India’s auto sector takes a sign of relief after October sees strong pick-up in sales, easing fears of an inventory pile-up.
08 Nov 2024 | 3962 Views | By Ashutosh Radhey Shyam & Prerna Lidhoo
Until a few months back, India's automotive industry was navigating a challenging period, with showrooms quieter than usual and dealers across the country grappling with ballooning stock levels. Then came October and with it, a shift that jolted the market back to life.
The festive season—arriving weeks earlier than ...
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Until a few months back, India's automotive industry was navigating a challenging period, with showrooms quieter than usual and dealers across the country grappling with ballooning stock levels. Then came October and with it, a shift that jolted the market back to life.
The festive season—arriving weeks earlier than the previous year—has taken monthly vehicle registrations to unprecedented levels. According to Vahan, the government-run vehicle registration portal, October 2024 saw an astonishing 478,450 car registrations—the highest monthly figure on record. This is a significant leap from the previous high of 399,112 units set in January 2024. The average daily registration rate was 15,434 units, distributed across over 1,400 Regional Transport Offices (RTOs) nationwide.
This surge was fuelled by a confluence of factors, with the festive season playing an integral role in reviving the appetite for aspirational purchases. The enthusiasm surrounding the festive period provided automakers with much-needed relief from the looming threat of stock overload, offering a reprieve that reverberated across the industry.
"In the festive season, we observed a strong recovery across all segments, particularly in passenger vehicles. The registration growth significantly outpaced earlier weeks. Two-wheelers saw high double-digit growth, driven by electric vehicles. Provisional sales for passenger vehicles also showed robust week-on-week and year-on-year growth," said Kumar Rakesh, Auto Analyst at BNP Paribas.
A comparison with the previous year underscores the magnitude of this growth. In 2024, eight out of the first ten months reported monthly car registrations surpassing 300,000, with an average of 338,311 units. This figure outpaced the corresponding average of 317,605 units recorded in 2023. Cumulatively, the year's registrations by October had reached 3.383 million, reflecting a 7.5% increase over the same period in 2023. For the January-September period, auto sales had been up 4.2%. With the strong performance in the first ten months, India has already reached 88% of the total 2023 passenger vehicle registrations of 3.811 million.
One of the pivotal drivers behind the remarkable figures in October 2024 was the timing and duration of the festive season. This year's festive period began on 3 October. The extended timeframe allowed for an unimpeded stretch of celebratory buying, contributing to an impressive 34% year-on-year growth in October—a multi-month high. The cumulative passenger car registrations for September and October surged by 9%, totalling 756,229 units compared to 691,916 units over the same two months in 2023.
Key states such as Maharashtra, Gujarat, and Uttar Pradesh contributed to this growth. Collectively, these regions account for significant portions of the national GDP, with Maharashtra contributing approximately 13% and Gujarat 8%. Registrations in Maharashtra reached 70,759 units, reflecting an impressive year-on-year growth of 49%.
Gujarat followed closely with 54,731 units, marking a 30% increase, surpassing Uttar Pradesh, which reported 54,118 units with a substantial 45% growth. Rajasthan emerged as the standout performer, boasting an 86% growth with 35,352 units, raising its share to 7.39%—noteworthy against its 2024 average of 5.29%. Madhya Pradesh and Haryana also exhibited strong growth, with registrations climbing 60% and 59%, respectively.
Industry insiders highlighted that the latter half of October witnessed an acceleration in registrations, a development that augurs well for easing stock pressures and sustaining consumer interest. A senior sales executive from a prominent multinational car manufacturer noted: "The surge in registrations during the festive season has been pivotal for the industry, particularly in alleviating stock concerns.
However, it's crucial to assess the collective impact of sales from September through November to gauge the true strength of festive demand, given that last year's key sales days extended into November." He added that while the current momentum was promising, full-year wholesale volumes were expected to grow only in low single digits, with cumulative three-month growth unlikely to exceed 5%.
Meanwhile, PV wholesale numbers for October, estimated at approximately 100,000 units less than the registration figures, indicate significant stock drawdowns. This trend, occurring as the festival season reaches its crescendo, provides welcome relief for dealers who had faced mounting financial strains.
The Federation of Automotive Dealers Associations (FADA) had warned that dealer stock had reached 80–85 days in September, with a cumulative value reaching Rs 79,000 crore—a result of aggressive dispatches by manufacturers. The inflated stock levels had placed considerable financial strain on dealers, exacerbating cash-flow challenges.
The latest surge in registrations relative to wholesale figures hints at an easing of these pressures, which accounted for roughly 3–4% of a vehicle's ex-showroom price and constituted less than 20–25% of a dealership's total earnings.
PVs Report Record Sales
Automakers expressed optimism, emphasising that the buoyancy in retail sales could bring down stock levels to a normalised state, potentially mitigating discount pressures that had previously squeezed profit margins, although FADA continues to be cautious on this front. Discounts typically peak at the year's end when buyers prefer vehicles manufactured in the new year, seeking to preserve the residual value of their purchases. Maruti Suzuki, India's leading car manufacturer, reported a reduction in stock to 30 days—approximately 15 days below the normalised level—thanks to robust retail sales during the festive season.
The company's retail sales reached an unprecedented 200,000 units in October, contributing to a stock drawdown of about 40,000 units. According to Partho Banerjee, Senior Executive Officer, Marketing and Sales, the company saw 202,402 vehicle retails in October, setting an all-time record. "The most exciting part is that it wasn't just one model driving the sales. Our top-selling model was the Brezza, with around 24,237 retails, followed by the Swift at 22,377, and the Wagon R at 21,114.
Rural areas also played a significant role, showing a robust 12% year-on-year growth from April to October," he said. Banerjee added that overall, MSIL recorded nearly 26% growth in retail sales this season. "Our stock now stands at a manageable one month, reflecting our careful approach to production based on demand. With SUVs holding a 57% share industry-wide, this segment is a huge focus for us as consumer preferences shift.
"Our CNG sales also hit an all-time high with 71,000 retail vehicles, reflecting increased demand for fuel-efficient options. And overall, we've completed more than 40% of our stock correction. For the month of October, the retail Industry numbers would be between 480,000- 490,000. Last year it was 390,000. There's almost 20% growth in this. Wholesales may seem flat because of stock correction by all the automakers," he said.
In sync with the soaring retail numbers, the company’s wholesales shot up to 206,000 units in October, buoyed by a 19% growth in its SUV segment, which maintained its market share at 40%. This surge was further supported by record exports of 33,200 units, marking a 51% year-on-year increase.
The scenario was largely similar for rival Hyundai Motor India. Tarun Garg, Whole-time Director and Chief Operating Officer, said the company saw strong demand for its SUVs during the festive period. This helped it achieve its highest-ever monthly SUV sales of 37,902 units in October, including highest ever monthly domestic sales of the Hyundai CRETA at 17,497 units.
“SUVs remain a cornerstone of our line-up, representing 68.2% of our total monthly sales in October 2024, with similar penetration in urban as well as rural markets.” He said the company continued to focus on its hybrid CNG technology. “It has helped us achieve the highest ever CNG sales volume of 8,261 units, thereby contributing 14.9% to domestic sales volume in October 2024," he said.
However, things were not quite as upbeat in the EV space. According to Vivek Srivatsa, Chief Commercial Officer of Tata Passenger Electric Mobility, there was a bit of a 'wait and watch' approach from customers, especially in Q2 of the financial year. "Customers were holding back due to a variety of reasons," he explained. "On the one hand, there's the overall financial situation in the country and questions about how things are going to stabilise. Additionally, there was a general feeling of instability in the auto industry. Negative news was circulating, and it didn't really support a consumer mindset for buying cars."
However, Srivatsa noted a resurgence of demand that carried into the festive season. "There was some pent-up demand, I would say, from Q2 building into Diwali. That's been a big standout. Compared to previous years where we saw more stable demand across the year, this time there's a bit of a peak happening now," he said. "But hopefully, with that negativity gone, we'll see customers becoming more decisive, leading to a steady demand going forward…Everything shifted to October this year. From October to October, we grew in excess of 30%. When you break it down further—especially from Dhanteras to Diwali period—we actually saw almost 60% growth," he shared.
Two-Wheelers Ride the Festive Wave
The two-wheeler segment also experienced a resurgence, with registrations growing by 40–45% among the leading manufacturers. This growth was underpinned by attractive financing schemes introduced by some OEMs to lure customers during the second half of the festival season. Two-wheeler registrations reached 2 million units in October, a 42% increase from 1.45 million units last year, according to Vahan.
Remarkably, most of the major two-wheeler manufacturers reported growth rates exceeding 40%, with Royal Enfield leading the charge with 97,083 registrations. TVS Motor also reported significant gains, with a 46.8% increase, bringing total registrations for the month to 352,053 units. The momentum from the festive period propelled the cumulative two-wheeler registrations for the fiscal year past the one crore mark, reflecting a growth of 14%.
One particularly notable financing scheme was offered by a leading OEM, allowing customers to take home a two-wheeler with minimal initial payment, with the balance financed by the company's financial arm. This initiative received an enthusiastic response, especially in North India, spurring sales in regions traditionally characterised by high demand.
Maharashtra emerged as the top performer, surpassing Uttar Pradesh, which had historically commanded the largest share of two-wheeler sales. Registrations in Maharashtra rose by 54% to 256,000 units, while Uttar Pradesh followed closely with a 54% increase to 249,000 units. Gujarat also posted impressive numbers, with 195,168 registrations—an all-time high for the state. This eclipsed the previous monthly record of 142,511 registrations set in November 2023.
Hero MotoCorp, the world's largest manufacturer of motorcycles and scooters, said that it achieved its highest-ever retail sales during the recent 32-day festive period starting from Navratri. The company registered a 13% growth compared to the festive season of 2023.
The company said that the 125cc motorcycle segment, with Xtreme 125R, emerged as a key growth driver, while the 100cc segment also contributed positively to the company's strong sales performance. "For the second consecutive year, we have achieved our highest-ever festive retail sales.
There has been good momentum and growth in most parts of the country with rural sales catching up with the urban segment in the latter half of the festive season. We expect the momentum to continue and are optimistic about the remainder of the year," Niranjan Gupta, Chief Executive Officer, Hero MotoCorp, said.
With the surge in registration volumes, two-wheeler stocks also saw a decline to more manageable levels of 20–30 days. Dealers credited this reduction to strategic discounts and price cuts on certain models, which played a pivotal role in stimulating demand.
One major two-wheeler manufacturer offered discounts of Rs 5,000 on popular 100 cc models, a move that successfully attracted new buyers and lowered acquisition costs, thereby boosting sales. Aggressive financing was another critical factor, particularly in the latter half of the festive season.
However, Non-Banking Financial Companies (NBFCs) exercised caution, calibrating their exposure with stricter controls in regions with lower CIBIL scores.
The question of sustaining this buoyant trend now hinges on the continuation of such financing strategies and the broader economic environment. While current figures indicate a thriving market, the durability of this momentum will depend on the willingness of financial institutions to maintain a balanced yet supportive stance and the overall consumer confidence in the face of evolving economic dynamics.
Demand Stabilisation Expected
The moderation in stock levels is expected to lead to a significant decline in the monthly production schedules for both passenger cars and two-wheelers. Although there were fears of high stock buildup at the beginning of the festive season, such concerns have eased considerably, resulting in reduced production cuts in November and December.
The tentative production plans of passenger car and two-wheeler manufacturers indicate a 10-15% decrease in production compared to October levels. Consequently, the customary annual shutdowns at the end of the year are expected to remain within normal limits.
According to MSIL's Banerjee, the company is likely to achieve growth of 3–5% during the year, in line with the forecast set for the industry at the beginning of the fiscal year. "Looking ahead, we're optimistic for November, especially with the upcoming wedding season, where several lakh marriages are expected within just 11-12 days.
It's another window where we anticipate strong, healthy retail sales…Although we're coming off a high growth base—23–29% over the past two years—this, more moderate growth is aligned with our long-term expectations, and there's no cause for concern," he said.
Historically, sales volumes and production tend to soften after the festive season, as manufacturers face challenges in pushing products due to the year-end effect. This period often leads buyers to delay purchases unless highly attractive discounts are offered.
At the start of the festive season, pressured by high stock levels, growth was expected to slip into negative or low single digits for the passenger vehicle industry and profit margins projected to remain under pressure. However, as the risks of elevated stock levels and excessive discounts subside, the passenger car industry is anticipated to stabilise at a year-on-year growth rate of 5-6% for the current fiscal year, following 8% growth in the previous year.
This would position the total volume of the passenger car industry at a record level of approximately 4.3 to 4.4 million units for FY25. Similarly, growth in the two-wheeler segment is projected to be around 8-9%, with volumes reaching 14.5 million units in FY25, excluding mopeds and electric two-wheelers. Despite this growth, total two-wheeler sales would remain approximately 5% lower than the peak volume of 16.46 million units recorded in FY19.