Auto Sales Preview: Passenger Vehicles Lose Steam, Two-Wheeler Demand Sustains

Passenger vehicle sales further slowed down in December due to weakening momentum post festive season, while two-wheeler demand sustained.

A slowdown in demand post festive season, high inventory at dealerships and dismal sales of entry-level cars limited sales of passenger vehicles, analysts said. Two-wheeler sales are likely to grow both at the wholesale and retail front, they said.

Nomura sees downside risks for passenger vehicle demand in the next fiscal, with industry volume growth currently pegged at 6%.

After strong growth in the previous and ongoing fiscal, experts expect the demand for passenger vehicles will gradually slow down in FY25, with moderate sales of utility vehicles, even as small cars continue in the slow lane.

Robust two-wheeler sales in December strengthened the expectations of recovery in the sector, particularly in rural areas. This comes after a disproportionate rise in prices led to muted growth for years.

“Volume growth is led by recovery in the rural region. Rural demand is strong on the back of marriage season spending in North and East India,” Dolat Capital Market Pvt. said.

As Hero MotoCorp Ltd. is the prominent player in the regions showing stronger growth, analysts expect it to accelerate market share gains for the company.

In the commercial vehicle segment, the demand continues to be driven by infrastructure development, with medium and heavy commercial vehicles leading sales.

Freight demand remains steady but has come off during the festival season, said Motilal Oswal Financial Services Ltd.

After a few weak months, the enquiry trends at dealerships hint at a slight improvement in the demand for tractors, the brokerage said in a note.

However, analysts expect the sales to remain soft for the next few months.