Scorpio gets its sting back

Renault Duster The warhorse has overtaken a promising new kid on the block in the sports utility vehicle (SUV) segment. The slowdown may have taken a toll on car sales, but some time-tested favourites are holding up well. Mahindra & Mahindra's (M&M) Scorpio has regained lost ground to again become the bestselling SUV.

A boisterous demand for the Duster had led its French parent Renault to usurp M&M and become the most-favoured SUV manufacturer. However, a sharper-than-expected slide in sales over the last few months has eroded its lead. The Scorpio, in its eleventh year of production, has surpassed the Duster in July (please see chart).

The Scorpio, which clocked sales of 400,000 units since its launch in 2002, has been able to avoid the steep month-on-month fall of that of the Duster. Though, in terms of average monthly sales, the Duster remains the best in its class with 4,700 units, compared to Scorpio's 4,300 and the much smaller Ford EcoSport's 4,500 units.

The market for the overall utility vehicle saw demand plummet to 160,919 units from 162,589 units in the same period of April-July, last year, according to the Society of Indian Automobile Manufacturers (SIAM).

Partners-turned-rivals
Three years after Renault broke ties with M&M, the Duster had dethroned the Scorpio that was the undisputed leader in SUVs for several years. Launched in July 2012, the Duster sold 57,308 units in the first 12 months, surpassing Renault's internal targets.

The Duster slides
M&M had to push the Scorpio harder than ever in the face of competition from the Duster, and now the Ford Ecosport (launched in 2013). The petrol Duster undercuts the M&M model by more than Rs 40,000 in Mumbai (Scorpio, on the other hand does not have a petrol variant), but its diesel variant is nearly Rs 68,000 dearer than the Scorpio. M&M started offering discounts on the Scorpio to the tune of Rs 40,000-60,000.

Scorpio had to face an additional 3 per cent excise duty levied a few months ago on SUVs sporting engines larger than 1,500cc or with a ground clearance of more than 170mm.

It meant the Duster could still be in the lower duty bracket of 24 per cent with its diesel engine of 1,461cc, while the Scorpio had to pay 30 per cent. The regulation coupled with the car's initial sales had led market watchers to predict the Duster would maintain its sales at around 5,000-5,500 units monthly.

Even then, the Duster took a harder fall than the old but steady Scorpio, prompting Renault to roll out a new TV advertisement.

Duster's sales in July was half of its March tally and was 44 per cent less than the average monthly sales of last fiscal (5,500 units). Renault India did not comment on this story.

Ground clearance or price
Scorpio still has to work hard because of the extra excise duty. Pravin Shah, chief executive (automotive sector) M&M says, "It's not a level playing field anymore. The 3 per cent additional duty has affected sales of the Scorpio. But the customer preference indicates that the Scorpio still has the competitive edge."

M&M is now exploring the idea of making technical changes to the Scorpio to pay a lower excise duty. If the company lowers the ground clearance of the Scorpio to 170 mm or less, it could gain entry into the lower bracket. But that would rob it of some crucial SUV chops - a Scorpio with less ground clearance runs the risk of losing its appeal as a contemporary SUV.

"We have been looking at the product to meet regulatory requirements, we are looking at options. Product development takes time. We will remember to not to take out the capabilities of a tough off-roader. We need to do the balancing act", adds Shah. A few weeks ago, M&M cut the prices on its most premium SUV, the XUV500, by as much as Rs 30,000 by reducing ground clearance.

Customers, however, prefer high ground clearance in SUVs as not only does it provide a better view of the road ahead, but also the ability to drive over uneven, pockmarked and waterlogged roads.

With the launch of the sub-Rs 10 lakh Nissan Terrano based on the same platform as the Duster and carrying the latter's styling DNA, competition will heat up.

Research agency India Ratings states that the demand for sub-Rs 7 lakh SUVs, that comprise the lion's share in SUVs, will likely remain under pressure in the next few months and will depend more on discount offers as diesel prices have moved up steadily.