Positive macroeconomic factors and a surge in demand for SUVs and electric vehicles drive growth
India’s thriving passenger vehicle market, valued at an impressive 4 million, has reached a significant milestone. Moreover, with annual volumes surpassing the four million mark for the first time in 2023. According to industry estimates, approximately 4.1 million passenger vehicles were sold in the local market last year. Altogether, reflecting an 8.2% increase compared to the 3.79 million units sold in 2022.
The Resurgence: A Post-Pandemic Boost
While the global pandemic initially suppressed the passenger vehicle market worldwide, India emerged as the fastest-growing automobile market. The scarcity of semiconductor chips, vital components for cars, disrupted global supply chains. As the pandemic’s impact diminished, there was a heightened demand for these chips, and India. Further, with its cars requiring fewer chips, was able to accelerate production faster than other major markets.
Macro Factors Driving Growth
The exceptional surge in car sales in 2023 can be attributed to several positive macroeconomic factors in the world’s fastest-growing major economy. Factors such as higher disposable incomes, the expanding middle class, improved road infrastructure, a growing inclination to travel, and pent-up demand from the pandemic have propelled India’s car market forward. The increasing popularity of sports utility vehicles (SUVs) and the wider adoption of electric vehicles further fueled the record-breaking sales.
Shailesh Chandra, MD of TATA Motors PV and TPEM, stated, “The PV industry has posted its highest-ever sales in the calendar year 2023. Further, crossing the significant 4 million mark. A strong supply situation backs this growth, new SUV launches, and robust demand during the extended festive period.”
Green and Smart Technologies Gain Traction
Chandra highlighted the notable growth in emission-friendly product categories. Especially, with both electric vehicles (EVs) and compressed natural gas (CNG) segments. Moreover, registering impressive growth rates of over 90% and 25%, respectively. This indicates a growing preference for green and smart technologies among Indian customers.
Outlook for 2024: Opportunities and Challenges
Despite expectations of continued economic growth, carmakers anticipate single-digit growth in sales for 2024, owing to the high base of the previous year. Factors such as the drying up of pent-up demand and high-interest rates impacting car loans may pose challenges to sales.
On the positive side, more than two dozen new car models, including EVs, are set to be launched in 2024. Basically, marking the highest number of introductions in the non-luxury segment in recent years. Attracting significant number of buyers are the New SUVs and EVs. Moreover, industry experts predict that these launches could contribute 8-10% to total volume growth. Further, translating to a record domestic aggregate of 4.3-4.4 million units in 2024.
Rajesh Menon, Director General of SIAM, expressed optimism about the industry’s outlook. Further, citing the all-round economic growth and supportive government policies as key enablers for a positive sales trajectory in 2024.