SUVs to lead PV sales in 2024-25: Crisil

• Follow

Sports utility venhicles are set to lead the charge in passenger vehicle (PV) sales in 2024-25. PVs are expected to log 5-7 per cent growth next year, according to credit rating agency Crisil.

This growth is expected to come on the back of an estimated high base of 6-8 per this financial year. The demand for SUVs has been rising sharply with its share now doubling to almost 60% in overall passenger vehicle sales. SUVs had a market share of around 28% in FY2019, Crisil said.

This preference is expected to grow further, backed by a healthy pipeline of new model launches across price points, including electric variants, and normalised availability of semiconductors after a prolonged period of short supply, it said.

“While the overall PV volume is seen rising 5-7 per cent next fiscal, we expect demand for SUVs to accelerate at twice the pace at over 12 per cent, driven by an array of feature-laden launches at competitive price points, varied technology options including hybrid and electric, and increased access to credit,” said Says Anuj Sethi, Senior Director at CRISIL Ratings In contrast, Crisil said, demand for cars is seen slowing this fiscal too due to the ongoing weakness in the rural market and lower affordability at the entry level.

The cost of vehicles has risen in the past 3-4 years as manufacturers have been passing on higher commodity prices and have had to comply with more stringent regulations on safety and emissions, it said.

The situation is similar on the export front. The share of PV exports is estimated to have slowed to 14 per cent this fiscal compared with around 17 per cent in fiscal 2019.

This was mainly due to inflationary headwinds and limited availability of foreign exchange in key export markets Latin America, Southeast Asia and Africa in the past two years, the rating agency said. This trend is expected to continue next fiscal, it added.

But increasing share of SUVs with higher realisations, along with stable commodity prices and the full benefit of price hikes executed last fiscal have resulted in operating margin expansion of manufacturers by around 200 basis points to around 11 per cent this fiscal, Crisil said.

A further improvement in sales mix in favour of SUVs can take that number to 11.5 per cent-12.5 per cent next fiscal, it said.

Healthy volume growth of the SUV segment, which enjoys higher margins, will steer an improvement in operating margin to 11.5 per cent-12.5 per cent next fiscal, Crisil said.

(With inputs from PTI)