Indian auto sales stumble in H1 FY25, industry body tempers full year sales forecast

The Indian passenger vehicle (PV) market saw slower-than-expected growth in the first half of FY25, with a modest growth rate of just 0.5%, below the initial expectations of 3-4% forecast by the Society of Indian Automobile Manufacturers (Siam), data released by the industry body on Monday showed.

The underwhelming performance is now poised to drag down the overall annual growth forecast, setting the stage for tempered expectations for the full year, even as automakers look to the ongoing festival season to deliver positive tidings.

Siam president Shailesh Chandra expressed disappointment in the market's H1 performance, pointing to a series of unforeseen events in May, June, and September, which dampened momentum. "Three out of six months in the first half were lower than expected, which led to this kind of a decline," Chandra told Mint. “There were multiple factors—elections, heatwaves, and heavy rains in certain regions—that contributed to this flat growth.”

Chandra acknowledged that while H2 could bring stronger growth, the full-year numbers are unlikely to hit the initial 5-8% target, with growth now expected to settle at less than 5%.

In the April-September period this year, passenger vehicle dispatches from automakers were up only 0.5% at 20.81 lakh units, compared to 20.71 lakh units dispatched during the same period last year. In September, passenger vehicle dispatches were down 1.4% year-on-year, according to Siam data.

Vehicle sales rebound in H2?

While the festival season in April had initially boosted expectations, the market failed to maintain the desired momentum in subsequent months. The festival sales in early October, however, have shown promising signs, with a 30-35% increase in vehicle registrations compared to September, carrying the hopes of a rebound in the second half of the year, Chandra said.

Despite the challenges in H1 FY25, Siam remains cautiously optimistic about a gradual recovery in the second half, buoyed by festival sales and new model launches. However, the industry is bracing for a slower-than-expected year, with the full-year growth likely to fall short of initial projections.

“I definitely believe that high single-digit growth in the second half of the year is imperative for the industry. This expected growth will be driven by intrinsic demand, which should increase, alongside OEMs' efforts to enhance the demand scenario in the country,” Chandra told Mint.

In response to the sluggish demand, many automakers have introduced discounts in an effort to excite the market. However, Chandra cautioned against viewing this as a long-term shift in consumer behaviour. "There has been a tactical strategy by manufacturers to bring more attractive models at the lower variants, but I wouldn't read too deeply into this. It's more about demand activation rather than a permanent trend," he told Mint.

EVs bear the brunt of demand downturn

Customers are also delaying purchases in anticipation of better options or better prices, for both IC-engine and electric vehicles. However, Chandra explained that the electric vehicle market, being a new technology segment, is seeing a worse-off impact of the demand downturn as customers slow down their decision making, especially as government subsidies are gradually scaled back.

“The top barriers for EV adoption—price, range, and charging infrastructure—are improving, but the latter remains a challenge,” Chandra said. "The government’s focus on investing in charging infrastructure is crucial to driving this segment forward," he said, referencing the allocation of ₹2,000 crore for setting up 22,000 charging stations for four-wheelers.

However, while passenger vehicle sales were subdued in the first half of the fiscal, segments such as two-wheelers and three-wheelers put up a much better show. Sales of two-wheelers were up 16.5% to 10.1 million units of two-wheelers leaving OEM factory gates in H1FY25, while three-wheeler sales at 374,000 and nearly 10% growth on-year, were at their highest level on record for the period.