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Informist, Tuesday, Jul. 1, 2025

 

By Anand JC

 

NEW DELHI – Despatches of passenger vehicles by Indian automakers expectedly contracted in June, but in most cases the year-on-year fall was higher than forecast by analysts. A dearth of new launches and seasonality drove softness in demand for this segment. While the industry itself is anticipating a growth of 1-2% for the ongoing financial year, the added element of uncertainty by the rare earth magnets issue may prolong weakness and delay recovery in demand, analysts have said. 

 

Maruti Suzuki India Ltd. sold 118,906 passenger vehicles to Indian dealerships in June, down 13% on year, and lower than Nomura Research's expectation of 120,000 units. This was the fewest passenger vehicles sold by the country's largest passenger vehicle maker in the past 18 months, with particular weakness in passenger cars and utility vehicles.

 

In June, Tata Motors Ltd. registered the steepest contraction since April 2023 in domestic passenger vehicle despatches, according to data available with Informist. The company sold 37,083 passenger vehicles in June, including electric vehicles, nearly 15% lower on year, and lower than Nomura's expectation of 40,000 units.

 

Shailesh Chandra, managing director of Tata Motors Passenger Vehicles Ltd., said that the industry saw volume pressure, particularly in May and June, which reflects the continued softness in demand. Chandra expects overall industry growth to remain subdued in the coming months.

 

"No new launches by the companies in the recent months have led to a fall in demand (for passenger vehicles). Volume is technically driven by new launches," an analyst covering the automobile sector for a domestic brokerage told Informist. "This lack of demand and low growth for passenger vehicles will sustain in the coming months. Sequentially, sales of all companies fell due to seasonality," the analyst said. 

 

Hyundai Motor India Ltd.'s domestic passenger vehicle despatches contracted 6% on year in June, but was higher than Nomura's expectation of 43,000 units. However, its exports soldiered on with a 15% on-year growth – a trend seen across all original equipment manufacturers' portfolios. "You can see that companies are relying on exports, because they are growing better than India sales," the analyst said. However, the South Korean automotive giant's Indian arm said that "geopolitical situation continued to affect the market sentiment" here.

Among the major listed companies, only Mahindra & Mahindra Ltd. reported an on-year growth in its passenger vehicle sales. The Thar maker's passenger vehicle sales in India grew 18% on year, rounding off a record-high quarter for its sport utility vehicles. However, it was lower than Nomura's expectation of 48,000 units.

 

DEMAND WOES
Analysts at Nomura and Nuvama Institutional Equities had expected passenger vehicle wholesales to drop 5% on year in June. They'd based this forecast on dealer checks which showed subdued demand which is showing no signs of recovery. This has also caused an uptick in inventory levels, they said. 

 

To clear out inventory levels, companies have increased discounts on offer. According to Nuvama's research report Monday, discounts offered by Hyundai Motor, M&M, Tata Motors have gone up year-on-year, although they remain lower for Maruti Suzuki. In June, blended discounts offered by automakers ranged between INR 5,000 and INR 100,000, according to a report by Nomura.

 

In addition, the lack of approvals from the Chinese government for rare earth magnets remains a headwind for Indian automobile companies. While they are used heavily in electric vehicles, internal combustion engine-run vehicles too use a lot of components that use rare earth magnets. Analysts expect impact of this to show July onwards.

 

RECOVERY IN SIGHT?

While geopolitical uncertainties currently cloud the already low 1-2% growth forecast for the passenger vehicle industry, analysts are optimistic that a turnaround is still possible in the ongoing financial year. 

 

"Planned launches by companies including refreshes and new car launches are expected to turn things around," the analyst quoted above said. In addition, festival season in the latter half of 2025 is also expected to give an additional boost to car sales. 

 

Nomura echoed this sentiment. "Recent drop in interest rates, slowing inflation, and income tax cuts augur well for demand. We expect an improvement in demand to be visible by the coming festive season," its analysts said in the report. The firm expects passenger vehicle industry to grow 5% on year in the ongoing financial year, but "expect(s) that a meaningful recovery will only be visible from 2HFY25 onward."  End

 

Edited by Deepshikha Bhardwaj 

 

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