In the second quarter of FY24, passenger vehicle sales reached an all-time high, but sales of entry-level cars, motorcycles, and scooters faced a significant decline. Vinod Aggarwal, the President of the Society of Indian Automobile Manufacturers (SIAM) and the Managing Director and CEO of Volvo Eicher Commercial Vehicles, shared insights into this challenge. The drop in entry-level vehicle sales can be attributed to two factors.
Firstly, there is a shift towards utility vehicles, especially SUVs, within the passenger car segment. Secondly, rural consumers’ income levels remain relatively low, affecting the demand for entry-level two-wheelers and scooters. While there are concerns about the entry-level segment, the overall passenger vehicle segment is growing.
Regarding the rural market, macro factors show improvements, including better monsoons, a healthier rural economy, and positive indicators in the FMCG sector. However, income levels in rural areas still have room for improvement, leading to reduced demand in the entry-level two-wheeler and passenger car segments. Unfortunately, specific data on the rural market’s contribution to passenger vehicle sales is not available.
Export trends are declining in all segments except passenger vehicles, mainly due to geopolitical situations in certain countries and foreign exchange-related issues. The government of India is actively working on strategies to address these challenges, such as trading in rupees, to potentially enhance export prospects.
At present, there has been no immediate impact on logistics due to the Israel-Hamas conflict, but the situation may change if the conflict escalates further.
Regarding semiconductor availability, there are currently no issues, and the industry has moved past previous supply constraints.
It is believed that India has the inherent capacity to unlock $400 billion in exports, and capacity creation and investments are underway to meet potential demand. The Indian entrepreneurial spirit is expected to play a significant role in achieving export targets.
In the three-wheeler segment, growth has been remarkable, with a 62 percent increase in quarter 2 of FY24, indicating positive sentiment in the economy and pent-up demand. The market is bouncing back after experiencing significant declines in recent years.
Electric vehicles continue to represent around 1.5 percent of the total market, with approximately 5,000 electric cars sold each month. The outlook for the rest of the year remains positive, with electric vehicle sales expected to grow gradually.