A record 1.03 million cars and SUVs are estimated to have been retailed in India in the 90-day period of festivities, which started with Onam in Kerala in August and concluded with Bhai Dooj across the majority of the states. In these three months, the vehicle makers would have generated a turnover of over Rs 1.1 lakh crore, turning out to be a key contributor to the swelling GST collection for the government of India.

The Indian car market continues to scale new peaks – not only are the volumes hitting a new high every month of this fiscal year, but the average ticket price is also moving up. The growing economy, rising disposable income and younger population have meant that the market is maturing fast and the cars are getting safer and are high on tech.

Between August 17 till the end of Navratri, the industry had registered a growth of over 18 percent, retailing over 7 lakh units, and an additional about 3.25 lakh to 3.3 lakh units are estimated to have been sold between Dussehra and the end of the season, taking the cumulative festive sale for the first time over a million units. Last year, the sales during the festive months were about 8.1 to 8.5 lakh units, indicating a growth of over 20-25 percent.

The sales this festive season are also higher than that of 2020, when there was a huge pent-up demand from the lockdown period of April to June, which subsumed during the festive period that year.

Reducing waited periods

Shashank Srivastava, senior executive officer, sales and marketing at Maruti Suzuki, says a longer festive period and the availability of semiconductor chips backed by strong production ramp up ensured that the industry broke new records and crossed 1 million deliveries for the first time. "High production and execution of non-festive orderbook getting culminated into the festive season ensured strong deliveries during this year's festive season. The sustained booking and enquiry numbers right from August also ensured that the numbers were strong. Maruti Suzuki on its part has been able to reduce its order backlog from over 4 lakh a couple of quarters back to almost 2 lakh units, doing better than the industry," said Srivastava.

Adequate stock at dealerships is what differentiated this festive season from others.

Tarun Garg, COO of Hyundai Motor India, says what differentiated this festive season over the last couple of years is that there is adequate stock of vehicles at dealerships. "This ensures that the value seekers and customers who make an instinctive decision to buy on the spot during festivals are able to purchase a vehicle they could drive home in. The fresh bookings over the last few months have remained strong and new launches like Exter have also brought in new car buyers for us," added Garg.

Hardeep Singh Brar, national head of Sales & Marketing at Kia India, says the customer sentiment has been extremely positive, which has helped Kia report its fourth-highest sales performance in October. “As far as the overall demand is concerned, we are exceedingly optimistic that the industry is poised to achieve its highest retail sales record by the end of this season. 95 percent of the supply chain issues were resolved already. Prior to the festive season, we were doing about 20,000+ retail, which increased to about 24,000+ (20 percent growth) in the festive period due to overwhelming demand for the Seltos. We shall be close to this number in November too,” said Brar.

Rural markets join festive cheer

For Maruti Suzuki, the rural growth was higher than the urban growth, due to its strong linkages in the hinterlands and deep reach. The carmaker grew its rural sales by 11 percent versus urban growth of 9 percent, and now the share of its rural sales accounts for 44 percent of its total sales.

For the overall market, the share of small towns and villages is fast approaching the one-third mark, with 31 percent of total sales coming from rural areas in 2023. All this growth has come despite a weak entry-level car segment, which was severely impacted by price increases over the last few years.

Srivastava believes, “The prices have stabilised now, the income levels are improving, the economy is back to normal, so one expects the disposable income to improve, which will help the entry car segment to come back… We can see revival in the two-wheeler segment, the revival in the entry segment will also happen.”

The way ahead

Production has already seen a month-on-month correction. The stock levels will naturally witness a correction, but the bookings and inquiries post-season will be important to deciphering how the market will end 2023. Yet the consensus appears to be that a strong festive season would drive the passenger vehicle market to grow by almost 7-9 percent to 4.13 million for the 2023 calendar year, about 1 lakh units more than the expectation.

Brar says initially the industry was expected to grow at the pace of 5 percent as there was a plethora of challenges from semiconductor shortage, which is a critical part for making feature-rich and secure cars. “However, with the industry posting record monthly sales since July, we think it will close the year with at least 8 percent growth,” he added.

Kia witnessed 20 percent retail growth in the festive season, thanks to the Seltos.

Garg agrees that growth has been better than expected. "An 8 percent growth rate for 2023 is very healthy, and while it is early to gauge the demand parameters for next year, the growth will continue albeit in low single digit," he added.

Kia India’s Brar says, “Currently, the demand is high because of multiple industry launches which have peaked buyer interest. He adds that he’s “cautiously optimistic” about the demand post festive season as the recovery trend this year has also been non-linear.

Earlier this year, post the Q2 earnings call, Maruti Suzuki chairman RC Bhargava, too, had said that there is a projection of the market slowing down to lower single digits. Clearly, the honeymoon period of low inventory and long waiting period is over and the industry is getting into a unique phase of high base and low growth. The only solace is the economy continues to be amongst the fastest growing in the world, the inflation too is under control, and it’s down to the fundamentals of strong brands and products.