The SUV market is projected to expand from USD 885.8 billion in 2022 to USD 1,221.7 billion by 2027, achieving a CAGR of 6.6%. The market’s growth is driven by the superior comfort and automatic safety features that premium SUVs provide, along with benefits like enhanced maneuverability, more interior space, and better comfort when compared to sedans. These factors are attracting consumers, especially in developing regions, to compact SUVs. Additionally, full-size SUVs offer several benefits, including versatility, multiple drivetrain options, off-road capabilities, heavy towing power, more seating and trunk space, and competitive pricing against sedans. The increasing adoption of electric and hybrid vehicles, along with advancements in semi-autonomous and autonomous driving technologies, will further accelerate the growth of the SUV market.
The Mid-Size SUVs would lead the global SUV market during the forecast period
The mid-size SUVs hold the largest market among all types. They are offered in multiple engine variants with gasoline (naturally aspirated and turbocharged), diesel, and some plug-in hybrid options for better fuel economy. Additionally, these vehicles are provided with various transmission options (manual, automatic transmission (AT), CVT, and DCT), 2 or 3 rows of seating options, and multiple luxury, safety, and driver assistance features (such as smart entry, start-stop, all-wheel disc brakes, heated & ventilated seats, sunroof, ambient lighting, etc.). Consumers mostly prefer mid-size SUVs, and the inclination is shifting from the premium hatchback or compact SUV segment to this segment. The key reason for the same is to get additional seating and cargo space with a moving inclination towards better functionality and improved practical features at comparatively lower prices than full-size SUVs. Increasing disposable income is also one of the reasons for this shift. Thus, the rising adoption of mid-size SUVs in the Americas, Europe, and developed countries such as Japan and South Korea will drive the growth of this segment.
The Electric SUV segment would be the fastest-growing SUV segment
Electric SUV is estimated to grow at the highest CAGR under the review period. The stringent emission regulations by global economies with lowered emission limits and updated CO2 and fuel efficiency regulations, soaring crude oil prices, and demand for fuel-efficient vehicles drive the electric SUV market. Battery electric SUVs hold the largest share, followed by plug-in hybrid versions of SUVs. Some global top selling electric SUV models are - Tesla Model Y, MG ZS EV, Mercedes-Benz EQC, Audi e-tron, Kona Electric, and Volvo XC40. Further, in the US and some European countries, OEMs are offering plug-in hybrid SUVs that offer better mileage without compromising on the engine performance. These growth factors would fuel the future electric SUV segments growth.
"Asia Pacific would be the largest market for SUVs."
The Asia Pacific region holds the largest market share in the SUV market owing to shifting consumer preferences, increasing per capita income of the middle-class population, and cost advantages that have led OEMs to increase vehicle production in the region. Thus, strong demand has been noticed in China, India, and Japan, accelerating the SUV market growth. In 2021, SUV sales in China have increased from 10.1 million units to 11.2 million units. The demand for entry-level and compact SUVs is growing in countries such as India and China due to more product launches with advanced features in this segment at a competitive price bracket. Further, increased demand for luxury cars with superior cabin comfort and off-roading capability for sport and recreational purposes would spur the demand for mid-size and full-size SUVs in the region.
DRIVER: The rise in demand for premium vehicles with advanced comfort features
The improving global economic conditions have changed the overall lifestyle of consumers. Consumers' preferences have changed due to rising disposable income, and their demands have changed in line with modern lifestyles. This has favorably affected the sales of ultra-luxurious cars across the globe. In addition to this, demand for luxury cars can be attributed to factors such as comfort, convenience, entertainment, safety features, luxury cars equipped with advanced connectivity elements, autonomous-driving options, and the latest powertrain electrification technologies.
In line with growing luxury vehicles, the market for premium SUVs has risen significantly recently. According to MarketsandMarkets Analysis, of total premium cars produced globally, the share of premium SUVs stood at ~53% in 2016, which grew to ~62% in 2021. Countries such as the US, Canada, China, Japan, and South Korea lead the premium SUVs market, constituting more than 90% of total production globally. For instance, in 2021, the production of luxury SUVs in the US out of total luxury cars was around 75%. On the other hand, developing countries such as China, Brazil, and India have shown tremendous growth in SUVs demand during previous years. China and India's market has grown by ~36% and ~10%, respectively, from 2018 to 2021.
RESTRAINT: High cost of SUV
SUVs offer various benefits over hatchback and sedan cars, and buyers have moved towards this vehicle segment. According to IEA, global SUV sales had grown remarkably by more than 10% between 2020 and 2021, accounting for more than 45% of all new car sales globally. However, along with offering several advantages, these vehicles also come with heavy price tags compared to small- & mid-size cars, especially full-size SUVs. The compact SUVs market rose significantly in developed and developing nations, and mid-size SUVs are still in the mid-range in terms of pricing, and demand is considerably good compared to full-size ones. Along with being installed with powerful engines and providing off-roading capabilities, these full-size SUVs also have several safety and comfort features. These features include an improved infotainment touchscreen system, heated front seats, powerful air conditioners for the third row, parking assistance, intelligent alerts, driver assistance features, and many more. Most of these full-size SUVs fall under the premium and ultra-premium segments, making OEMs adopt more advanced features to sustain competition, ultimately increasing the overall cost of the vehicle.
OPPORTUNITY: Electrification of SUVs and growing adoption of advanced connected technologies
With the growing global vehicle sales, The government & regulatory bodies such as European Commission (EC) and the United States Environmental Protection Agency (US EPA) around the world have imposed stringent emission norms for controlling GHG emissions. Stringent emission norms have shifted the global focus towards electric and hybrid vehicles, which has resulted in exponential growth of these vehicles in recent years and simultaneously for electric SUVs. Many automotive OEMs are launching their electric SUVs in the market. At least one or more electric SUV models are currently available in the market from BMW, Mercedes, Audi, Volvo, Jaguar, Kia, Tesla, Chevrolet, and Hyundai, and several more are working to develop and launch in the coming future. According to IEA Global EV Outlook 2021, more than 55% of announced models globally are SUVs and pickups. The potential reason for electrifying SUVs is that the SUV is amongst the heaviest and most fuel-consuming vehicles, and electrification would help to meet stringent emission targets.
Further, these vehicles are costly compared to small cars and offer high-profit margins. This helps OEMs to bear extra electrification costs compared to smaller cars. US market has the highest electric SUV market share, whereas India, China, and some of the EU countries are the fastest growing in this segment; thus, the advantages would offer excellent growth opportunities to the OEMs and components suppliers
CHALLENGE: Challenges in meeting fuel economy and emission limits
The SUV market has grown at a significant pace in recent years. According to IEA, the number of SUVs will grow by more than 35 million on the world’s roads in 2021, increasing CO2 emissions by 120 million tonnes. Generally, mid-size and full-size SUVs have larger engines, generating higher Co2 emissions and lesser fuel efficiency. The engine size of top-selling full-size US SUVs ranges from 355HP to 420HP. Whereas in Europe, the engine sizes of top-selling large SUVs are ranging in between 315 HP to 400 HP. For instance, the top-selling model of Chevrolet Suburban in the US has an engine size of 420 Hp, and similarly, the best-selling large SUV Volvo XC90 in Europe has an engine size of 400 Hp. OEMs are focusing on producing large-size electric SUVs. However, the full-size electric SUVs would require high-capacity batteries that will be required a high charging time, and the overall weight of SUVs and cost of full-size SUVs will also increase. Thus, the electrification of large SUVs would require battery technology advancement.
Considering the stringent emission targets by regional bodies, the SUVs, especially mid-size and full-size SUV segments, continue to dominate conventional powertrains, which run on gasoline or diesel fuel. Though OEMs are developing hybrid powertrains to join the crowded race of electric vehicles, a handful of SUV models run hybrid or electric powertrains.
Apart from strict emission norms & certain OEMs efforts, policymakers of some countries implemented taxes & fines on heavy cars, which emit maximum emissions. For instance, France has imposed a pollution tax on SUVs and trucks, and Germany imposed a vehicle tax on high-emission cars. Similarly, the Road Transport and Highways Department of India approved a 'green tax' proposal on old vehicles with higher pollution. Thus, rising stringent government regulations on conventional SUVs and less fuel economy can hinder the growth of ICE engine SUV Market.
Content Source:
https://www.marketsandmarkets.com/PressReleases/suv-trend-analysis.asp
https://www.openpr.com/news/3506807/suv-market-worth-usd-1-221-7-billion-by-2027-at-a-cagr-of-6-6
