Indian Auto Industry sets off on a Purple Patch

With the chip shortage saga behind, the domestic auto industry is gearing up for the long festive season ahead. The growing appetite for big cars among customers is making the industry rev up

Indian car buyers seem to be gradually moving over its ‘kitna deti hai‘ yardstick, a phrase famously coined by the country’s largest passenger car maker, Maruti Suzuki India. The phrase has lived with us for many generations. However, it appears that the Indian consumer is now wishing the machines to be bigger and meaner. 

The domestic automobile industry’s worth stood nearly at USD 100 billion at the end of FY23 according to media reports. It is getting its mojo back with sales improving for car companies. With frequent month-on-month launches, the Indian consumer is spoilt for choices like never before. 

The industry is riding a purple patch on multiple levers.  

The last 3-4 years for the industry have been traumatic with it witnessing dwindling sales, that began even before the onset of the pandemic. In 2020, when the Coronavirus pandemic overshadowed the world, countries were caught off-guard as the enormity of the problem overwhelmed everybody. All economies, be it big or small, came to a standstill virtually. People were forced to stay in their homes with movement coming to a screeching halt. Automobile sector, along with tourism, were among the hardest hit. The pandemic did not just hit the demand, but also it destabilized one of the most important industries for the global auto sector – the semiconductor or the chip industry.

Companies were unable to meet the demands despite it being at a low because of the chip crisis. Evolving technologies are driving the automobile industry and chips are the backbone of the systems in today’s machines, be it a four-wheeler or a two-wheeler.

The Rebound

The auto industry is now on a rebound led by sales in bigger cars over the last so many months. Most car companies are witnessing a steep jump in the sales of sports utility vehicles (SUVs) as the customer preference shifts to road presence, space, comfort and loads of features. They are no longer just used to ply between home and office or driving down to buy daily groceries. The SUVs are increasingly becoming a preference across the demographics, including genders.

The chip issue is more or less resolved now which augurs well for industry.

Car Size Matters

Sample this! The growing demand for SUVs and electric vehicles has woken Maruti up from its commanding comfort zone, as the number one Indian carmakers by volumes has shifted gears to this segment with a purpose.     

The July sales numbers posted by Maruti Suzuki narrate a telling story. Its single-digit sales growth was led by sale of utility vehicles viz. Brezza, Ertiga, Fronx, Grand Vitara, Jimny and XL6 which clocked sales of 62,049 units during the month. This was a 200 per cent jump over the units dispatched in the same month of the previous year. Meanwhile, sales of mini segment cars comprising Alto and S-Presso fell over two times to 9,590 units in July 2023 from 20,333 units in July 2022. The compact cars viz. Dzire, Ignis, Swift, Baleno and Celerio fell 21 per cent year-on-year. The numbers speak for themselves. The contribution of the SUV in its monthly sale was nearly 50 per cent. 

Its nearest rival Hyundai Motor’s sales was dominated by SUVs though its month-on-month sales were only marginally up. Other bigwigs like Mahindra & Mahindra and Toyota Kirloskar Motors have a similar story to tell in terms of sales picking up for bigger cars.

But the true grit has been shown by Tata Motors, a company which has literally risen from the ashes. After buying the Jaguar land Rover (JLR) brand, it has upped its game for its domestic offerings too. The company is now India’s largest EV maker and it claims to offer the cheapest car in this segment too. Its Nexon, Tiago and Harrier models are now household names. The company is not just catering to big cars but also the changing preference to electric cars. The company has already stated its ambitious plans for JLR. 

Not to mention the depth now being offered to the Indian consumers with the entry of Morris Garages and Kia Motors.

Triumphant Two-wheelers

The two-wheeler sales were largely hit for multiple reasons over the past 3-4 years. A majority of the vehicle buying is discretionary spending in India. But the growing Indian middle class is becoming aspirational with an exception of this phase. It is now gradually emerging from the loss of jobs and salary cuts, and is pushing boundaries. 

Eicher Motors’ launch of Classic models in 350 cc and 500 cc created a rage and it still remains a highly popular choice with virtually no competition in this segment. 

The last one year has been very eventful for the sector. The revival of Yezdi by the Mahindra Group brings back the legacy of Jawa motorcycles. But the biggest talking point has been the tie-ups between Bajaj and Triumph, and between Hero MotoCorp and Harley Davidson that sent ripples in the industry. 

Their association is expected to take the Indian two-wheeler space to a new level with a bunch of top options for the riders. The competition is only heating up and we can brace ourselves for more.

With the upcoming festive season which kicks-off from September, companies are gearing up for what is considered to be the busiest time of the year for the industry.

The two-wheeler sales declined around 6 per cent YoY in July with lower demand and advent of the monsoon which has been quite severe in many parts of India. The demand is expected to improve going forward, with new product launches and inventory build-up in the preparation for the festival season. 

One of the reasons for the lacklustre show in July was the decline in exports for most two-wheeler companies. The export demand is picking up again, though the pace remains lukewarm, but it augurs well in the long run.

The Economy

The auto sales are crucial indicator of the trajectory of the Indian economy and the auto industry is critical to its growth. It is also one of the top employment generators in India not just for the OEMs but also for the small and big ancillary companies serving this sector. Be it spare-parts manufacturers, tyre accessories and others which contribute significantly to the growth of the sector, and of the economy.  

The government has realised its importance and is giving a lot of thrust to upgradation of infrastructure, including building of roads. Over the past nine years, Indian roads have been going through a transformation and it has been changing the way people travel. The car-makers have responded to that zeal and are only raising the bar.

The thrust is also being given to local manufacturing and the production linked incentives (PLI) especially for battery manufacturing and semiconductors development which are steps in the right direction. 

The future looks interesting and companies look ready to step on the gas pedal.    

Leave a Reply

Your email address will not be published. Required fields are marked *