The Indian automobile market, once driven by a surge in post-pandemic demand, has seen a significant slowdown over recent months. After witnessing a steep rise in sales post-COVID, with pent-up demand fueling the numbers, the market now faces declining figures. According to data from the government’s Vahan portal, sales of passenger vehicles (PVs) — which include cars, utility vehicles, and vans — dropped to 277,000 units in September from 309,000 units in August.
The downward trend has continued for several months, largely attributed to the waning post-COVID buying frenzy. Dealers have noted sluggish demand across the sector, which has led to stockpiles of unsold vehicles and increased inventory costs. Nikunj Sanghi, an automotive dealer, expressed concern, saying, “The festive season might help ease the inventory levels, but we’re seeing high stocks, with dealers holding between 75 and 90 days’ worth of inventory.”
Despite these declines, the industry remains optimistic about a turnaround during the festive season. Automakers are banking on the major festivals of October, including Navaratri, Dussehra, and Diwali, which typically account for 30-40% of annual sales. “As the festive fervour picks up, footfalls and enquiries are charged up, which makes us positive of a very good festive season. Notably, our SUV, MPV, and small car segments have experienced significant growth nationwide, contributing over 90 per cent to our sales in the month of September,” TKM Vice President, Sales-Service-Used Car Business, Sabari Manohar said, in a PTI report.
Gearing up for a festive push
As October rolls in, car manufacturers are hoping for a seasonal demand surge, in line with the typical pattern during India’s festive period. Historically, these months see a substantial uptick in vehicle sales as consumers look to make big purchases. Automakers like Honda Motor, Hyundai Motor, Mahindra & Mahindra, and Maruti Suzuki are betting on this tradition to boost sluggish sales and are taking strategic steps to stimulate demand.
According to Ravi Bhatia, President of Jato Dynamics, automakers have three main tactics to revive demand: launching new models, offering substantial discounts, and, as a last resort, implementing price cuts. Several companies have already introduced discounts to attract hesitant buyers. While many manufacturers are adjusting prices and adding incentives, others are focusing on promoting new models to entice customers. Tata Motors and JSW MG Motor, for example, have increased their offers on select models, though they have raised prices on some others. Mahindra & Mahindra is also launching targeted promotions to accelerate sales across various models, with Nalinikanth Gollagunta, CEO of M&M’s automotive division, confirming, “We have run targeted sales acceleration schemes as part of our festive season strategy.”Similarly, Maruti Suzuki also reported a sweet 10% spike in bookings in Kerala ahead of Onam. Deliveries in Maharashtra and Karnataka are also hitting the accelerator on the first day of Ganesh Chaturthi, as previously reported by ET.
The auto industry faced a high benchmark last year during the festive season, setting the stage for some challenges this time around. While the growth rate may remain low, industry executives are optimistic that absolute volumes will expand, helping to chip away at unsold stocks. As Partho Banerjee, Maruti’s senior executive officer for marketing and sales, aptly puts it, “While there are positive indications helping the industry to get over the demand lull in the last few months, festive season growth may seem muted because of the high base of last year.”
In the same ET report, C.S. Vigneshwar, president of the Federation of Automobile Dealers Associations (FADA), highlighted that there’s a significant amount of pent-up demand in the market due to weak sales in the first five months of the fiscal year, largely due to elections and weather-related disruptions. Thankfully, discounts have started to spur car sales during Onam, breathing life into the market. Vigneshwar aptly notes, “These festive sales could give the industry the much-needed push to clear out the inventory that’s been piling up.”
So, what are the big guns in the industry saying about the outlook? Well, it’s a mixed bag, but with a sprinkle of positivity. Partho Banerjee said that while last year’s high sales figures might temper growth rates a bit, the actual number of units sold is expected to rise, helping to clear out some of that unsold stock.
What are the festive season discounts this year?
As the festive season rolls into view, everyone is hopeful for a surge in sales for the Indian auto sector. However, indicators suggest that this increase may not hit the usual high notes we’ve seen in previous years. Dr. Aurodeep Nandi, India Economist at Nomura, has flagged some concerning trends, including two consecutive months of declining passenger vehicle sales. These dips raise eyebrows about the cyclical growth story of the Indian economy and whether current promotional strategies will be enough to revive consumer demand.
Passenger vehicle sales usually serve as a reliable pulse check on discretionary consumer spending — basically, they give us a sense of how willing folks are to splurge on non-essentials. Dr. Nandi pointed out that the recent sales drops are a cause for concern, especially with rising discounts flashing warning signs of a broader economic slowdown. The medium and heavy commercial vehicle (M&HCV) segment is also showing signs of a slowdown, with two months of declining sales reinforcing worries about a weakening economic landscape.
However, the industry is banking on a mix of discounts, exchange offers, and attractive financing options to lure buyers during the festive season. With car dealerships brimming with vehicles, eager for new owners, savvy shoppers are in for some fantastic deals during this bustling time.
As part of their festive season strategies, automakers have rolled out substantial discounts to lure buyers, with deals in September likely to carry forward into October. These discounts are expected to intensify in the coming weeks as the peak sales period draws nearer, coinciding with Diwali.
Maruti Suzuki has already offered price cuts across several models. Discounts of up to ?40,000 are available on the Alto K10 and S-Presso, while the WagonR comes with offers ranging from ?15,000 to ?30,000. The Brezza and Swift, sold through Maruti’s Arena showrooms, are also discounted by ?10,000. Over at the company’s Nexa showrooms, the Jimny—a rugged SUV—is available with an attractive discount of ?2.5 lakh, accompanied by an exchange bonus of ?15,000 for customers scrapping older vehicles.
Hyundai has similarly introduced aggressive offers. Buyers of the Grand i10 Nios can enjoy a discount of up to ?35,000, while the Aura sedan is being offered with up to ?30,000 off. The popular Venue SUV also comes with cash benefits of up to ?45,000, depending on the variant. Hyundai’s premium models, such as the Tucson and Kona EV, are being offered at discounts that could reach ?2 lakh.
Mahindra & Mahindra (M&M) has raised the discount on its Scorpio Classic SUV to ?100,000 from ?20,271 in August. The Thar SUV’s consumer benefit has also increased to ?150,000 from ?20,000. In an earlier ET report, M&M’s automotive division CEO, Nalinikanth Gollagunta, stated, “As part of the festive season every year, we run targeted sales acceleration schemes and we have done the same across a select part of the portfolio this year as well.”
Honda has also increased benefits on its Amaze sedan to ?112,000 this month from ?96,000 last month. Total benefits on the City sedan have risen to ?114,000 from ?88,000, while the Elevate SUV now offers an additional ?10,000, totaling ?75,000. Kunal Behl, vice president of marketing and sales at Honda Cars India, commented, “There’s definitely a struggle in generating fresh demand,” but he believes that with the festive season starting, “the worst is over.”
Tata Motors announced festive offers up to ?300,000 on its electric vehicles until October 31 and benefits up to ?2.03 lakh on its petrol, diesel, and CNG range. Car sales rose just 1% in the first five months of the fiscal year due to factors like extended general elections and weather disruptions in Telangana, Gujarat, and Kerala.
Luxury car manufacturers like Mercedes-Benz, Audi and BMW are also anticipating robust demand during the season. Mercedes-Benz India’s MD, Santosh Iyer, highlighted the festive period’s significance: “This season generally gives us high double-digit sales growth, helping to balance out the lower growth of earlier months.”
Industry experts remain cautiously optimistic. Although festive discounts and incentives are driving demand, the success of these strategies will depend on consumer sentiment. Puneet Gupta, director at S&P Mobility, explained, “For buyers, this season creates an ideal opportunity with automakers offering significant discounts. But how much the industry can recover remains to be seen.”
The upcoming months are going to be crucial in determining whether the festive surge can counteract the recent sales dip and what that means for the broader economy.