Passenger vehicle sales in the country reached their highest-ever levels last month, driven by strong demand for sports utility vehicles. However, sales of entry-level cars and motorcycles in wholesale volumes remained sluggish due to financial constraints faced by consumers in the lower-income segments of the market.
According to data from the Society of Indian Automobile Manufacturers (SIAM), a total of 359,228 passenger vehicles were sold in August. This represents a significant increase of 9.4% compared to the 328,376 units sold during the same period in the previous financial year.
Vinod Aggarwal, President of SIAM, commented on the positive trend, noting that August witnessed record-high sales for passenger vehicles and three-wheelers. The commercial vehicle segment also experienced notable growth in August 2023. Demand remained particularly strong for newer models in the utility vehicle segment, with leading manufacturers like Maruti Suzuki, MG Motor, and Hyundai offering feature-rich, larger vehicles that align with consumer preferences.
While urban markets with easier access to vehicle financing continued to show positive demand, the sales volumes of smaller and entry-level cars for most automakers declined. This decline is attributed to a delay in the income growth of entry-level consumers, especially in Tier 2, 3, and rural markets.
In contrast, three-wheeler sales surged by 69%, totalling 64,763 units for the month. Two-wheeler sales remained stagnant at 1,566,694 units in August. It’s important to note that Indian automakers typically report wholesale dispatches from factories to dealerships rather than retail sales to customers.
Dhruv Mudaraddi, Research Analyst at StoxBox, pointed out that two-wheeler sales, especially in the entry-level internal combustion engine (ICE) segment, faced challenges due to price hikes. However, the mid-sized and premium two-wheeler segment saw healthy growth, driven by shifting consumer preferences and increased competition among OEMs, resulting in attractive pricing for newer models.
Industry experts are optimistic about consumer sentiment improving in the entry-level segments during the upcoming festive season. They cite strong macroeconomic fundamentals and the revival of monsoon rains after a deficit in August as factors that could boost demand. Vinod Aggarwal added that based on the previous month’s performance, there is increased optimism for a demand upswing during the festive season.
Mudaraddi concurred, expressing expectations for a recovery in demand for entry-level two-wheelers in the coming months as the monsoon season progresses and rural incomes rise. Additionally, the robust order book for newer models and the onset of the festive season are expected to further drive demand.