Concerns over sluggish vehicle demand, even in the ongoing festive season, have perhaps deprived Indian auto majors of a fireworks-filled Diwali.

Car sales in the local market declined for the third straight month in September despite automakers offering hefty discounts to boost demand.

As per industry estimates, 3,55,000-3,60,000 cars, sedans and utility vehicles were sold in September, which is a decline of about 1-2.5% over 364,000 units sold in the year-ago period. PV sales dropped by 1.8% in August, and by 2.5% in July.

Industry numbers were dragged down by Maruti Suzuki, Hyundai Motor India, Tata Motors who all reported a drop in sales last month. Market leader Maruti Suzuki said it “calibrated” wholesale dispatches from factories to dealerships to control stocks at retail outlets. The company said inventory in the channel stands at about a month, down from 36-37 days at the start of last month.

Sales numbers for October are due now.

A INR 79,000 cr glut choking dealers
Dealers across carmakers are staring at an all-time high inventory of 80-85 days. Even though October is the main festival month, especially in the north, they are staring at an all-time high inventory of 80-85 days, equal to 790,000 vehicles worth INR 79,000 crore. This is partially due to aggressive despatches by automakers amid low sales. Car inventories have been increasing this year, especially since May.

Evaporating demand for cars
“The demand in the middle segment in the price range of INR 10 lakh to INR 25 lakh, which was driving sales for the last two-to-three years, has suddenly evaporated. Demand is still a little better among premium segment cars,” believes Puneet Gupta, director-automotive at S&P Global Mobility. Discounts and pile up of inventory reflect the crisis in this segment. Also, a flood of launches in the compact SUV segment impacted some models resulting in heavy discounting.

FADA president CS Vigneshwar said inventories have been rising over the last five months across car segments. However, he is optimistic that robust sales during October due to both Dussehra and Diwali will liquidate most stocks by the close of the month with sales continuing into November.

Auto stocks in red
Auto stocks also succumbed to the selling pressure earlier this week. Tata Motors led the downside with 6 % drop on Tuesday. Nifty Auto index was trading over 2% lower. Shares of Bajaj Auto and Hero Moto fell around 3% each while Maruti Suzuki and Mahindra & Mahindra were trading around 2% lower.

Analysts have said that the auto index could drop at least 10-15 % from the current leve

Auto majors are worried
While the slowdown in cars sales in the first half of this fiscal is not a cause of concern, the continued decline in demand for vehicles priced below INR 10 lakh is worrisome, Maruti Suzuki Chairman R C Bhargava said, adding, unless the lower end of the market grows there will be less feeders to the premium segment.

Car sales in the local market grew by a meager 0.5% from a year earlier to 2.08 million units in the fiscal first half ended September, showed data issued by industry body Society of Indian Automobile Manufacturers (SIAM).

In September, Maruti Suzuki’s volumes dipped by about 4% to 144,962 units. Korean rival Hyundai too saw sales fall by 5.8% to 51,101 units. Meanwhile, at homegrown auto major Tata Motors passenger vehicle sales declined by 8% to 41,063 units.

A lean patch for Maruti to Hyundai
In September, Maruti Suzuki’s volumes dipped by about 4% to 144,962 units. Korean rival Hyundai too saw sales fall by 5.8% to 51,101 units. Meanwhile, at homegrown auto major Tata Motors passenger vehicle sales declined by 8% to 41,063 units.

Shailesh Chandra, Managing Director, Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility said, “The PV industry in Q2 FY25 saw more than 5% decline in retails (Vahan registrations) compared to Q2 FY24 driven by slow consumer demand and seasonal factors. In contrast, industry offtake was significantly higher than registrations in anticipation of a strong start to the festive season, resulting in a continued buildup of channel stock.”

Electric vehicle sales in the personal segment too was affected by the lapse of registration and road tax waivers in key states, he added. In the meantime, fleet EV sales continued to remain impacted due to the lapse of FAME II and non-inclusion of the fleet segment in PM-eDRIVE scheme.

Can this festive season bring some cheer?
With the onset of the festive season, demand is expected to gain momentum helping bringing down stocks in the network, SIAM’s Shailesh Chandra said.

Auto dealers are hopeful that their sales will cross the 4,00,000 mark in October and may extend their month-end incentives by 3-4 days to capitalise on Diwali and Dhanteras demand.

Several mainstream manufacturers are offering substantial discounts on select models to stimulate sales. MG leads the discount wave with up to ₹450,000 off on its Gloster SUV, followed by Mahindra's XUV400 and Hyundai's Kona with discounts of ₹300,000 and ₹200,000.

The proposed extension of month-end sales incentives suggests dealers are optimistic about converting festive sentiment into sales, which may not be as buoyant as the last two years but not a washout either.