The MoTown India automobile industry, which had seen a demand boom post the Covid-19 pandemic. Is now feeling the pinch of a slowdown. According to The Times of India, dated October 15, data from the Society of Indian Automobile Manufacturers. Reveals that the retail sales of vehicles are still struggling to pick up as vehicle dispatches to dealerships have fallen. Consumer spending continues to be cautious even as manufacturers continue to offer significant discounts to tap demand. Making the sales season for the industry a tough one.
Slowdown in passenger vehicle dispatches
An indicator of the health of the industry, passenger vehicle dispatches declined sequentially in the second quarter of the current fiscal. SIAM said that dispatches declined by 2% as against 10.7 lakh units dispatched during the corresponding quarter last year and 10.5 lakh units in the current year. In a festive season, automakers traditionally ramp up dispatches to stock up inventory at dealerships. This year has been an exception-it indicates a low level of retail demand.
The dispatches for the first half of the fiscal year, that is, April-September, grew marginally at 0.5% to 20.8 lakh units compared to 20.7 lakh units during the same period last year. The numbers for the first half appear stable, but there lies the underlining challenge for the industry as growth has largely stagnated.
MoTown India: Muted Growth Outlook for the Full Year
Tata Motors Passenger Vehicles and Electric Mobility unit head and SIAM president Shailesh Chandra warned that the industry is expecting muted growth for the full fiscal year. “The first half for the passenger vehicles industry has been flat, and even if we grow by over 5% in the second, we will end up at sub-5% for the full year,” Chandra said.
SIAM had termed the initial forecast for the passenger vehicle segment in the beginning of the fiscal year as around 5% to 8% growth. However, with this slowdown in demand from consumers and seasonal factors, this appears to be something too optimistic. With some recovery expected in the second half of the fiscal year, growth will remain subdued even then.
MoTown India: Key Manufacturers Cut Back Dispatches
Major car makers like Maruti Suzuki, Hyundai, and Tata Motors are reducing their vehicle dispatches as the retail market is too slow. “India’s largest car maker, Maruti Suzuki, made the rare decision to cut wholesales before the grand festivals of Navratri, Diwali, and Dussehra. “This was more of a rebalancing of his inventory,” said Partho Banerjee, Senior Executive Officer for sales and marketing at Maruti.
Following this yearlong period of increased base demand in 2022, which was fueled by pent-up demand as the market recovered from the additional pandemic-related restrictions, that demand is largely now satisfied, and growth has leveled off.
Reasons Behind the Decline
Industry heads point out a combination of factors for the current slowdown. Shailesh Chandra pointed out slow consumer demand and seasonal factors as key catalysts behind the weakening dispatch in the second quarter. “The decline during the second quarter was largely because of slow consumer demand and seasonal factors. However, the offtake was way stronger than the registrations. I am hoping for a good start to the festive season, and it is still creating a continued buildup of channel stock,” he said.
And then there’s channel stock, where a higher number of vehicles than sold to end users are sent out. The automakers had entered this festive season with much hope of a roaring one. However, low consumer expenditure has ensured that there is more inventory at dealerships than what is needed.
Conclusion
Dispatches decline, and retail sales are sluggish for the Indian automobile industry. But what’s important is that while the automakers have showered endless discounts to get customers in. Consumer caution has prevailed. The new low single-digit fiscal year outlook from SIAM comes at the back of key manufacturers such as Maruti Suzuki, Hyundai, and Tata Motors. Adjusting their inventory has led this industry. The reason is that before festive. It would remain to be seen whether consumer demand can recover, but the overall outlook remains uncertain.
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