Automotive Industry and Upcoming Indian Festivals: 2023

All eyes are on India's car industry as the country's Christmas season draws near. The most recent statistics & trends from August 2023 provide a complete picture of the industry's performance, highlighting both its strengths and its future concerns. In this financial blog, we'll discuss the most important findings from the most current report & examine the dynamics at work in the domestic passenger vehicle (PV), two-wheeler (2W), commercial vehicle (CV), & tractor segments.

Passenger Vehicle Segment

With mid-single-digit growth, the domestic PV & 2W retail volumes have proven resilient. However, dismal retail trends for commercial vehicles continue, particularly as a result of the segment's sluggish demand for light commercial vehicles (LCVs). Due to a weak monsoon in August 2023, tractor demand also suffered. Particularly in the 2W & tractor categories, the export segment continues to fall short of projections.

Original Equipment Manufacturers (OEMs) have been stockpiling items in advance of the holiday season, especially in the PV sector. In August 2023, domestic PV retail volumes increased 5% year over year. According to estimations, the wholesale volumes of the domestic PV sector increased by a high-single-digit to low-double-digit percentage year over year, while retail volumes increased by 5%. Despite the persistent difficulties of the hatchback market, this gain was driven by consistent demand patterns in the SUV segment.

In August 2023, overall volumes for Maruti Suzuki, a major player in the Indian PV industry, increased significantly by 15% year over year. Particularly impressive rise of over 100% year-over-year was seen in SUV volume. In August 2023, Maruti Suzuki's market share increased by 240 basis points year over year to reach over 43%.
In contrast, Tata Motors reported a 4% year-over-year fall in sales in August 2023, while Hyundai & Mahindra & Mahindra (M&M) saw volume growth ranging from 9% to 27%.

Two-Wheeler Segment

The domestic 2W retail sector performed well, with volumes increasing by around 6% on a yearly basis. A consistent outperformance in the premium market & a slow but steady improvement in Electric Vehicle (EV) 2W volumes were credited with this rise. In August 2023, wholesale volumes roughly tracked retail increases, while export trends remained lame with just little year-over-year growth.

Hero MotoCorp Limited (HMCL) said that its volume for August 2023 increased by 6% over the previous year. An astounding 17% year-over-year surge in scooter sales was the main factor in TVS Motor's reported 4% year-over-year gain. Royal Enfield also reported successful results, with volumes of 11% year over year, driven by a rise in domestic sales of 11% &  an increase in export quantities of 13%. In contrast, Bajaj Auto had a 15% decrease in total volumes year over year because of the high base of August 2022.

Commercial Vehicle Segment

In August 2023, volume improvements in the commercial vehicle category were in the mid-single digit’s year over year. Strong results in the passenger carrier & medium & heavy commercial vehicle (MHCV) categories were the main factors for this gain.

The MHCV category saw a 14% year-over-year gain, the buses segment saw a 30% year-over-year improvement, & the Intermediate & Light Commercial Vehicle (I&LCV) segment saw a 5% year-over-year improvement in Tata Motors' CV volumes. However, a 4% year-over-year fall in the Small Commercial Vehicle (SCV) freight category somewhat negated these improvements.

While VECV scored an astounding 29% year-over-year volume growth in August, Ashok Leyland (AL) reported a decent 10% year-over-year increase in volumes.

Tractor Segment

Unfortunately, the domestic tractor market suffered in August 2023 as volumes fell by a single digit percentage year over year. The main reason for this reduction was a weak monsoon at that time.

Weak monsoon trends were one of the major reasons influencing tractor sales. Ample reservoir levels & improving trade conditions, which are anticipated to lessen the impact of the monsoon, might provide some solace, nevertheless.
While Escorts Kubota recorded a 9% year-over-year fall in overall tractor volumes in August 2023, Mahindra & Mahindra (M&M) reported flat tractor volume growth.

Conclusion

The Indian car sector is navigating a challenging environment as the holiday season draws near. The commercial vehicle & tractor segments face difficulties because of variables including monsoon changes, but the passenger vehicle & two-wheeler segments are demonstrating resilience & development. The industry's efforts to take advantage of the holiday season & adjust to shifting customer tastes & economic situations will be especially important in the upcoming months.