The SUV market is projected to reach USD 1,221.7 billion by 2027 from USD 885.8 billion in 2022, at a CAGR of 6.6%. The growth of the market includes the advanced comfort and automatic safety features premium SUVs offer, and the benefits like better maneuverability, larger space, and better comfort compared with sedans, are drawing the consumer inclination towards compact SUVs in developing countries. Similarly, Full-size SUVs offer several advantages, such as versatility, multiple drivetrain options, off-roading capabilities on rough and unpaved terrains, heavy towing capacity, larger seats and trunk space, higher level of comfort, and competitive price range against sedan cars. Moreover, the rising adoption of electric & hybrid vehicles and the advancements in semi-autonomous and autonomous vehicles would bring tremendous growth potential to the SUV market.
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.
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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.
Asia Pacific is estimated to be the dominant regional market for SUV
The market growth in Asia Pacific countries such as China, Japan, and India can be attributed to the increasing demand for vehicles owing to changing consumer preferences, increasing per capita income of the middle-class population, and cost advantages to global OEMs. Due to the increased vehicle production and sales, China is estimated to be the largest market for SUVs. As demand for passenger cars is growing, the consumer preference for comfort and advanced safety features has increased. Further, OEMs in this region offer multiple variants of SUVs in different type of SUVs at competitive pricing, which resulted in shifting consumer preference from sedan to the hatchback. Thus, rising vehicle production and consumer inclination for advanced safety and comfort features will create lucrative opportunities in the coming years.
Key Market Players
Toyota Motor Corporation (Japan), Hyundai Motors (South Korea), Volkswagen AG (Germany), General Motors (US), and Honda Motor Co., Ltd (Japan). These companies adopted new product launches and expansion to gain traction in the SUV market.
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