Festival To The Rescue?

The Indian automobile industry stands at a crossroads with cautious optimism as the 2024 festive season unfolds. Faced with record-high inventory levels, subdued consumer demand, and a broader market slowdown, automakers are pinning their hopes on the festive period to spark a turnaround. Manufacturers have turned to hefty discounts, slashing up to Rs 2 lakh off best-selling models in an attempt to boost sluggish sales. Yet, despite these generous offers, the market remains sluggish.  

A key factor behind the recent downturn is the Shraddh period, a 16-day stretch of religious observance considered inauspicious for new purchases. This year, Shraddh extended from September 17 to October 2, effectively pausing many consumers' plans to buy new vehicles. Historically, this period results in a dip in sales, but automakers are now counting on the major festivals like Navratri and Diwali—both falling in the same month—to impart a much-needed boost. 

What happened last year also provides some hope. Despite Shraddh extending until mid-October in 2023, the industry recorded impressive sales of 3,53,990 units, even against a high baseline. With this precedent in mind, automakers believe that the festive season could ignite a resurgence in demand, clearing out inventories and setting the stage for stronger growth in the months ahead.

Mounting Inventory
Despite these glimmers of optimism, recent data paints a picture of concern. The Federation of Automobile Dealers Associations (FADA) reported a decline in passenger vehicle sales for three consecutive months. In September 2024, sales fell to 275,681 units, an 18.81 per cent drop from the same month in 2023, when 339,543 units were sold. This marks a significant decline even from August 2024, when 309,053 units were sold.  

Adding to the industry's woes, heavy rains in several parts of the country further delayed purchases, contributing to the sluggish sales. As a result, dealerships are grappling with historically high inventory levels, averaging 80-85 days' worth of stock. In total, approximately 790,000 vehicles, valued at a staggering Rs 79,000 crore, now sit unsold in dealer lots across the country. 

"While dealers and OEMs are betting on robust festive sales, especially in rural markets where positive cash flow and better agricultural conditions are expected to spur demand, the outcome remains uncertain. A successful October is essential to clear out excess inventory and set a positive growth trajectory for the remainder of FY25," says FADA President C.S. Vigneshwar. Rising inquiries and a general sense of optimism have provided some hope, but it is clear that the industry's immediate future depends heavily on October sales. "If the anticipated sales do not materialise, it could shift the outlook to pessimistic, putting both dealers and OEMs in a difficult position heading into the new year," Vigneshwar added.  

New Launches
With so much riding on the festive season, automakers are pulling out all the stops to attract buyers. Major players such as Mahindra, Tata, Kia, and MG are unveiling new models across multiple segments, aiming to capitalise on the heightened consumer interest that accompanies festivals like Navratri and Diwali. 

Kia has launched its fourth-generation Carnival and the highly anticipated EV9 electric SUV. Both vehicles will be sold as completely built-up units (CBU), with the EV9 set to serve as Kia’s flagship electric offering. The new-generation Carnival, meanwhile, has made its debut in its Limousine trim, showcasing a dramatic redesign and a range of premium features that set it apart from its predecessors.

On the domestic front, Mahindra is gearing up to launch the XUV 3XO EV, an electric version of its popular compact SUV, by the end of this year. This EV is expected to boast a range of up to 450 km on a full charge, making it a strong contender in India’s burgeoning electric SUV market. It will compete directly with the Tata Punch EV, another highly anticipated launch that is set to heat up competition in the compact EV segment.

Meanwhile, Tata Motors has introduced the CNG version of the Tata Nexon, which generated significant buzz since its debut as a concept at the Bharat Mobility Global Expo. Featuring Tata’s innovative twin-cylinder technology, the CNG Nexon is expected to appeal to a broader range of buyers by offering several trim options. This expansion is part of Tata’s broader strategy to cater to the growing demand for alternative fuel vehicles in India.

MG, too, is entering the fray with a mid-life facelift of the Gloster, a full-size SUV that has gained a loyal following since its initial launch. This launch marks MG’s continued effort to stay competitive in India’s premium SUV market.

Rising Competition
Automakers are pulling out all the stops, not just in terms of discounts but also through strategic launches aimed at capitalising on the festive fervour. New models with cutting-edge features, competitive pricing, and various financing options are part of the mix. As the industry awaits a potential rebound, manufacturers are eager to see how consumer spending evolves during this critical period. Agrees Balbir Singh Dhillon, Head of Audi India, “We anticipate positive buying trends to continue during the festive season. Our bestselling models -- the Audi A4, A6, Q3, Q3 Sportback, Q5, Q7, and the newly launched Q8 -- continue to drive robust demand.” 

The high stakes are undeniable. Indeed, the industry will be watching the upcoming weeks with bated breath, hoping that the tide will turn in their favour and deliver the much-needed boost they’ve been waiting for.