Despite a slowdown, the PV market in India has expanded at very healthy levels, with the year likely to close with sales of around 4.3 million units.
01 Jan 2025 | 3428 Views | By Ketan Thakkar and Ashutosh Radhey Shyam
India, the world’s third-largest car market, is set to attain peak volumes of 4.25–4.3 million units in 2024, recording its fourth consecutive year of growth. However, the growth rate has significantly decreased given the high base of 2023, erratic rains in certain states, IT sector layoffs and that 2024 was ...
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India, the world’s third-largest car market, is set to attain peak volumes of 4.25–4.3 million units in 2024, recording its fourth consecutive year of growth. However, the growth rate has significantly decreased given the high base of 2023, erratic rains in certain states, IT sector layoffs and that 2024 was an election year during which government spending slowed.
Industry participants and analysts have told Autocar Professional that the Indian passenger vehicle market will grow by 3.5–4.5%, making it next to only China in the world. In the first four months of 2024, it grew 7% as the supplies improved, but for the period between May and November, the pace had decelerated to 1%.
India to keep its No. 3 tag
India has firmly cemented its place as the world’s third-largest car market, while the Japanese car market continues to slide. In the first eleven months of this calendar year, the Indian car market has touched 3.98 million units, posting a growth of 4%; Japan’s market has declined by 6%.
The gap between India and Japan has more than doubled from 1 lakh units in 2023 to over 2 lakh units in 2024, and this will only increase by the end of the year.
Shailesh Chandra, president of the Society of Indian Automobile Manufacturers and managing director of Tata Motors’ passenger vehicle business, said the PV segment witnessed significant growth over the past few years, so a moderation in demand was expected.
But despite this correction, the market in India has expanded at very healthy levels, and Chandra expects the year to close with sales of around 4.3 million units. Giving a perspective, he said annual sales stood at 2.7 million units four to five years ago, which means the industry grew by over 50%. “Thus, while the growth rate has slowed, absolute demand remains strong. However, the effort required to sustain this demand has been significant. OEMs have had to focus heavily on new product launches, market activation efforts and dealer initiatives. This has made it a challenging yet resilient year for the industry.”
Operating on a higher base
The average monthly run rate of the Indian passenger vehicle industry has risen to 3,59,726 units in 2024 from 2,46,845 units in 2019, reflecting a compounded annual growth rate (CAGR) of 7%. This pace aligns closely with the medium-term growth in the country’s gross domestic product.
In the current year, monthly sales volumes have consistently exceeded 3,00,000 units, indicating a gradual expansion of the car-buying base. Rising per capita income and increasing notional wealth, driven by equity markets, have played a pivotal role in boosting demand.
A key driver of this growth is the rising popularity of utility vehicles (UVs), which have demonstrated significant expansion. In 2024, around 67% or nearly two out of every three passenger vehicles sold in India were UVs. That’s about a two-fold increase in the segment’s share compared to five years ago.
However, the overall market growth rate has been moderating over the past two years due to continued pressure in the hatchback and sedan segments, which show no apparent signs of bottoming out.
UVs in demand
The compact SUV segment remains the largest category in India, recording 21% year-on-year (YoY) growth to reach 1.038 million units in the first ten months of 2024. This segment is followed by larger utility vehicles (above 4 metres), which grew by 12% to approximately 0.9 million units. Except for March, when compact UV volumes dipped to 98,233 units, all other months have witnessed sales exceeding 1,00,000 units, with five carmakers having models that individually achieve over 10,000 units in monthly sales.
Tata Motors’ Punch has emerged as a dominant player in the compact SUV segment, contributing 1,71,523 units to the total in the year’s first ten months. It is followed closely by Maruti Suzuki’s Vitara, which recorded 1,55,906 units during the same period.
In the SUVs over 4 metres, Hyundai Creta continues to lead, closely followed by Mahindra & Mahindra’s Scorpio, which sold 1,41,465 units between January and October.
During this period, the multi-purpose vehicle (MPV) segment has recorded the highest growth among all passenger vehicle categories, expanding by 34% YoY to 3,74,854 units. MPVs now account for 10.5% of the total market, surpassing the contribution of hatchbacks and sedans.
A significant driver of the segment’s growth is Maruti Suzuki’s Ertiga, whose sales jumped 53% to 1,58,885 units. This has pushed Ertiga’s share in the MPV segment to nearly 42%, a gain of approximately 7 percentage points compared to last year.
According to data from automotive industry intelligence provider Jato Dynamics, the shift towards UVs has accelerated, with the segment accounting for almost two-thirds of the market. The share of SUVs in passenger vehicle sales is estimated to be the highest ever at 54%, and MPVs make up about 13%.
Meanwhile, the share of hatchbacks in the overall market has slipped below 25% for the first time (it was 30% last year), and that of sedans has declined to 8% from 10%.
Winners and losers
Mahindra and Toyota Kirloskar continued their outperformance with strong double-digit percentage growth, but the rest of the market had it tough in the current calendar year.
The top three players—Maruti Suzuki, Hyundai Motor and Tata Motors—continued to face market share challenges due to a significant part of their portfolio falling in the sub-Rs 10 lakh market, which has been under prolonged stress.
While the debate over electric vehicles and hybrids continued, thanks to the growing demand for SUVs, diesel’s share in the overall market is estimated to have inched up to 18% this year from 17% in 2023, industry sources told Autocar Professional. The share of CNG vehicles has surged.
Inventory pileup: Taking stock
In 2024, as pent-up demand disappeared, dealerships got flushed with higher stock levels. The result? Discounts hit a five-year high.
Vinkesh Gulati, former president of the Federation of Automobile Dealers Associations and managing partner of United Automobiles, said 2024 was the best year from a consumer standpoint—regarding car availability and the best deals in the market.
“Despite the high base, the industry is set to post another record year, which is fantastic. Yes, the stocks at the dealerships have gone up with the ramp-up in production, putting pressure on dealers. The dealer fraternity will be forced to return to financial prudence and learn to manage bigger volumes. We expect this growth momentum to continue in 2025,” added Gulati.
Unlike the calendar year 2023, when there was a supply challenge and minimal discounts, 2024 is characterised by high discounts and inventory of over 40-50 days. As the year comes to an end, there is rising pressure on vehicle makers and dealers to liquidate their stocks at low prices.
The huge unsold stocks as of mid–December are a cause of concern. Steep discounts and frenzied activity in the last fortnight will clear some of the inventory, but a sizeable number of unsold units will spill over into 2025.
“A 25–30-day inventory at the beginning of December is comfortable. However, this year, we have seen stocks of 45-45 days, which may force dealers to give discounts. We hope the production is rationalised,” added Gulati.
What to expect in 2025
Gaurav Vangaal, S&P Global’s associate director for Light Vehicle Production Forecasting—Indian Subcontinent, said that on the light vehicle front—which includes passenger vehicles and small commercial vehicles up to 5 tonnes—India’s growth rate is projected to be 3.4% (YoY), reaching 5.62 million units in CY2024, compared to 5.4 million in CY2023.
“While the US, Japan, Germany and South Korea are expected to experience negative growth rates, India and China continue to show growth,” said Vangaal.
According to him, the Indian light vehicle market’s production increased at a CAGR of 4.1% between 2013 and 2023. He expects the country to retain the fastest-growing tag in the coming decade, with an estimated 4.3% CAGR between 2023 and 2033.
Industry players are confident that the passenger vehicle market will return to faster growth of 5–6% on the back of a good monsoon and increased government spending.
Hardeep Singh Brar, head of marketing and sales at Kia India, estimates that the passenger vehicle industry will post about 5% growth in 2025 on the back of government investments, which will likely be back in “full swing”. Also, volumes “will depend a lot on how monsoon turns out to be” and other economic fundamentals.
Meanwhile, United Automobiles’ Gulati feels the new product action, especially on the EV front, will generate more buzz in the market, help improve sentiment next year and drive the demand even for internal combustion engine vehicles.