Why are Carmakers Rushing to Add a Third row on a Five-seater SUV?

Vivek Gupta, 34, an IT professional and an avid traveller, was looking for a capable SUV for his long weekend trips and leisure. Eventually, he zeroed down on Hyundai Creta and MG Hector based on his needs. Vivek lives in a joint family and their preference is an MPV like Toyota Innova or Mahindra Marazzo. These options, however, don't really go with Vivek’s personality. He needs something that ticks all the right boxes for him and his family. 

After good research and visits to various car dealerships, Vivek found two options – the MG Hector Plus and the newly launched Tata Safari – options that boosts his ego, and is the right fit for his extended family. 

New Trend 

This, in fact, is one of the current trends gripping the Indian SUV market. 

Carmakers are rushing to add a third row to a five-seater SUV to accommodate two additional occupants, offering a 5+2 seating option. They are not seven-seater SUVs in the traditional form, but 5+2 seater SUVs – essentially five-seater SUVs featuring an additional third row. They are built on the same platform, have the same engine and provide almost the same feature value to customers. But that’s not what it looks like?

Carmakers are trying to break the monopolistic category of Toyota Innova, which has made the MPV segment its own for years. At some point, the Innova was one of India’s largest selling UV by value. 

The Japanese MPV alone contributed over $2.4 billion to Toyota’s turnover in 2016, which is the highest by any brand in the Indian passenger vehicle market for a company ever.

Industry experts believe that carmakers are trying to ride on the popularity of SUVs and gain volumes from the MPV segment with their seven-seater versions of the existing five-seater SUVs. Many carmakers such as Renault, Mahindra & Mahindra and Honda Cars have earlier tried to crack the MPV segment but have got little to no success in the segment. 

“Automakers are looking to combine the popularity of the SUV style with the value offered by an MPV. That is why we see the trend of seven-seater SUVs like the Hector Plus, Safari, and the Hyundai Alcazar. The third row in most cases is more of an apology but as long as it is presented as a differentiating feature – even if it can seat only children – it seems to work. Sales in the MPV segment, led by the Toyota Innova, is what they are aiming for to cannibalise, covering vehicles like the Marazzo and XL-6. It makes the SUV play the role of a ‘family’ vehicle too, something that was the preserve of the MPV till now,” Avik Chattopadhyay, Co-creator, Expereal India told Mobility Outlook. 

In just the last three months of the on-going calendar year, the SUV segment has witnessed the introduction of three major SUVs – MG Hector Plus, Tata Safari (earlier named Gravitas) and Hyundai Alcazar. And there are reports that say Jeep India is also planning to bring a seven-seater version of the Compass. 

“If a customer, who has a big family, is planning a road trip with a big group, or regularly drives multiple people around, seven-seater SUVs make sense. This was the domain of MPVs earlier but with the popularity of SUV body-style growing, SUV brands are eyeing that space,” said Ravi G Bhatia, President and Director, JATO Dynamics. 

He further added, “SUV body styles lend themselves well to seat addition, as they are taller and boxier. The rear space behind the second seat can be either used for storage or for a third-row seat (folding or fixed).

One of the experts said the strategy is similar to mobile handset manufacturers like Apple and few Chinese companies. They have a basic handset such as Apple 12, and then add higher-end versions such as Apple 12 Pro and Apple Pro Max. This helps to get more money from the existing set of customers by providing some value and charging an extra price for it. Similarly, the carmakers are looking for an extra buck with an addition of the third row. 

Apart from this adding more options to the existing product portfolio and utilising the capacity are the other reasons behind introducing a seven-seater.  

Kaushik Madhavan, Vice President – Mobility, Frost and Sullivan said, “With a seven-seater, the carmaker get to differentiate products and gives them the opportunity to add another model to the line-up using the same platform with minor modifications.”

He also pointed out that the carmakers are catering to a new customer segment – customers, who are looking for a ‘three row’ vehicle, not necessarily a seven-seater. “These are usually just 5+2 seaters. Customers with a slightly larger family will go for these products,” he said

According to Jato Dynamics, the overall market share of SUVs in 2020 was 29% out of which 4% was for seven-seater SUVs. 

SUVs were the only segment that grew faster than any other segment because of the series of products introduced in the segment. 

Customer Upgrades

Even carmakers are expecting their existing customers to upgrade to newer and premium offerings. 

A financial daily recently quoted SS Kim, MD and CEO, Hyundai Motor India as saying that the Alcazar has been developed keeping in mind that company’s existing six-lakh-plus Creta owners. Indians purchase new vehicles in a span of five years and he expects HMI’s existing customers, who want a premium experience, to upgrade according to their needs.

Similarly, MG Motors believes that the seven-seater version is a natural progression, bringing to market a larger SUV with more aggressive styling and a larger seating area, apart from having an imposing presence on the road.

In an email response to Mobility Outlook, the company said, “Seven-seater version of the Hector Plus further expands the Hector portfolio of vehicles for our customers, who desire to address the travel plans of their family, in addition to the daily commute. To innovate and enhance our customers’ ownership experience is core to our operations. The introduction of the seven-seater variant of Hector Plus was a step in that direction.”

With a strong history of providing a seven-seater SUV, Tata believes that the segment has not seen much activity in terms of new launches for a very long time. Vivek Srivatsa, Head, Marketing, Passenger Vehicles Business Unit, Tata Motors, said, 'In current conditions when personal and family mobility is becoming very important, this segment presents a large opportunity to grow and that’s the need gap we have filled with the launch of the all-new Safari. In the age of the pandemic, people are looking for opportunities to spend time with their families and friends and head outdoors in a safe environment without depending on public transport or shared mobility which is further acting as a catalyst to strengthen consumers’ preference for SUVs.'

Round-Up

*Estimated Price of Alcazar 

**Prices of base variants are compared in the table

While SUVs continue to be the flavour of the market, a quick look at the prices of 5+2 seater SUVs reveals a small difference between these variants with their smaller five-seat variants. Considering most consumers in India get their vehicles financed, these seven-seater SUVs shouldn’t pinch their pockets much. 

The segment is heating up with additional product introductions, not just exciting customers but also providing the industry much-needed succour in these difficult times.

(The story has been updated on 12/04/2021)