vast dealership networks. Local manufacturers like Mahindra & Mahindra and Tata Motors lead the market due to their deep understanding of consumer preferences and government policies. Global brands like Hyundai and Kia are rapidly expanding their market presence by offering innovative SUV models with cutting-edge technology.

Table: Key Competitors in the India SUV Market

Company Name

Year Established

Headquarters

Annual Revenue (USD Bn)

Number of Employees

Production Units

Global Sales Network

Electric SUV Models

Export Share (%)

Dealer Network Size

Mahindra & Mahindra Ltd.

1945

Mumbai, India

Tata Motors Ltd.

1945

Mumbai, India

Hyundai Motor India Ltd.

1996

Chennai, India

Kia Motors India Pvt Ltd.

2017

Anantapur, India

Maruti Suzuki India Ltd.

1981

New Delhi, India

India SUV Market Analysis

Growth Drivers

SUV Adoption in Tier II & III Cities: The demand for SUVs is rising significantly in India's smaller cities (Tier II & III). In 2023, over 5 million vehicles were sold in these regions, with SUVs accounting for a significant portion due to their adaptability to rough terrains and urban expansion in these areas. This surge is supported by improved infrastructure, road connectivity, and the aspirational nature of these vehicles. The Government of Indias focus on boosting rural road projects under the PMGSY scheme has enhanced accessibility, driving further SUV adoption.

Consumer Preference for Fuel Choices in SUVs: The Indian SUV market is seeing a marked shift in consumer preference towards alternative fuel vehicles. According to the Ministry of Road Transport and Highways (2024 data), there were around 350,000 SUVs running on hybrid and electric fuel options on Indian roads, a substantial increase from previous years. This shift is driven by fuel cost concerns, rising awareness of emissions, and consumer interest in cleaner alternatives. Diesel engines are still popular but face competition from these newer options due to long-term fuel savings.

Shift to Electric and Hybrid SUVs: The Indian government has amplified its push towards electrification, and the SUV segment is benefiting from this transition. Electric SUVs such as Tata Nexon EV are becoming popular due to their performance and reduced ownership costs. With the rollout of FAME II, India now has over 1,800 charging stations, making it easier for SUV users to adopt electric variants. Government subsidies and the significant expansion of charging infrastructure are expected to further drive the adoption of electric and hybrid SUVs.

Market Challenges

Rising Fuel Costs and Impact on Demand: The rising cost of fuel in India, with diesel prices reaching 95 per liter in 2024, has become a significant challenge for SUV sales. Consumers are shifting their preferences towards more fuel-efficient or electric alternatives due to the higher operational costs of conventional SUVs. Data from the Petroleum Planning & Analysis Cell shows a steady rise in fuel costs, negatively affecting the demand for larger, less fuel-efficient SUV models, which were once dominant.

Stringent Emission Norms (Bharat Stage VI Implementation): The implementation of Bharat Stage VI (BS-VI) norms in 2020 has placed considerable pressure on manufacturers. Compliance costs for upgrading engines to meet these stringent emission standards have increased production expenses, particularly in the SUV segment, where larger engines dominate. In 2024, the production cost for BS-VI compliant SUVs rose by an average of 80,000 per vehicle, causing manufacturers to pass on the costs to consumers, thereby reducing demand.

India SUV Market Future Outlook

Over the next five years, the India SUV market is expected to show significant growth driven by government incentives for electric vehicles, advancements in SUV technology, and increasing consumer demand for premium, family-oriented vehicles. The adoption of hybrid and electric SUVs will rise substantially, backed by environmental regulations and infrastructure developments. Furthermore, compact and mid-size SUVs will continue to be the preferred choice due to their versatility, cost-effectiveness, and fuel efficiency.

Market Opportunities

Growth in SUV Leasing and Financing Options: The rise in leasing and financing options has opened new doors for consumers looking to purchase SUVs. In 2024, the leasing penetration in India for SUVs was reported at around 250,000 units, driven by favorable terms such as lower down payments and flexible repayment periods. The collaboration between automakers and banks/financial institutions, along with government-backed interest subsidies for electric vehicle loans, has further made SUV ownership more accessible to a wider population.

Export Opportunities to Emerging Markets: India's SUV manufacturing sector is witnessing strong export growth to emerging markets in Asia and Africa. In 2023, India exported over 120,000 SUVs, a 15% increase over previous years, with countries such as South Africa, Nepal, and Indonesia being key destinations. The production cost advantages in India, coupled with the increasing demand for durable vehicles in similar road conditions abroad, present a major growth avenue for the industry.
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