The Indian passenger vehicle market is on track to surpass 4 lakh units in monthly sales for the first time, driven by restocking, consumer demand, and new model launches in 2025.
31 Jan 2025 | 8554 Views | By Ashutosh Shyam, Ketan Thakkar and Kiran Murali
The Indian passenger vehicle market continues to scale new peaks even as market growth slows to the low single digits. The car market will likely breach the historic 4-lakh unit monthly dispatches for the first time in January. Total dispatches could range from 4.05 lakh to 4.10 lakh units, registering ...
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The Indian passenger vehicle market continues to scale new peaks even as market growth slows to the low single digits. The car market will likely breach the historic 4-lakh unit monthly dispatches for the first time in January. Total dispatches could range from 4.05 lakh to 4.10 lakh units, registering a 2-3% growth over 3.93 lakh units in October 2024, coinciding with the festive season.
This will mark the 13th consecutive month in which the industry registered wholesale volumes exceeding 300,000 units. Moreover, the six-month average volume is anticipated to reach 364,894 units.
Sources say channel restocking and increasing consumer demand, spurred by a wave of new launches scheduled for 2025 are the primary drivers of this growth.
Interestingly, there has been a lag between retail and wholesale (dispatches). In December, for example, OEMs reported retail sales of 4.45 lakh. However, according to the government of India’s Vahan portal, which tracks actual vehicle registrations across the country, the number was only 3.3 lakh.
This disparity is likely to be addressed in the form of a high number of dispatches to dealers in January, as retail numbers reported by OEMs can often ‘run ahead’ of actual dispatches and registrations, particularly in December. It is a practice for dealers to report high retails in December to take advantage of expected price hikes and high promos/incentives, while the actual deliveries take place in January.
The spike in car sales volume is likely to come from manufacturers such as Maruti Suzuki, Mahindra & Mahindra, and Toyota. The top five carmakers are projected to sell approximately 355,000 vehicles collectively in January 2025, accounting for nearly 90% of the industry's total volume. Maruti Suzuki may also surpass its monthly high in the domestic market, driven by efforts to replenish channel inventory.
While Maruti Suzuki retail sales rose 3.5% in April-December, its wholesales increased by 2.6%. The company had adjusted its vehicle production and dispatches to dealerships towards the end of 2024.
Meanwhile, Hardeep Singh Brar, who heads sales and marketing at Kia India, warned against reading too much into the spike in dispatches in January, attributing it to stock replenishment rather than any revival in retail demand.
"The estimated wholesale of four lakh units in Jan is driven by strong retail performance in October and December, which led to stock of less than 30 days in the industry. However, this dispatch does not fully reflect the actual market sentiment," he said.
He pointed out that the average growth rate has been in the 3-4% range after the elections.
"Given the overall domestic & global market customer sentiments are currently low, we will continue to monitor current market conditions and global trends to assess the situation further. The positive indication of the government investments coming back and recruitment in IT sector are good news and will definitely help the market," he added.
During its third-quarter earnings call with investors, Maruti Suzuki disclosed that its inventory levels had declined to nine days."Retail sales growth in the nine months of the financial year was 3.5%. Our retail sales growth in the fourth quarter is also expected to follow the same trend as seen in the first nine months. We would like to enter the new financial year with less inventory,” said Rahul Bharti, ED, Corporate Affairs, Maruti Suzuki.
Consequently, Maruti Suzuki's domestic sales volume is projected to reach 175,000 units in January 2025, compared to 166,802 units in the same month of the previous year. Including sales to other original equipment manufacturers (OEMs), commercial vehicle sales, and exports, the company's total volume is expected to touch an unprecedented level of approximately 210,000 units.
Fight for Third Place
The fight for third place is getting closer. Both Tata Motors and Mahindra & Mahindra are anticipated to dispatch around 50,000 units in January 2025.
In an earnings call with investors, Tata Motors recently indicated that its network inventory is less than 25 days, while typical inventory levels range between 30 and 45 days.
Historically, January has consistently witnessed significant month-on-month growth, ranging between 10% and 37% over the past decade.This surge is primarily driven by automakers ramping up production for the new model year, while December production is typically subdued.
Many buyers avoid purchasing vehicles in December as they would otherwise lose nearly a year's depreciation benefits upon resale. This is a key reason why car manufacturers schedule their annual maintenance shutdowns in December, a period of reduced daily production.
Additionally, average discounts per vehicle stood at Rs 31,000 in the third quarter of FY25, compared to Rs 29,300 for Maruti Suzuki in the second quarter of FY25. This trend reflects manufacturers' competitive pricing strategies to maintain sales momentum while navigating market dynamics.
With inventory management, new model introductions, and sustained consumer demand, the Indian passenger car industry is set to commence 2025 on a firm footing, further reinforcing its growth trajectory.
Raghunandhan NL, Director at Nuvama Research, also predicted that January would be a seasonally strong month with over 400,000 units wholesale as dealers rebuild inventories. “Retail growth is to be in single digits, supported by positive growth in rural and urban markets. M&M will remain an outperformer on the back of strong demand for key models,” he added.