Driven by improved availability of semiconductors and pent-up demand as well as the expanding economy, India’s passenger vehicle industry grew at around 8.5 percent on a year-on-year basis during the financial year 2024 to a new record. The craze for sports utility vehicles (SUVs) offset the impact of weakness in demand for small cars. SUVs now account for over 50 percent of the passenger vehicle industry volume.
Automakers are estimated to have sold a total of 42.3-42.5 lakh, or 4.23-4.25 million, passenger vehicles in 2023-24, against 38.9 lakh, or 3.89 million, units during the previous financial year, as per the estimates from India’s top car makers Maruti Suzuki and Hyundai Motor India. The industry has reported its highest-ever monthly sales numbers in all 12 months of the financial year.
The biggest factor that drove passenger vehicle volume during the year was the country’s economic growth, said Maruti Suzuki’s Member Executive Committee Shashank Srivastava. “The economy is doing very well. The correlation between auto industry numbers and economic per capita income growth is huge,” he told reporters today.
The semiconductor supply constraint gradually eased for the automotive industry over the last year and is now completely out of the woods. The demand-supply dynamics improved as automakers ramped up their production. The companies increased inventories, gave discounts and serviced the large number of pending orders. The stock level industry has come down to 3.09 lakh units from around 2.10 lakh units at the beginning of the previous financial year.
The sales in the SUV segment grew by 28 percent in 2023-24 while multi-purpose vehicle volumes rose 19 percent. Srivastava said sales of hatchbacks and sedans fell 12 percent and 6 percent, respectively. SUVs accounted for 50.4 percent of the passenger vehicle market, followed by hatchbacks, multi-purpose vehicles and sedans at 28 percent, 9.8 percent and 9 percent, respectively.
Improvement in the rural sentiments also boosted the industry sales. Maruti Suzuki and Hyundai said that rural growth was higher than urban growth during the year. The demand from rural areas, which accounts for 33-35% of passenger vehicle sales, reflects better infrastructure and improved income levels. “One very clear reason is the great infrastructure development that has happened across the country in terms of connectivity,” said Hyundai Motors Chief Operating Officer Tarun Garg.
India’s largest car maker Maruti Suzuki, which has a market share of around 42 percent, clocked 9.5 percent growth in domestic passenger vehicles during the financial year to 1.76 lakh units, while the second largest car maker Hyundai saw its domestic sales increase 8.3 percent to 6.15 lakh units.
FY25 Sales Growth Seen Moderating to Low-Single Digits
The industry, which grew at around 26% in 2022-23, moderated to a high single digit in 2023-2024, and is expected to moderate further to a low single digit in 2024-25. A high-volume base, continued weakness in the demand for small cars, and higher borrowing costs are likely to reduce the pace of growth this year.
At the SIAM Looking Ahead Conclave that was held in January, automakers were anticipating passenger vehicle industry volume in the current financial year to be at 4.3 million units. This could be a growth in the range of 2-2.5 percent from the previous financial year.
The current growth in the passenger vehicle industry is being fueled by strong demand for SUVs, while small car sales have been declining with higher increases in the cost of vehicles. The growth in small cars is essential for the industry to be on a sustained growth path as entry-level cars attract many first-time buyers, particularly from rural areas.
Maruti Suzuki expects a turnaround in the segment in 2026, considering the demographics and improvement in the affordability factor. “As per our preliminary analysis which we have done, we do see some sort of a reversal around 2026, where the affordability factor would probably go up from what it is today,” Srivastava added.