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AUTO PUNDITZ

Indian Car Sales Analysis - H1 2024

Writer's picture: managementpunditzmanagementpunditz

Highlights

  • The Indian market grew by 7.5% in H1-2024 and registered the highest ever half-yearly wholesales of 21,61,655 vehicles

  • The average monthly volume in 2024 was 3,60,276

  • 3,93,645 vehicle sales make January 2024 the best sales month in history

  • Strong demand for SUV, crossover and MUV body-style products are the major growth driver in 2024



Indian mass market passenger vehicle industry

The Indian passenger vehicle industry growth rate has moderated to 7.5% in H1 2024 to post the highest ever wholesale of 21,61,655 vehicles (dispatch from brands to their dealers). Unlike early 2023, there were no supply-side constraints in H1 2024.

The early 2024 growth rate was on the higher side due to the lower base effect of 2023, which can be regarded as the tail end of the supply-side shortage phase induced by the COVID-19 pandemic. However, the month-over-month growth rate has started tapering downward as India progressed through different phases of the general election starting in April 2024. Post-election results: growth remained muted in June 2024 at 3.6%.


The decline in demand in Q2 2024 was quite widespread across the passenger car industry, as the top three luxury car makers in India also reported a muted growth rate: Mercedes (0.5%), BMW (-0.3%), and Audi (-6.5%). Seasonality does not come into play here, as it is a comparison of the same month in a different year.



Decoding growth path

To better understand the growth trend, we at Auto Punditz put together the Indian passenger vehicle CAGR (Compound-Annual-Growth-Rate) in series, with 2005 as a common base year. Growth in 2024, at its best, can be regarded as a steady state when seen over the long term, but it hasn’t returned to the pre-pandemic level.

The comparison between 2023 and 2024 clearly shows how successful SUV body styled products with high aspirational value are key growth drivers in the Indian passenger vehicle market. Hatchback products are still reeling under stress, thus carrying hefty discounts.


2024: From seller’s market to buyer’s market

Defying several macro and automotive-world-specific headwinds like high vehicle and fuel price inflation, the Indian passenger car market was driven by buyers’ sentiment, which fueled pent-up demand during the post-pandemic period. And the ensuing supply-side constraint made India largely a seller’s market for nearly three years, with a long waiting list for several products.


Towards the tail end of 2023, a slackening of demand driven again by general sentiment was visible as retail sales (dealer to end customer) started trailing behind wholesales (brands to dealer) by a wider margin. This is because supply-side constraints phased out in the early half of 2023 and products were readily available on the market. Large discounts have started following up on several slow-moving products to convert high wholesale into retail.


In the meantime, commodity-super-cycle has also subsided, thus reducing cost pressure on brands, leading to a few product price corrections by some brands, while others followed the discount route to lower the transactional price (= sticker price - discount) rather than changing the sticker price for sales sustenance. The wait list has largely waned in 2024, except for a handful of super-successful products.


The future demand and growth path for the remainder of 2024 will now depend on evolving consumer sentiments, which don’t seem to be very buoyant as of now. Brands need to be cautious with pricing and dealer stock levels for the sustainability of the overall business ecosystem, especially during the upcoming festive season. Higher marketing spend at this point may not improve demand and bring higher sales growth, but a price correction and product enhancement can arrest sales fall in an unseen future.

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