How to sell an SUV: Lessons from Mahindra XUV500 and Toyota Fortuner

There is something that Mahindra and Toyota are doing right. The Mahindra XUV500 sells four times more vehicles than others in the Rs. 12 lakh to Rs. 18 lakh price segment. Similarly, the Toyota Fortuner sells four times more vehicles than others in the Rs. 18 lakh to Rs. 25 lakh price segment.

What have these two vehicles got that other carmakers just haven’t managed to tap? CarToq takes a look at these two price segments to see what Mahindra and Toyota got right with these price segments.

What the XUV500 got right

How to sell an SUV: Lessons from Mahindra XUV500 and Toyota Fortuner

For instance, take a look at the Rs. 12 lakh to Rs. 18 lakh price segment first. Cars in this segment besides the XUV500, include the Tata Aria, Skoda Yeti, Toyota Altis, Chevrolet Cruze, Skoda Laura, Honda Civic and recently launched Hyundai Elantra among others. The leader among sedans in that segment is the Toyota Altis which sells an average of 720 vehicles a month, looking at the last 12 months sales figures (sales have fallen in the past few months). Related: Mahindra XUV500 road test

The second largest-selling SUV in that price segment of Rs. 12 lakh to Rs. 18 lakh is the Skoda Yeti which sells an average of 125 vehicles a month, despite Skoda offering huge discounts on the Yeti to clear stocks.

Now look at the Mahindra XUV500. Mahindra sells an average of 2,700 XUV500s a month. In fact, that figure would have been higher if Mahindra had the production capacity to produce the XUV when it launched the vehicle last September. It started out producing only 2,200 XUV500s a month and has slowly ramped up capacity to meet demand. Sales of the XUV500 have hit the 4,000 units a month mark in the past two months, but waiting period continues to increase as more bookings pour in. The average waiting period is now four months for the XUV500. Related: Mahindra XUV500 vs. Ford Endeavour!

Clearly, buyers of vehicles in the Rs. 12 lakh to Rs. 18 lakh segment see much better value in the XUV500 than in any of the other offerings, be it sedans or SUVs. It probably has got to do with the fact that they see the XUV500 as perfect value-for-money going by the number of features it offers. Mahindra has loaded the XUV500 with features not found in vehicles twice its price.

It’s not all good with the XUV500 though. There are some issues that early owners of the vehicle face, but many are willing to overlook these niggles just for the price to value equation it offers. Read more: Mahindra XUV500 problems and solutions

So what did Mahindra get right with the XUV500? Obviously, it understood the Indian buyers love for features, and pulled out all the stops to ensure everything a buyer wanted was there in the XUV500, so that she didn’t find the need to buy a competing product. It also indulged in clever introductory pricing, pricing it below Rs. 11 lakh at launch, while building up expectations of a vehicle that was clearly worth over Rs. 15 lakh! (The only benchmark to compare at the time was the Tata Aria – which matched the XUV500 on most features, but was priced at over Rs. 14 lakh).

What the Fortuner got right

How to sell an SUV: Lessons from Mahindra XUV500 and Toyota Fortuner

The Toyota Fortuner is nearly Rs. 7 lakh more expensive than the Mahindra XUV500, yet it continues to sell an average of 1,142 vehicles a month (over the past 12 months), with sales staying consistently above 1,200 units since February, after the launch of the face-lifted Toyota Fortuner with two new variants.

Now look at the segment in which the Toyota Fortuner operates – the Rs. 18 lakh to Rs. 25 lakh segment, and you’ll find a huge gap between the Fortuner’s sales and the number two car in that segment. This segment has the likes of the Ford Endeavour, Hyundai Santa Fe, Chevrolet Captiva, Mitsubishi Pajero Sport and Honda CRV among SUVs and Skoda Superb, Toyota Camry, Honda Accord and Volkswagen Passat among cars.

The second-best selling vehicle in this price segment is the Skoda Superb that sells an average of 204 vehicles a month, nearly five times lower than what the Toyota Fortuner sells. Ok, so that’s an apples to oranges comparison. How about the second-best selling SUV in that segment? The Ford Endeavour is the second-best selling SUV, selling an average of 147 units a month, with sales varying significantly month-on-month.

The Toyota Fortuner isn’t a vehicle that’s loaded with goodies and features like the XUV500, but it has just the right amount that a buyer is looking for. Also see: Mahindra XUV500 vs Toyota Fortuner

So what then has Toyota got right with the Fortuner? Perhaps it’s the fact that it is a diesel SUV (compared to the Honda CRV and Mitsubishi Outlander that a petrol). Perhap’s is because of the sheer size and road presence of the vehicle (compared to the Hyundai Santa Fe and Nissan XTrai among others). Or perhaps it’s just the Toyota brand, which conjures up a perception of reliability and trust.

Perhaps the Toyota Fortuner buyer sees great value in her purchase – comparing what the Toyota Fortuner offers vis-à-vis the Audi Q5 and BMW X3 – vehicles which are twice the price of the Toyota Fortuner. Why then has the Ford Endeavour not been able to emulate Toyota’s success? Perhaps it’s the better all round mix of comfort, road-presence and off-road ability that the Fortuner offers that’s hard to beat. Also see: Toyota Fortuner road test and review

The new student: Renault Duster

Whatever the lessons these two vehicles have to offer – other carmakers will do well to take note. There is an understudy on the blocks now – the Renault Duster, which has got a good initial response of over 3,100 units in its first full month. Do you think it can emulate the success stories of the Toyota Fortuner and the Mahindra XUV500? Share your thoughts.