Festive demand helps Passenger vehicle wholesales rise marginally in October: SIAM

admin August 29, 2023

The Indian automobile industry has long relied on the festive season to drive sales, and this year was no exception. According to the latest data from the Society of Indian Automobile Manufacturers (SIAM), passenger vehicle (PV) wholesales in India experienced a marginal increase in October 2024, largely due to the seasonal boost in demand associated with the festival period. The month of October, which coincides with major festivals like Dussehra and Diwali, typically sees a surge in consumer spending, especially in the automotive sector, where vehicles are often considered auspicious purchases. The festive demand, however, did not result in a significant surge but was enough to see a modest increase in wholesales when compared to the previous month. This report sheds light on the factors driving this uptick, while also providing a nuanced understanding of the broader challenges facing the industry. In October 2024, passenger vehicle wholesales rose by a modest percentage, reflecting a combination of several factors such as pent-up demand, promotional offers, and the festive buying season. SIAM’s report highlighted a slight but encouraging uptick in wholesales compared to the previous month. While the increase in numbers was not explosive, it was a positive sign given the context of a challenging economic environment and a slowing global auto market. For the automobile manufacturers, the rise in sales during this period, albeit marginal, was critical in stabilizing production and distribution channels that had been under strain in recent months due to both domestic and international uncertainties. The festive season in India is known to have a significant impact on consumer behavior, with many families opting to make large purchases as part of their celebrations. The tradition of buying new vehicles during festivals is deeply ingrained in Indian culture, where new vehicles are often seen as a symbol of prosperity and a good omen. The festive period typically includes major festivals such as Diwali, Dussehra, and Navratri, which occur between September and October. In this context, the role of festive demand in driving a rise in vehicle wholesales is well-established, and the industry generally anticipates a boost in sales during this period. This year, the festive season came with a few additional considerations. On the one hand, the impact of inflation and higher interest rates, which had tempered discretionary spending in the months leading up to October, created some uncertainty. However, on the other hand, various promotional offers, discounts, and the availability of more affordable financing options provided the necessary incentive for consumers to make purchases. These factors combined to create a favorable environment for vehicle wholesales, contributing to the marginal rise in sales numbers. Manufacturers and dealers typically ramp up their marketing and advertising efforts during the festive season to attract buyers. Special offers, including reduced prices, free insurance, and low-interest financing schemes, are common strategies used to stimulate demand. These efforts, coupled with the long-standing cultural significance of buying vehicles during festivals, played a key role in driving sales, even if the increase was not as sharp as anticipated. While festive demand provided a boost to wholesales, the growth was not as robust as some had expected, especially considering the pent-up demand following months of subdued sales. One of the key factors contributing to the moderate increase in wholesales was the continued strain on the global supply chain. The global automotive industry has been grappling with persistent supply chain disruptions, including semiconductor shortages, rising raw material costs, and logistics challenges. These constraints have had a significant impact on vehicle production, leading to longer waiting periods for customers and slower manufacturing cycles.

Moreover, the overall economic environment also played a role in tempering consumer sentiment. Despite the positive effects of the festive season, the broader economic backdrop in India has been a mixed bag. While the economy has shown resilience, factors such as inflationary pressures on essential goods, rising fuel prices, and elevated interest rates have all contributed to a sense of caution among consumers. The higher cost of loans, driven by the RBI’s policy of tightening interest rates to combat inflation, has impacted the affordability of big-ticket items like cars. This has been especially true for mid-range and high-end vehicles, where financing is a crucial component of the purchasing decision. For many consumers, the decision to buy a new car has been delayed as a result of these economic pressures, and even during the festive season, many have opted to spend more conservatively. As a result, the increase in vehicle wholesales, although positive, was not as pronounced as might have been expected in previous years when the market was in a more stable phase. Another important trend noted in SIAM’s report was the increasing preference for compact and electric vehicles (EVs), which continued to gain traction during the festive season. With a growing emphasis on environmental sustainability and fuel efficiency, consumers are increasingly considering electric vehicles as an alternative to traditional internal combustion engine (ICE) vehicles. While the overall volume of EVs sold during the festive period was still a fraction of the total passenger vehicle market, their share has been steadily rising. Government incentives and subsidies for electric vehicles have played a significant role in driving this shift. Additionally, the rising cost of fuel and the increasing availability of EV charging infrastructure have made electric vehicles a more viable option for many consumers. The shift towards EVs is in line with the broader global trend of transitioning towards cleaner, greener alternatives in the automobile sector. This trend is expected to continue gaining momentum in the coming years, particularly as automakers increase their EV offerings and as consumers become more environmentally conscious. At the same time, compact cars, which are generally more affordable and offer better fuel efficiency, continued to see healthy demand. These vehicles, which often appeal to young buyers and first-time car owners, have become increasingly popular, especially in urban areas where traffic congestion and high fuel prices make larger vehicles less appealing. This preference for smaller, more economical vehicles was evident during the festive season.

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