Why SUVs have become so popular?

After reading the headline of this article, most of you might have the feeling that you know the answer. This being a generic topic, plenty of answers are available on the internet. Something which readers believe that they know, and already there are many answers available given me hints that there is no reason to write on this topic. I decided to challenge myself to come up with more logical reasons behind the growing popularity of SUVs. I did some research and am glad to share my findings in this article.

Sports Utility Vehicle (SUVs) origins can be traced to the mid-1930s; that’s nearly half a century after the invention of the modern automobile. SUVs were meant to be driven in rough road conditions and it gained popularity among masses who lived far in the country side, where paved roads were nearly absent. Just before World War 2, SUVs demand increased by the military due to its rugged appeal. However, a downside of SUVs was its uncomfortable ride. But as a matter of fact, SUVs were not meant for luxury & comfort and practicality was the main focus.

For the next 5-6 decades, the SUV’s share globally was in low single digit percentages. In the year 2000, SUV’s share in sales was just 3.7% in Europe, while now it has crossed 40%. In United States, SUVs had share of approx. 20% in the year 2000 which jumped to over 50% last year. Similar trends are visible across India as well. Last year, SUVs contributed close to 40% of passenger car sales in India.

So the question arises what is the reason for this exponential increase in SUV sales and popularity.

Before going in detail on why SUVs gained popularity, let’s understand why SUV sales were so low just a couple of decades back. SUVs had some drawbacks like:

1. SUVs had higher noise, vibration, and harshness (NVH) levels than sedans

2. Poor build quality of SUV contributed to body noise (after some years of usage) 

3. Suspension was not so good, and having a higher center of gravity meant that comfort was less with high body roll

4. Boxy shape not liked by all

5. Bigger in size and low aerodynamics led to higher fuel consumption

6. Being bigger in size, maneuvering within the city was difficult

7. SUVs were considered for rough road usage; hence 4-wheel drive transmission was essential, which used to increase the cost

Sedan was considered as executive class. Not many luxury SUVs were available back then. So what changed in last few decades that favored SUVs? There are multiple reasons, let me try to explain.

In order to reduce oil consumption, United States introduced Corporate Average Fuel Economy (CAFE) and made it stringent in the mid-1980s, CAFE norms mandated car manufacturers to ensure certain fuel economy. SUVs were categorized as light trucks; hence SUVs got exemption from passenger car CAFE norms. Many car manufacturers took advantage of this exemption and started focusing on SUVs. In United States, fuel prices were quite low and stable in the 80s and 90s; hence low fuel economy of SUVs was not a pain point for US customers. The success of SUVs in United States was noticed by the world, but initially it was thought that its United States specific phenomenon.

In the late 1980s, automobile technology improved remarkably.  A few examples of where SUVs benefited due to improved technology:

• Better suspension reduced body-roll and provided more comfort

• Better build quality, hence no more body squeaking noise after getting older

• Diesel engines became smoother hence, lower noise and vibration

• Features like Reversing camera and sensors made parking easy

• Electric power steering made maneuverability easy

• Most of SUVs had Ladder frame chassis while Sedan had Monocoque chassis. Later on engineers adopted Monocoque in SUVs which made it lighter. To get better fuel economy, many SUVs launched with curve shape (Aerodynamic). All these changes helped to improve fuel economy at the same time those who were not liking boxy shape of SUV had alternative.

After these technological improvements, people gravitated towards SUVs more than earlier. Once they started using it, found the below mentioned edge over sedan (Of course most of them were existing before technological improvements but after improvements, the positives tilted towards SUVs :

• Higher seating position of SUV offers better visibility and sense of control to the person in driving seat

• SUVs offer better road presence thus give macho feeling to user

• Higher ground clearance help to deal with speed breaker and potholes

• Bigger tires of SUVs help to deal with rough roads

• SUVs gives impression of being safer with respect to Sedan

• SUV offers more cabin and cargo space than Sedan

• SUVs are more suitable for tall people (better headroom)

• SUV offer ease of Ingress and egress for all age group

• Many SUVs offer 7 seating option hence suitable for bigger families

Apart from technological improvements, what has helped SUVs to grain traction is growing wealth. The GDP of the world increased from approx. $34 trillion to approx. $90 trillion in the period of year 2000 to 2020. In many parts of the world, the share of young customers has increased. They preferred SUVs because of the reason mentioned above. Another thing which helped SUV sales is consumers attempting to try something new. Those who were using Sedan, Hatchback and Vans wanted to new body type; hence SUVs offered the alternative.

Recently, concept of urban SUV developed (without 4 wheel drive) which is cost effective. Customers who used SUVs for long drives boasted about its comfort; thus positive word of mouth helped SUV sales. We know ‘Success brings success’, the same is applicable on SUVs too. Popularity of SUVs helped to get better resales value, which further helps demand for new SUVs.

Car manufacturers rushed to manufacture SUVs and launched them into the affordable price segment. More choice of SUVs helped all segments of customers. Its win- win situation for all stakeholders.

Of course, Sedan and the hatchback have their own set of advantages, but the purpose of this article is not to compare but to put across the reason for the SUV’s surge in sales.

A few decades back, what was considered as product for specific usage has now emerged as the first choice of most. In my opinion, the dominance of SUV would continue for the coming few decades and then something new would emerge.

Hope I was able to explain that there are multiple reasons behind success of SUVs.

Manoj Tripathi 

Author of bestselling non-fiction book "Power of Ignored Skills"

(Disclaimer: The article is the personal view of the author. Data is an approximation to make readers understand the logic)

Source of information: JATO Dynamics, World Bank and Wikipedia

5 Mega Trends in India

What you would be after 5 years largely depends on the ‘books’ you read, the ‘people’ you spend time with, the ‘habits’ you adopt, the ‘food’ you eat, and the ‘conversations’ you engage. In a nutshell, what you are and what you would be depends on your right decisions.

The right decisions not only make a difference in the life of an individual, but the same is applicable for society and country. Society and country can be prosperous only if the right set of decisions or priorities are set. Like any other country, India has also its own set of problems like Poverty, Corruption, Unemployment, Education system, pollution, and uneven growth. The solution lies in action in the right direction.

Let me share five mega-trends which gives hope that as a country, India is in the right direction.

1. Policy focused on large Industries:

India’s manufacturing sector contributes close to 17% of GDP. To address huge problem of unemployment and underemployment, there is no better option than focus on growth of manufacturing sector. To push manufacturing output, Government of India has announced Production Linked Incentive Scheme worth $27 Billion for 14 Industries.

Why is this significant? They say “You can’t get different results by doing the same action every time”. Since independence, Government policies where pro Small and Medium Enterprise (SME) and rightly so. In the closed economy, this kind of policy tilt works well, but once you are part of global trade, advanced technology plays a very important role in competing. Let’s say a company based in United States wants to buy some goods; thus that company has option of choosing best supplier from more than 200-odd countries from where company would get cheapest and best quality product. So Indian supplier would need to beat 200 competing countries to be able to win the contract. Herculean task. SMEs ability to adopt latest technology is limited because of their size/limited revenue. Many countries have helped home-grown companies to become big so that those companies do R&D and bring latest technology in manufacturing. This latest/high-end technology is supposed to percolate down to smaller industries and in Toto, it’s beneficial to overall country. Classic examples of this approach are South Korean companies like Samsung, LG and Hyundai.

Because of many compulsions, Indian Government never supported large scale Industries but looking at need of the hour, now finally Government has decided to take path of large Industry led growth model which is significant change from earlier policy. Production linked Incentive (PLI) scheme is applicable to 14 sectors where companies need to investment minimum threshold to be eligible for scheme and there is opportunity of 4%-6% incentive on incremental sales. The best part is that the PLI scheme seems to be a huge success looking at the participation levels of all mega companies.

2. Export Focus:

Almost all prosperous countries are very strong on exports. Though 16% of humanity lives in India but in just a couple of decades back, Indian share in global exports used to be less than 0.5%. In last financial year, Export grown by whopping 40% leading to achievement of $418 billion worth of merchandise export. Thanks to robust exports, the export share rose to 1.9%. Last year’s export performance is significant because between 2012 to 2020 the export growth was stagnant. Export constitutes approx. one fifth of Indian economy; thus exponential export growth obviously helps overall economy. India has managed to export $1.5 billion dollars in arms exports, which is 6 times more than what it used to be 7 years back. Recently, India signed a $375 million deal to export the BrahMos supersonic cruise missile to the Philippines which proves India’s growing capability in cutting edge technology. Electronic manufacturing capability is another highlight which is proved by Mobile phone exports from India which increased to $5.5 Billion in FY2022, registering 75% growth. More than the figures, what is important is that people are talking about exports, which is compelling media to give space to export-related news.

3. Entrepreneurship:

India has emerged as the 3rd largest country in the space of start-ups. In the first week of May 2022, India registered its 100th unicorn. The kind of enthusiasm young India’s are showing towards entrepreneurship is incredible. MNCs are surprised to note that despite them offering top dollar to final year students studying in India’s premier educational Institute, students are not willing to join them but opting for starting something of their own. This is a big shift in a country where news of lakhs of people applying for few hundred clerical jobs opting in Government sector used to be flooded.

To promote entrepreneurship, Government of India established Micro Units Development & Refinance Agency Ltd (MUDRA) where people can take loan up to INR 1 Million ( $13,000). In last 7 years more than 340 Million Indian’s took this loan and best part is that 68% of them are women.

The kind of euphoria “Shank Tank” has created in India is unbelievable.

4. Connectivity:

The world has been greatly benefited by the movement of goods, people, and ideas; thus better connectivity is most important for prosperity. India is constructing almost 10,000 km of highways every year. Air traffic has almost doubled in the last 5 years. Thanks to one of the cheapest internet cost in India (approx. $0.1 per GB), the per-user internet consumption has touched 16 GB in a month, which is double that of developed countries. Well-traveled and well-informed Indians would demand more growth-oriented policies from the government, which is crucial for prosperity.

5. Digital Adoption:

As per Government sources, India’s digital economy was of the size of 200 billion in 2017 and expected to cross $800 by 2025 at current prices resulting in share of the digital economy jumping from 8 per cent in 2017 to 18% percent in 2025. Remarkable achievement by a country where the adult literacy rate is still below 80%. India leads digital payment in the world. In 2021, India made 48.6 billion real-time payments beating China, which is in second place, with 18.5 billion real-time transactions.

More than 1 billion Indians got digital Covid vaccination certificates, while citizens of most developed countries got hand-written Covid vaccination certificates.

Indian’s digital adoption would immensely help start-ups like Practo, which connects doctor and patient on it’s platform. Did you know grocery delivery apps are still unheard of in many developed countries?

Charles Dickens once said that “the most important thing to be successful is to stop saying ‘I Wish’ and start saying ‘I Will’.

India has started saying ‘I Will’. Now it’s up to you to live in the ‘Wish’ or ‘Will’ world.

If you are convinced with Mega trends, please share this article with your family and friends. Awareness is key to progressive society and country.

Jai Hind!
Manoj Tripathi
(Author of bestselling book “Power of Ignored Skills”)

Disclaimer: The views mentioned in the article are personal. The purpose is not to hurt the sentiments of any cast, creed or group of people. Data is an approximation to help readers understand the context.