Thanks to a robust booking pipeline, improved supply chain, and easier availability of semiconductor chips, carmakers, including Maruti Suzuki India Ltd (MSIL), Hyundai Motor India Ltd (HMIL), Tata Motors, Kia India, and Mahindra & Mahindra (M&M), are collectively anticipating sales of one million units during the ongoing festival season that kicked off in August-end. Furthermore, sports utility vehicles (SUVs) across segments continue to outperform the overall passenger vehicle (PV) market.
As per industry estimates, the industry is poised to sell four million units during the current full financial year, out of which 25 percent will be recorded during the festival season (spread over 87 days this year). The previous peak was in 2021, when 9.34 lakh units were sold during the festive period spread over 92 days. Last year, automakers sold 892,000 PVs during the festival season.
For the month of September 2023, a record wholesale is projected at around 3.61 lakh units, better than last year's 3.55 lakh units.
“India is riding the optimism wave. This, coupled with the festive season, is expected to bring a lot of cheer to the industry. Also, we are seeing positive customer sentiments both in urban and rural markets. The new model launches in the recent past and availability of cars will result in record car sales in October,” said Puneet Gupta, Director of S&P Automotive.
Carmakers look to cash in on the momentum
PV market leader Maruti Suzuki India Limited (MSIL), which witnessed a 24 percent year-on-year (YoY) increase in Onam sales this year at 18,000 units, remains optimistic about its wholesale numbers for the coming weeks.
Shashank Srivastava, Senior Executive Officer, Marketing & Sales, Maruti Suzuki, told Moneycontrol that the company had pending orders for 325,000 units, with as much as 40 percent of these being SUVs, including Jimny, Grand Vitara, Fronx, and Brezza.
"Demand remains strong. Festive season sales should be good this year as automakers can produce vehicles in line with customer demand patterns," said Srivastava.
“On average, the festive season accounts for about 23-26 percent of the industry's annual sales, and this year it would be no different," he added.
However, Srivastava said high interest rates and the monsoon deficit impacting rural sentiments have to be closely observed. “These two factors are the red flags. If these two don't happen, the industry will sail smoothly,” he said.
Hyundai Motor India highlighted that the festival season has kicked off on a “positive note”, with the company seeing 10 percent growth in sales in Kerala during Onam. The Indian arm of the South Korean carmaker said that it expects around 9 percent YoY growth in sales volume this festival season.
“We are expecting to log around 9 percent growth this year," Tarun Garg, Chief Operating Officer (COO) of HMIL said when asked about the company's expected performance during the festival season.
Counting the positives, Garg said the waiting period has come down, thus helping in the timely delivery of models. “However, last year there was a lot of pent-up demand, which is not there anymore. It is now about fresh demand, and we are happy that it appears to be very strong. Robust fresh demand is a good indicator of things to come, and generally, we are positive about the situation," he noted.
India’s largest utility vehicle maker, Mahindra and Mahindra (M&M), is betting big on the festival season with a booking pipeline of 2.9 lakh SUVs.
“The rate of inflow of bookings every month continues to be in the range of 48,000 to 50,000 (units per month) and the cancellation rate continues to be very low, in the range of 6 to 8 percent. As we get into the festival season and even beyond that, we continue to grow on a month-on-month (MoM) basis because of a strong booking pipeline," Veejay Nakra, President, Automotive Division, M&M, told Moneycontrol in a recent interview.
M&M is also on course to ramp up its production capacity from 39,000 units per month to 49,000 units per month by March 2024.
“We have been able to manage the supply chain better over the last six months. Last month, we were able to demonstrate a very strong supply chain feeding into production. The third growth lever is that the capacity of 39,000 units (per month) is already available." However, he acknowledged certain headwinds in the market, particularly in the price range of Rs 8-10 lakh.
Tata Motors spokesperson, in an emailed reply, stated that it expects industry growth to be “strong” in this festival season and full-year sales to touch four million units.
Luxury carmakers like Mercedes-Benz, Audi, and Lexus are also anticipating brisk sales during the festival season.
Limited discounts for select models
For the auto retailers’ body, the festival season is essentially a 42-day period, beginning with Navaratri and lasting until 10 days after Diwali, when buyers buy vehicles in droves.
Federation of Automobile Dealers Associations of India (FADA) President Manish Raj Singhania stated that post-COVID, consumer spending has been rising, especially in the “premium SUV” segment, where the models are priced in the range of Rs 10-20 lakh.
When asked about the discount offerings by dealers, Singhania maintained that, unlike last year, when getting a vehicle delivered was a major challenge, some dealers may resort to “limited discounts” for entry-level cars this festival season. As per his estimates, the discounts may range between 8 and 10 percent for entry-level cars and 3-5 percent for mass-market two-wheelers.
“Since supplies have improved dramatically, PV dealers have kept a stock of (only) 62 days. As the maximum waiting period has come down from two years to six months, dealers are gearing up to roll out attractive schemes to entice buyers of different categories and profiles. Moreover, many buy-and-sell exchange offers are expected to be rolled out,” Singhania told Moneycontrol.
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