India’s Car Sales Growth Hits 4-Year Low as Urban Market Struggles

Overview
In 2024, the growth rate of automobile sales fell to barely 5%, which was the slowest pace in four years and highlighted difficulties in urban areas, according to ToI. The automotive industry is expected to sell approximately 43 lakh vehicles in 2024, up from 41.1 lakh units in 2023, based on preliminary forecasts. During the period under analysis, SUVs sales accounted for 54% of the total sales which reflects their popularity and sets SUVs as the main growth drivers.

Given the strong sales foundation of prior years, several automakers voiced optimism about the 5% growth rate, while others are preparing for more difficulties in the upcoming year. Speaking on this issues, a prominent company executive stated that the industry is now focused on getting incentives from the upcoming budget scheduled on 1st of February, 2025, and consumption would be fueled if potential income tax rates are cut.

Car sales in Urban Centres
Throughout the year of 2024, the demand for passenger vehicles remained weak which resulted in manufacturers to give aggressive price reductions coupled with discounts to accelerate sales, specifically in the latter part of 2024 which includes festive seasons. The sub-Rs 10 lakh market, which has seen a steady drop in previous quarters, has seen the most noticeable dip, according to a story in The Indian Express. Trends observed in other important consumer industries are consistent with this trend in the automotive sector. Companies that sell fast-moving consumer goods (FMCG) have also noted first indications of a slowdown in demand. Tata Consumer Products Ltd. executives have voiced concerns about a “softness” in urban demand, while Nestle India said that demand was muted in key cities, partially due to strong pressures from food inflation. Furthermore, vehicle affordability has suffered as a result of rising auto prices brought on by the recent enforcement of stronger safety and pollution standards. The slow development of urban sales has been exacerbated by this trend.

This downturn in the automobile industry is occurring at the same time that the GDP is growing more slowly. Growth fell short of the Reserve Bank of India’s 7% forecast in the first quarter, from 7.8% in the previous quarter to roughly 6.7% in the first quarter, and may further slow to 6.5% in the July-September quarter, according to the study. Additionally, rising FMCG volumes and an increase in sales of three-wheelers and tractors suggest that rural demand is still strong, according to the Finance Ministry’s September economic review. But because of weaker consumer sentiment, lower foot traffic brought on by more rain than usual, and seasonal shopping restrictions, urban demand is waning.

Performance of major car companies in 2024

Maruti Suzuki
Strong demand in rural areas helped Maruti Suzuki achieve its highest-ever yearly sales in 2024, despite the general decline in the auto sector. The company sold 17.9 lakh units in 2024 as opposed to 17.4 lakh units in 2023. In a statement given by an official from Maruti Suzuki said that they have managed to gain growth across segments. Furthermore, the sales growth spread out in almost all segments and not just SUVs where the company now has 27% share.

Hyundai India
With sales increasing by barely 1%, 2024 was a very flat year for Hyundai India. During the year, the company sold just over six lakh cars. “Despite significant challenges faced by the industry as a whole, Hyundai has maintained sales momentum in 2024,” stated Director and COO Tarun Garg.

Tata Motors
In 2024, Tata Motors sold more than 5.6 lakh cars, beating its sales record for the fourth year in a row. Managing Director of Passenger Vehicles and Electric Mobility Shailesh Chandra attributed the increase to the growing demand for SUVs and CNG-powered automobiles. Chandra further stated that PV sector saw moderate growth which was driven by SUV segment and growing demand for eco-friendly vehicles.

Conclusion
The government’s policies will determine the industry’s expectations for 2025. Many automakers are hoping that the upcoming budget would provide incentives, such as possible income tax rate reductions, that will increase affordability and stimulate consumption. However, in the near future, the persistent issues of growing expenses and stagnant urban markets can still have an impact on sales growth. The auto sector is still concentrating on sustaining growth in rural areas and using the robust demand for SUVs to offset the general slowdown in the market. Vehicle manufacturers now anticipate with strategic pricing models and supportive policies, obstables in the near future would be overcome.

The image added is for representation purposes only