November 2024 Auto Sales: A Market in Flux

The Indian automobile industry in November 2024 presented a vivid contrast, with the passenger vehicle (PV) segment grappling with challenges while the two-wheeler (2W) market enjoyed a resurgence. Data from the Federation of Automobile Dealers Associations (FADA) highlighted a 14% decline in car sales juxtaposed with a 16% growth in two-wheeler sales, reflecting a tale of two distinct consumer behaviors.

Passenger Vehicles: A Slowdown Post Festive Highs
Passenger vehicle sales slumped in November, marking a sharp decline from the record-breaking October sales fueled by festive demand during Dussehra and Diwali. The steep fall points to an exhausted pent-up demand, signaling market normalization after the seasonal high.

Segmental Challenges:
While SUVs and utility vehicles (UVs) performed well during October’s festivities, sedans and hatchbacks saw waning interest. The UV segment has increasingly captured market share, accounting for nearly half of the total PV sales, as highlighted by robust October growth rates of 13.9% year-on-year (YoY). However, this shift may have temporarily disrupted supply chains, contributing to November’s downturn.

Rising Costs and Interest Rates:
Higher vehicle prices, coupled with elevated interest rates on auto loans, deterred prospective buyers. Rising input costs, particularly for essential components like steel and semiconductors, have driven automakers to hike prices, impacting affordability for middle-income consumers.

Inventory Challenges:
Dealers struggled with high inventory levels post-festivals, especially in Tier-II and Tier-III markets. The Society of Indian Automobile Manufacturers (SIAM) noted that the increase in wholesale dispatches ahead of festivals did not translate into sustained retail demand, leading to overstocking.

Two-Wheelers: Resilience Amid Adversity
In contrast to passenger vehicles, two-wheelers emerged as a growth story in November, continuing their festive-season momentum. The 16% YoY growth reflects strong rural demand, affordability, and evolving urban mobility needs.

Rural Demand Drives Growth:
The revival of rural demand, aided by improved agricultural incomes and targeted financing options, played a significant role in boosting sales. Hero MotoCorp and TVS Motors capitalized on this trend, registering robust sales growth during the month.

Shift to Electric Vehicles (EVs):
Electric two-wheelers continued gaining traction, reflecting changing consumer preferences for sustainable and cost-efficient options. Companies such as TVS Motors reported a 45% YoY surge in EV sales during October, and the trend likely continued into November.

Affordability and Accessibility:
Two-wheelers remain the preferred choice for middle-income households due to their affordability. Rising fuel prices have also nudged consumers toward scooters and motorcycles, which are economical and convenient for daily commutes.

Broader Market Implications
Export Markets Thrive:
Both PV and 2W manufacturers reported significant growth in export markets. Royal Enfield witnessed a 150% jump in exports, leveraging its strong brand presence in South Asia and Latin America. Similarly, Bajaj Auto and Hero MotoCorp achieved double-digit export growth, diversifying revenue streams amid domestic challenges.

Urban vs. Rural Divide:
The urban-rural split continues to shape the auto market. While urban centers saw a slowdown in PV demand due to economic uncertainties, rural regions fueled two-wheeler growth, aided by better monsoon outcomes and favorable MSP (Minimum Support Price) policies for crops.

EVs Gain Momentum:
Across segments, the focus on electric mobility intensified. Automakers expanded EV portfolios to cater to rising demand, driven by government incentives, lower running costs, and growing environmental awareness among consumers.

Policy Recommendations
Credit Support:
Policymakers should enhance credit access for consumers, particularly in rural areas, to sustain two-wheeler demand. Interest rate subsidies or targeted financing schemes could address affordability challenges in the PV segment.

EV Incentives:
The government should continue supporting EV adoption through subsidies and infrastructure development, such as expanding charging networks. Addressing bottlenecks in EV component supply chains could further accelerate growth.

Rural Development:
Strengthening rural infrastructure and enhancing income opportunities will indirectly boost auto demand. Policies targeting improved road connectivity and last-mile mobility solutions can create new opportunities for automakers.

Conclusion
November 2024’s auto sales highlight the complexities of India’s automobile market. While passenger vehicles face short-term challenges, the two-wheeler segment’s robust performance reflects resilience and adaptability. For stakeholders across the value chain, understanding these dynamics and aligning strategies accordingly will be critical. Investors, in particular, should focus on long-term themes such as electrification and rural penetration to navigate the sector’s evolving landscape.

The Indian auto industry stands at a crossroads, with opportunities in sustainable mobility and export growth offering a pathway to future resilience. By leveraging these trends, the sector can weather current headwinds and emerge stronger in the years to come.

The image added is for representation purposes only