Monday, 04 Dec, 2023
By: Damini Mehta
The month of October in India marks a heightened consumer spending across segments largely owing to the festive season. Image Source: IANS
The lower middle income households that mainly focus on entry level cars do not appear as optimistic in luxury spending as the entry level car segment sales have somewhat pulled the overall growth down.
At a time when several countries across the world are still facing economic challenges due to the after effects of the COVID-19 pandemic, international developments like the Russia-Ukraine war and now the West-Asia conflict have cast a shadow on the global economy. India is no stranger to this and the government has been grappling to introduce measures to bring economic growth, investment and consumer spending back on track. The festive season, which falls around the months of October and November usually brings a boost to economic activity as consumers heighten spending and purchases across segments. The last few years, however, saw even that showing muted response. This time around, the trend appears to be changing, but the impact that the COVID pandemic and subsequent geopolitical developments have had on individual incomes is yet to recuperate to original levels.
The month of October in India marks a heightened consumer spending across segments largely owing to the festive season. The automobile segment and within that the passenger vehicle segment especially witnesses a surge in sales during these months as the consumers are more open to spending and sellers offer attractive offers to boost consumer purchases. Interestingly, the pattern of vehicle segment purchases indicate a boost in the SUV and sedan car segments, a likely result of increasing incomes in the upper middle class, but given the two-wheeler segment has also had record sales, the ‘aspirational’ middle and low income India also appears to be on an upward path to financial revival. Although the Diwali festival this time falls in the month of November, let’s take a look how October 2023 has borne testimony to increased spending across segments in automobiles, a marker of how Indian households are refocusing on luxury purchases.
While the automobile companies in the passenger vehicle segment have recorded a significant boost in sales in the month of October 2023, the tractor and commercial vehicles segments was a witness to mixed performance. The top five passenger car companies- Maruti Suzuki, Hyundai, Tata Motors, Mahindra and Kia, managed to sell a cumulative 3.48 lakh units of passenger vehicles alone in this month. YoY growth in sales across the top five players ranged from anywhere between 5 per cent to 35 per cent.
Source: BQ Prime, Hindu BusineessLine
Maruti Suzuki, India’s largest passenger vehicle manufacturer recorded a near 20 per cent YoY growth in domestic sales, its highest ever recorded jump. Whereas Hyundai Motor, the second largest player in the Indian market, clocked a 15 per cent increase in domestic wholesales (to dealers) and a staggering 36 per cent jump in exports. According to experts the jump in sales can be attributed to a revival of the economy and increased funds in the hands of the consumers.
Source: BQ Prime, Hindu BusineessLine
Tata Motors, and Mahindra, the two other major players witnessed near about 7 and 35 per cent YoY growth respectively compared to October 2022. The finer details of growth in the automobile sales indicate that the growth momentum is largely driven by SUVs and big cars, a segment largely driven by high and upper middle class households.
Source: Wikimedia Commons
The lower middle income households that mainly focus on entry level cars do not appear as optimistic in luxury spending as the entry level car segment sales have somewhat pulled the overall growth down. Interestingly, the two-wheeler segment that dominates purchases by lower income and semi-urban households also witnessed record growth in sales, a clear indication that the lower and middle income groups have more money in their hands and are willing to spend more. Amongst the top players in the two wheeler segment, Hero Motocorp registered the largest growth in domestic wholesale in October 2023 at nearly 24 per cent followed by TVS Motors at 17 per cent. Baja Auto and Eicher (Royal Enfield), however, lagged in sales with less than 4 and 1 per cent growth in wholesale sales respectively.
Passenger vehicle sales point towards more spending power in the hands of the consumers but an uptick in vehicle sales in the commercial segment suggest a revival in business and industrial activity, a positive for the economy as a whole. However, major players in the commercial vehicle segment have seen varied performance in wholesale pick up of sales. On the one hand, Ashok Leyland recorded a 34 per cent Y-o-Y jump, Tata Motors (CV) saw a decline of 2.68 per cent in October 2023. Eicher (VECV)’s commercial vehicle sales jumped by more than 12 per cent in the same month but its share in the market remains low with just about 6,800 units sold.
Commercial vehicle uptick is a positive indicator of reviving growth and economic activity in any economy and has a ripple effect across industries, incomes and jobs. To this end, one segment that registered a declining sale across players and bodes ill for revival of the agriculture sector is tractor sales. Escorts and M & M Tractors, the two major players in the market, recorded a negative Y-o-Y growth of nearly 14 per cent each. As the festive season peaks, the automobile segment is likely to see a further boost in sales before Diwali. What remains to be seen is if the commercial vehicle segment, a closer indicator of overall economic activity, will be able to keep pace with the growth in passenger vehicles, a yardstick to purchasing power in the hands of the consumer.
