Passenger vehicle sales likely to remain flat in fiscal 2025, down from 4.2 million units last year

Automakers believe that switching to cleaner fuels will also boost sales. (Illustrative photo)

4 minutes of reading Last update: August 11, 2024 | 14:47 IST

Industry experts believe that passenger vehicle sales, which have been growing at a slower pace this fiscal year, will most likely end the 2024-2025 fiscal year at a stable level.

While OEMs are optimistic about sales during the upcoming holiday season, analysts predict that overall PV sales growth in fiscal 2025 will remain at around 0.8 percent.

Shailesh Chandra, Managing Director, Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility, expects the year to end with an overall growth of 2-3 per cent in retail solar sales from last year’s 4.2 million units (the highest ever).

Chandra says that growth in the second half of the year will be driven by the festival season. So far, there has been no significant change in any of the macroeconomic factors that affect car sales – be it the projected GDP growth, interest rates or inflation. “Rural demand is once again riding on the good monsoon sentiment. Enquiry levels at dealerships are also stable,” he adds.

Chandra said a 2-3 per cent year-on-year growth is realistically possible from last year’s 4.2 million units in 2024-25. “The H2 will bear the brunt of defining the growth in car sales this fiscal as the H1 was largely flat. Even if there is a 10 per cent growth in sales in H2FY25, the overall year-on-year sales growth will be around 5 per cent,” he told Business Standard.

“The data from Jato Dynamics clearly illustrates the trend of the automotive market cooling down after the post-pandemic rebound. After a strong 26.8% year-on-year growth in fiscal 2023, we have seen a significant slowdown. The growth slowed to 8.7% in fiscal 2024 and the forecast is for a mere 0.8% growth in fiscal 2025,” said Ravi Bhatia, President and Director, Jato Dynamics.

Market leader Maruti Suzuki India feels the festive season holds promise. “We have achieved the highest total sales in the history of our company in Q1. Coincidentally, it would also be the highest in the Indian automobile industry. The upcoming festive season promises to bring new opportunities. The budget announcement on strengthening road network and infrastructure is a boost to our enthusiasm,” said Partho Banerjee, Senior Executive Director, Marketing and Sales, MSIL.

Banerjee added, “As a market leader, our efforts are aimed at capturing the interest of customers across segments. The launch of the Epic New Swift and the introduction of the Dream Series Limited Edition Celerio, Alto K-10 and S-Presso and the Ignis Radiance edition are generating a lot of interest from customers.”

SUV maker Mahindra and Mahindra believes that the SUV segment will grow in the mid to high teens. “At M&M, we expect SUVs to grow in the mid to high teens in FY25. We had a successful launch of 3XO and are excited about the upcoming Thar Roxx, which should sustain the momentum,” Rajesh Jejurikar, Executive Director and CEO, Automotive and Agri Sectors, M&M, told Business Standard.

Therefore, car manufacturers believe that switching to cleaner fuels will also increase sales.

Banerjee, for one, said their CNG portfolio (14 models) continues to attract customers. “In Q1, 30 per cent of our sales were CNG variants. We are trying to further increase production to meet the high demand for CNG variants,” he said.

Similarly, Chandra felt that demand from fleet operators for EVs would return in the second half of the year. The discontinuation of the FAME subsidy scheme had an impact on fleet sales. “Customers had made early sales (in Q4Fy24) and now they are postponing sales. So, Q1Fy25 saw that impact. But once there is clarity on the subsidy, demand will return,” he said.

Due to this increasingly common trend, customers are reluctant to buy both combustion engine and electric cars, and the waiting time for a response to an inquiry at the retail outlet is getting longer.

“This slowdown is further highlighted in our four-month analysis. The April-July period shows a stark contrast in growth rates, falling from 33.2 per cent in 2022 to 8 per cent in 2023 and further to just 2 per cent in 2024,” Bhatia told Business Standard. See the chart.

These numbers suggest that the initial deferred demand and supply chain rebuilding that fueled post-Covid sales growth has largely already happened. The industry now faces more normalized market conditions, potentially coupled with economic headwinds that temper consumer demand for new vehicles.

“As we move forward, automakers and dealers may need to adjust their strategies to navigate this cooler market environment, focusing on efficiency, innovation and value propositions to sustain growth in an increasingly challenging environment,” Bhatia added.

First published: August 11, 2024 | 14:44 IST