Why SUVs will dominate Nepal's auto marketGrowing preference for recreational driving fuels sales of sport utility vehicles.
Form and function. That’s what millennials, the largest customers of sport utility vehicles in Nepal, say they love about the segment.
"A few years ago, I took Hyundai's Creta and also Mitsubishi's ASX—belonging to my relatives and friends—on a test drive, and that is when I decided to buy an SUV," said Rupesh Rajbhandari, a hospitality entrepreneur.
When asked why SUVs scored over slick stylish sedans, Rajbhandari rattled off a noteworthy list of automotive design traits: 'Comfortable, luxurious, spacious and a sturdier body ensuring a safe ride over rugged terrain'.
Rajbhandari, 27, represents the growing number of car owners whose preference and economic strength has boosted the sales of SUVs—crossovers, compacts and modern family wagons—such that this automotive design now accounts for half of Nepal's auto sales.
As per automobile dealers, half a decade ago hatchbacks held the lion's share of automobile sales in Nepal and SUVs were in the backdrop, gradually gaining validation as an all-activity vehicle.
However, in the past three years, SUVs have managed to enter and cross the 'trend state' and with more millennials looking forward to owning an SUV, the tides and times are in the segment's favour, clearly reflected in the dealer's launch choices in Nepal's annual auto show.
Among the range of offerings, four SUVs—Compass, Vitara Brezza, XUV 500 and Nexon—had made their mark during the 2018 NADA Auto Show.
This year, in line with buyers' comfortable and luxuriant personal and business mobility needs and growing preference for recreational driving in Nepal's rugged terrain, dealers are again boasting several mid-sized utility vehicles.
Customers will be spoilt for choice at this year’s NADA show with Nissan Kicks, facelifted Ford Ecosport-Thunder, Trail Hawk and Sports Plus from Jeep, Mahindra's XUV 300, Hyundai's Venue and Tata's H5 touted as potential crowd favourites.
According to a study, the emergence of the SUV as a versatile and spacious five- to seven-seater vehicle and the introduction of redesigned models with the looks of a car and the functionality of mid-sized trucks have made them a logical upgrade from sedans and hatchbacks.
Asia-Pacific represents the largest market for SUVs with India and China as high priority segments for big players trying to cash in on the expanding income of the urban middle class. So, utility vehicles—whether crossovers or single body frame sport vehicles—are here to dominate Nepal's market.
"Hatchback and sedan owners are satisfying their replacement needs with SUVs or compact urban vehicles, and at this rate of increasing sales despite regressive policies on auto loans, SUVs will continue to dominate sales charts," said Ramesh Danekhu, assistant manager, corporate communications and marketing at MAW Enterprises.
According to Danekhu, car buyers have stopped looking for the ‘premium factor’ that sedans offer, and are instead going for compact urban vehicles. The sturdier build and larger wheels of SUVs have proved to be ideal for Nepal's unpredictable road conditions.
Global trends also support Danekhu's assertion as projects show that the world market for SUVs is projected to surpass 20.9 million units by 2020, driven by safe, convenient and comfortable mobility needs in emerging markets. However, traders say that affordability is a primary concern in Nepal, and is hindering exponential growth of utility vehicles.
"Because of high taxes and other surcharges, buyers opt to ride a mid-range passenger car; and after a few years, they upgrade to utility vehicles in the range of Rs3.5 to Rs4.5 million," said Siraj Panta, deputy general manager of CG Motorcorps. "Nonetheless, the demand for crossovers and compact vehicles, which are branded as sports utility vehicles, is rising 15-20 percent per annum, and with new design upgrades bestowing a more rugged look to the segment, growth is inevitable."
In Nepal, automobile dealers say that passenger vehicles held dominion over sales four years ago, accounting for 60 percent of the total sales; but as private car owners were offered a range of choices in the utility vehicles segment, they happily upgraded.
"Particularly, the private and semi-commercial consumer segment has boosted sales of the UV-1 subcomponent to nearly 50 percent of the total market worth and looking at the purchases over the last three years, it is fair to say that SUVs have crossed the trend state," said Panta.