If you are observing the sales charts for a few years, there is one thing that is very evident: the rise of the SUV market. This is not just in India but throughout the world. Even supercar manufacturers have broken their stereotypes and manufactured SUVs for the first time in their history. This shows the shifting trend to these bigger and taller segments of cars. But manufacturers obviously won’t be doing anything if there is no profit in it, right? So let’s see how SUVs are making big money for Indian manufacturers, shall we?
If you want to know why Sedans are better than SUVs, you can read all about it here.
Shifting to higher demand models
Last time we checked, there were almost a million reasons why people prefer an SUV over any other type of car. The most famous ones were ground clearance, status symbol, road presence, the illusion of people believing that bigger is better, etc. No matter which one you pick, the result of your choice is an SUV, and this is happening not just in India but all over the globe. Now, because of these reasons, whether they are valid or not for a prospective buyer, the demand for SUVs has skyrocketed.
The above chart shows the number of new models introduced in 2020-2021, and as you can see, the difference is enormous. It is because of this reason that Indian manufacturers are introducing more models in the SUV segment and hence making more money from it.
Taking advantage of the Sub-4meter tax bracket
As you can see from the information provided above that the excise duty on cars lesser than 4m and up to 1.5-liter attract 12.5% tax whereas cars more than 4m in length range from 24-30% tax. That is almost half the tax levied on smaller vehicles, and that’s why we have more Sub-Compact SUVs than any other car in India. Combine this with the first point mentioned above, and you can start to imagine why manufacturers like it so much. Who doesn’t want more profit?
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Large scale production advantage
It is a known fact that the cost of production reduces with more quantity. Making one car definitely costs more than making a million models of the exact vehicle. This is another area where the manufacturers can save money in general and not just on SUVs, but the fact that SUVs are in high demand and there is a lesser tax on sub-4m SUVs, the profit percentage is further increased.
There are many other reasons along with the three mentioned above, and we don’t see a reason why the manufacturers shouldn’t follow this trend because, after all, they are only supplying for the demand created in the market. As we said before, we do not like this trend because if this continues, then the manufacturers might stop producing sedans or hatchbacks, citing reasons that they do not fetch much profit and the demand for them is already declining at a high pace.
Now, after seeing how SUVs are making big money for Indian manufacturers, it’s a no-brainer that this trend will only grow. With the adaptation of Electric SUVs in the future, let’s see how the demand goes. It is rather interesting to observe how the manufacturers can make a profit from it, and we are all the more interested to find out.