As per industry estimates, 375,000-376,000 hatchbacks, sedans and utility vehicles will be dispatched from factories to dealerships by the month end, a jump of more than 8% over the record 346,000 units dispatched in January 2023.
What more, SUVs – which normally offer higher profit margins to automobile manufacturers than sedans and hatchbacks – are driving the demand.
Senior industry executives that ET spoke with expect the share of SUVs in the domestic market to expand to 52-53% this calendar year from 49% in 2023.
Increasing consumer preference for more expensive, feature-rich SUVs have raised the average selling price of passenger vehicles in the country by almost ₹1 lakh in the last 12 months, and by ₹3.3 lakh in the last four years, executives said.
Strong fresh bookings
“Demand parameters, as indicated by bookings and enquiries, remain healthy,” said Shashank Srivastava, senior executive officer (marketing and sales) at the country’s largest carmaker Maruti Suzuki.
Overall dispatches this month, though, will be ahead of retail volumes with dealers restocking showrooms post robust deliveries in December, he said.
Inventory in Maruti Suzuki’s channel is expected to reach about 250,000 units by the end of January – still shy of meeting estimated demand for a month – up from 176,000 units at the start of the month.
Srivastava is optimistic of demand remaining buoyant in the ongoing quarter, which would help Maruti Suzuki breach the two million mark in sales by the close of fiscal year 2024.
Its closest rival Hyundai is equally buoyant.
“Growth, definitely, is on cards,” said Tarun Garg, chief operating officer (COO) of Hyundai Motor India. “GDP growth estimates are good, stock markets are at an all-time high despite geopolitical tensions. Pent-up demand went away 4-5 months back but fresh bookings are strong,” he reasoned.
“And even if the growth rate comes down on the high base of last year, this will be the third straight year of record sales for carmakers in India,” Garg added.
Room for further expansion
Sales of passenger vehicles in India grew by 8.2% to breach the four-million mark for the first time in 2023.
Hyundai, which registered 53% of its sales from SUVs last year, expects the share to increase to account for nearly two-thirds of its overall sales this year. “There is a lot of upside left in the SUV segment… The sub-Rs 10 lakh segment is expanding rapidly,” Garg said.
While interest rates for car loans have been rising, carmakers are hopeful that lower inflation projected by the Reserve Bank of India (RBI) will help keep the rates under check and support sales.
Maruti’s Srivastava said nearly 80% of all cars sold in the country are financed.
Since April 2022, the benchmark repo rate – or the rate at which the RBI lends money to banks – has increased by 250 basis points, or 2.5 percentage points. Car loan interest rates have gone up a little over half of that during this time.
“There is a possibility that the remaining 120 basis points creep in (to vehicle loan rates),” Srivastava said. “However, in case interest rates come down (given projections of lower inflation), demand will be stronger.”
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