The Indian passenger vehicle (PV) industry is poised for moderate growth in the fiscal year 2025, with sales volumes expected to expand by 3-5%, according to a recent report by CareEdge. This forecast follows a 7.4% increase in FY24, marking a noticeable slowdown from previous years.
Several factors contribute to this deceleration, including the stabilization of pent-up demand post-Covid recovery, increased vehicle prices, and the ongoing impact of high interest rates. Throughout FY24, the PV sector navigated through fluctuating consumer sentiment and challenging economic conditions. Initial growth was driven by strong order books and robust demand for new model launches, particularly in the sports utility vehicle (SUV) segment. However, this momentum gradually tapered off.
The high base effect from the previous fiscal year compounded these challenges, leading to a moderation in overall volume growth. CareEdge Ratings projects a continuation of this tempered growth trajectory into FY25. Arti Roy, Associate Director at CareEdge Ratings, commented, “The PV industry is expected to exhibit moderate volume growth of around 3-5% in FY25 due to the high-base effect of FY24, a shrinking order book, and persistently subdued demand for entry-level variants. However, strong demand for new model launches and SUVs, coupled with the expectation of interest rate cuts in the second half of FY25, is expected to keep the sales momentum rolling.”
A notable trend in recent years has been the rising popularity of SUVs, which have outperformed other segments within the PV category. In FY24, SUV sales surged by 22.4%, highlighting a clear shift among consumers towards vehicles offering greater utility and perceived safety benefits. This trend is expected to persist, further consolidating the SUV’s dominance in the market.
The electric vehicle (EV) segment continues to gain traction, recording a remarkable 90% year-on-year growth in FY24. Electric car volumes are projected to reach between 1.3 to 1.5 lakh units in FY25, buoyed by improving infrastructure and growing consumer acceptance of environmentally friendly alternatives.
Despite these positive indicators, challenges remain for the PV industry, particularly concerning entry-level vehicles. Hardik Shah, Director at CareEdge Ratings, noted, “While the market for premium vehicles is predicted to thrive, driven by a surge in demand for luxury and high-end models, entry-level variants are likely to see continued diminished demand due to a downturn in both rural and urban markets. The rural sector is feeling the pinch as entry-level vehicles become more expensive, whereas urban consumers are increasingly opting for SUVs, reflecting a shift in market preferences.”