Auto Woes Continue As Record Year-End Sales Fail To Lift PV Sales
The sector is also saddled with inventory backlogs and weak demand due to subdued discretionary spending.
Passenger vehicle sales remained muted despite dealers and financiers giving out higher year-end discounts than festive discounts, found Emkay Research. This trend is prompting caution among financiers, with approval rates declining from 90% to 75–80%, reflecting stricter norms, heightened risk aversion, and evolving borrower profiles.
Emkay’s analysis of Vahan registration data found weak PV demand, following meek festive season growth. Record-high discounts during the year-end have failed to stimulate retails, as weak consumer sentiment and increased financier caution weigh on demand.
While wholesale growth in fiscal 2025 year-to-date stands at a modest 11%, dealers are grappling with elevated inventory levels, adversely affecting profitability due to higher interest costs and discounting pressures to clear stocks.
Emkay also predicts that passenger vehicle original equipment manufacturer margins could face significant pressure in the third quarter of the fiscal, due to record-high discounts. While Mahindra & Mahindra Ltd. outpaces peers with a fresh product portfolio, Tata Motors Ltd.' passenger vehicles segment is underperforming, particularly after a lukewarm response to the Curvv SUV, Emkay said.
Hyundai Motors India Ltd. and Mahindra & Mahindra Ltd. face headwinds, with Emkay maintaining a 'reduce' rating on both. However, Maruti Suzuki India Ltd. remained a preferred pick, benefiting from reasonable valuations and growth potential.
Inventories Backlog Woes Continue
Dealer inventory levels, although reduced by approximately 10 days, remain high at 65-68 days as per FADA data. Dealers report sluggish demand in the non-premium PV segment, citing limited product variety and the pull-forward of festive demand into October. High loan interest rates and reduced financier approvals further dampened discretionary purchases.
Aggressive year-end discounts and promotions are expected to counter subdued sentiment and potentially revive sales. However, dealer profitability continues to decline, as shown by YoY Ebitda drops in key dealerships like Landmark Cars and Popular Vehicles by 4.2% and 35%, respectively.
Outlook: Recovery Still Distant
The PV segment is expected to remain under pressure until the second quarter of fiscal 2026, with ongoing challenges in consumer sentiment and financier caution. High inventory levels and persistent discounting will also add to the woes, according to Emkay.
