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Demand For Smaller SUVs Endures Amid Slowdown

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Nissan Motor Co on Tuesday, 20 August, unveiled its redesigned "Terrano" compact sport utility vehicle in India, aiming to tap the relatively strong demand for affordable crossover vehicles, despite the doldrums the country's overall auto market has suffered this year.

"The Terrano will play a key role in boosting Nissan's sales volume in India and marks the company's entry into the expanding compact SUV segment," Nissan said in a statement.

With the launch of the Terrano, which Nissan will produce at its factory near Chennai and start taking orders from next month, the Japanese automaker is trying to take advantage of a segment in which a Ford Motor Co executive said he expects to see continued growth.

Though sales of sport utility vehicles fell 17.5 per cent last month, the first monthly slide in four years, the segment had been a rare bright spot in India's otherwise gloomy auto market.

Demand has "exceeded our expectations and we are witnessing an unprecedented demand for the EcoSport," Vinay Piparsania, executive director of marketing, sales and service at Ford India, told Reuters.

With an aggressive starting price of Rs 559,000, the EcoSport has proven popular since being launched in India in June, not only rivaling Renault's compact SUV Duster, which shares Terrano's platform, but also entry-level sedans and super compact cars. The Duster starts at 800,000 rupees.

Ford sold 4,715 EcoSports in July, pushing up the company's overall monthly sales by 26 percent, according to data from the Society of Indian Automobile Manufacturers.

Renault said it shipped 3,763 vehicles during the same month, a two-fold jump over the same period last year, with 3,089 Dusters sold, but still lower than the 4,523 in the previous month, a sign that the EcoSport may have stolen some customers.

It's a positioning that "is beginning to draw from customers who would otherwise have considered other vehicles," Piparsania said.

Nissan hopes the Terrano, which will start at a price below Rs 10 lakh, will appeal to existing SUV buyers as well as those looking to "graduate" to SUVs, said Kenichiro Yomura, CEO of Nissan Motor India.

The demand for smaller SUVs is expected to boom over the next few years in emerging markets, with IHS Automotive forecasting sales in the segment will grow from just 6,140 vehicles in 2012 to more than 126,000 in 2015 in India. In China, it expects sales to more double this year to more than 207,000.

"There aren't many products available in the segment (in India), so whoever is launching a car is creating a pull towards those models," said Mohit Arora, Singapore-based executive director at auto market research firm J.D. Power.

Arora, however, cautioned against declaring the EcoSport a success so soon after its launch.

"While there is an initial pull, one has to look at the stable-state demand, rather than just the initial pull, which comes for any new car that you may launch in the market."