While inventory levels have declined sharply, reducing the need for discounts, a flurry of new launches could keep prices modestly under pressure
29 Jan 2025 | 2996 Views | By Ketan Thakkar, Darshan Nakhwa
Tata Motors expects the pricing environment in the passenger vehicle industry to remain "competitive" in the new year, driven by new model launches and correction of inventory across the industry. This comes as the demand for passenger vehicles is expected to cool off following two years of strong growth.
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Tata Motors expects the pricing environment in the passenger vehicle industry to remain "competitive" in the new year, driven by new model launches and correction of inventory across the industry. This comes as the demand for passenger vehicles is expected to cool off following two years of strong growth.
“Given the innovations and intensity of launches we are seeing, we should continue to expect a competitive market in India," the company’s Chief Financial Officer PB Balaji said during a media call held to discuss December quarter earnings. “At the same time, we do believe lower inventory levels would help offset any pressures that people have in terms of just dumping inventory,” he added.
In 2024, the Indian car market presented a stark contrast to the previous years. Gone were the days of long waiting lists and eager buyers snapping up new models as quickly as they arrived. Instead, dealerships found themselves with overflowing lots, and manufacturers were faced with the reality of slowing demand. This shift in the market dynamics led to a flurry of discounts and incentives aimed at enticing hesitant customers. "The crux of the discounts came in earlier this year, when the market's inventory levels became unsustainably high. Therefore, you (companies) had no choice but to incentivise retailers and take it out," Balaji said.
The reasons behind this slowdown were multifaceted. Rising interest rates made car loans more expensive, while inflationary pressures squeezed household budgets, leaving less disposable income for big-ticket purchases like cars. Economic uncertainty further dampened consumer sentiment, leading many to postpone major spending decisions.
Car manufacturers offered direct price reductions, while exchange bonuses incentivised customers to trade in their old vehicles for new ones. Loyalty programs rewarded repeat buyers, and attractive financing schemes offered lower interest rates or extended loan terms. These offers aimed to clear out unsold inventory, maintain sales momentum, and keep production lines humming.
The PV inventory situation in the country has now changed, according to Balaji. "Right now, inventory is corrected sharply across the industry, and for Tata Motors, it is also significantly brought down. We are less than 30 days with respect to retail inventory," he said
While acknowledging a moderation in demand growth, the company emphasised the context of this slowdown. "The growth is not as buoyant as it was, but we shouldn't forget that we are coming off two blockbuster years in terms of volume," the official stated. Looking ahead, Tata Motors expects a continued competitive environment in the Indian auto market, fueled by ongoing product launches, innovation, and controlled inventory.