SUV saturation? Volkswagen says there’s still room to grow
Despite fears of market overload, SUVs continue to command demand Down UnderThe News
Volkswagen Australia executives have admitted the SUV segment looks oversupplied, but insist demand is still holding strong as the car-maker adds new models like the new seven-seat Tayron to its range to sit alongside Tiguan and T-Roc.
The Key Details
- Volkswagen acknowledges SUV “saturation” but says sales remain solid
- SUVs now account for 60 per cent of new vehicle sales in Australia, up from 35 per cent a decade ago
- Fragmentation in Australia is high compared to other global markets
The Finer Details
Aussies have jumped on board the SUV wave in droves. However, with every passing month comes a handful of new offerings that have made it harder to distinguish where one size category ends and the next one begins. Take the newly released Volkswagen Tayron seven-seat large SUV, the replacement for the Tiguan Allspace for example.
Asked at the launch of the Tayron on whether the SUV market had reached a total saturation point, Piergiorgio Minto, Director of Volkswagen Passenger Vehicles Australia told carsales, “A couple of years ago, I would [have] thought that we are at a saturated level. But it’s not there. There are still some classic segments [non-SUV] in the market and they will remain niche, some of them will disappear completely.”
“At the end of the day, it’s not just the customer that is doing that, sometimes it’s also the offer [by the brand].
“If the manufacturer just offers SUVs, then all the rest will disappear automatically. It’s quite an interesting question, and market dynamics sometimes take it some way that you wouldn’t have thought.”
While Arjun Nidigallu, Head of Product at Volkswagen Passenger Vehicles Australia, admitted that for years industry watchers have been predicting saturation, but it has never quite eventuated. “Certainly in the last five years, I would have called a number of times that, we just can’t have any more fragmentation. But lo and behold [it] still sustains it. Every year, after year, we have more SUVs and they still sell reasonably well enough to hold their ground.”
In Australia, the SUV shift has been particularly pronounced. SUVs now account for 60 per cent of new-vehicle sales, compared with just 35 per cent 10 years ago. That growth has come at the expense of traditional passenger cars, which now make up only a small fraction of the market.
The situation in Australia is also striking compared to other regions. “The Australian market is a bit of a unicorn, in that sense. We don't really understand how it sustains it, but you speak to anyone from the US or the UK for example, they're quite shocked.” Nidigallu said.
While some worry the addition of the Tayron next to Tiguan risks splitting sales, Volkswagen insists the multi-pronged SUV strategy gives buyers more choice. Their mantra remains ‘as long as they leave with a Volkswagen’.
The Road Ahead
Despite persistent talk of saturation, the SUV market remains the dominant force in Australia and globally. Volkswagen’s plan to layer new SUVs alongside existing favourites underlines its confidence that demand still has further to run, even if the market is more fragmented than ever.
Related: Volkswagen Tiguan and Tayron PHEVs confirmed for Australia
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Related: VW’s Tiguan R was ridiculously popular – so where’s the new one?
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