PV growth to slow this financial year amid overall moderation in industry

The Indian automotive sector is witnessing a complex recovery pattern, with the two-wheeler segment experiencing a notable K-shaped trend since the COVID-19 pandemic. While premium cars and SUVs have seen robust growth, small cars and hatbacks continued to struggle, reflecting wider economic disparities in the country.

The passenger vehicle (PV) industry, which includes cars and utility vehicles, is also expected to face headwinds in the coming fiscal year. According to CareEdge Ratings, the PV sector is likely to see moderate volume growth of around 3-5% in FY25. This projection comes on the heels of a strong performance in FY24, setting a high base for comparison.

Arti Roy, Associate Director at CareEdge Ratings, explained, "The PV industry's growth is expected to moderate due to a high-base effect from FY24, a shrinking order book, and persistently subdued demand for entry-level variants." However, Roy added that strong demand for new model launches and SUVs, coupled with potential interest rate cuts in the second half of FY25, could help maintain sales momentum.

The electric vehicle segment continues to be a bright spot in the automotive landscape. After recording an impressive 90% growth with volumes reaching 90,432 units in FY24, electric car sales in the PV segment are projected to reach between 1.3 to 1.5 lakh units in FY25, indicating growing consumer acceptance of EVs.

Hardik Shah, Director at CareEdge Ratings, highlighted the diverging trends within the market. "While the premium vehicle segment is expected to thrive, driven by demand for luxury and high-end models, entry-level variants are likely to face continued weak demand in both rural and urban markets," Shah stated. This trend mirrors the K-shaped recovery seen in the two-wheeler segment, with higher-end products outperforming budget options.

The shift in consumer preferences is particularly evident in the utility vehicle (UV) category. UVs have grown from contributing 10-15% of total PV sales volumes in FY12 to accounting for over 55% of all new PV sales today. This growth has been driven by innovative designs, new models, and enhanced technological and safety features.

As the Indian auto industry navigates this period of transition, manufacturers are closely watching economic indicators and consumer sentiment. The potential for interest rate cuts later in the year could provide a much-needed boost to the sector, particularly for the struggling entry-level segments in both the two-wheeler and four-wheeler markets.

While the overall outlook remains cautiously optimistic, the industry must adapt to changing consumer preferences, environmental regulations, and economic conditions to maintain growth in the coming years. The contrasting fortunes of premium and entry-level vehicles underscore the need for targeted strategies to address diverse market segments in India's evolving automotive landscape.