NEW DELHI: After three years of blockbuster growth, passenger vehicle (PV) sales have come under pressure in FY25. Due to waning pent-up demand and lack of interest shown by new consumers, dealer showrooms are filled with inventory of unsold vehicles despite steep discounts and promotional schemes.
“PV wholesale volumes grew 3% in Q1FY25 on a YoY basis, but retail volumes fell 7% amid factors like heat conditions, implementation of model code of conduct and the General elections impacting retail footfalls. While the underlying demand drivers remain supportive, ICRA expects domestic PV sales volume growth to fall to 3-6% in FY25 on waning replacement demand and effects of a high base,” said Srikumar Krishnamurthy, senior VP & co-Group head - corporate ratings, ICRA.
PV industry saw sales of 42.3 lakh units in FY24 as against 38.9 lakh units sold in FY23, up 8.7% YoY. Puneet Gupta, director, S&P Global Mobility, said while the industry is expected to grow in FY25 over a high base, absence of pent-up demand, geopolitical uncertainties and delay in rate cut by the RBI remain concerns.
He said to create fresh demand, OEMs will have to realign consumer-reaching strategy. “For the last 3-4 years, it was a supply-driven market. A lot has changed now. EMIs have gone up, prices have gone up, there is no pent-up demand and inventory at showrooms has piled up. Automakers will have to rethink needs of customers, realign pricing strategy and spend heavily on marketing,” said Gupta.
Amid the softening demand, especially for entry-level vehicles, inventory levels at dealer showrooms have risen to 67-72 days in July 2024, as per the Federation of Automobile Dealers Association. Earlier this month, the association said dealers are sitting on 730,000 unsold vehicles. This inventory, whose valuation pegged at Rs 73,000 crore, can meet demand for two months. The Society of Indian Automobile Manufacturers has estimated unsold inventory to be 400,000 units.
Krishnamurthy said with the higher-than-normal levels of inventory, discounting levels have gradually risen, especially on slow-moving models. As per industry figures, barring a few SUVs, almost all models are offered with attractive schemes. “In the run-up to the festive season, elevated discount levels and promotion schemes, along with better rural demand, are seen supporting the gradual liquidation of inventory. Factors like excessive rainfall, presence of a wide product range, and consumer sentiments amid inflationary environment are key watchpoints,” he added.
Meanwhile, Maruti Suzuki’s parent company Suzuki Motor Corp recently said the demand in India’s PV industry has been weaker than expected in the April-June period. SMC informed its investors that Maruti Suzuki is currently adjusting production to reduce market stock and that they are closely monitoring demand trends.