Tarun Garg, Chief Operating Officer of Hyundai Motor India, is one of the first to admit that the Indian automotive industry rebounded swiftly after the chaos of 2020. Over the past two years, monthly sales have consistently grown, suggesting that by the end of the fiscal year in March 2024, the Indian passenger car market will cross four million units. This would firmly establish India as the world’s third-largest car market, following China and the United States.
Yet, when I run into Garg at Delhi Airport, he points out several advertisements from rival carmakers in newspapers, offering massive discounts on their flagship products. “If you are offering such large discounts around Diwali, it is a sign that things may not be as positive as they seem. The three days between Dhanteras and Diwali are the biggest delivery dates for the industry,” he said. In fact, Garg predicts a secular decline in growth as 2024 approaches, marking the end of this period of intense growth.
Interestingly, despite Garg’s concerns, data from the Society of Indian Automobile Manufacturers (SIAM) reveals that in October 2023, 389,714 passenger cars were sold in the Indian market—a growth of 15.87 per cent compared to October 2022, when 336,330 cars were sold. So, why are there discounts if growth is still robust?
While major manufacturers like Hyundai saw their October sales grow by close to 15 per cent, just a shade below the rest of the industry, smaller players such as Renault, Nissan, and Citroen have seen sharp declines. This could be because of a lack of suitable products, but not necessarily because lack of growth has been experienced even by a carmaker like Honda, which took out a front-page advertisement in The Times of India offering attractive ‘Diwali Discounts’ and recently launched its ‘Elevate’ SUV expecting sales growth.
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Sinister discount game
Discounts game is not unique to the ‘meat of the market’; they are rife even at the luxury end, albeit not always in a direct form. The chief of a luxury carmaker told me that, to show volumes, manufacturers offer attractive loan deals through their finance arms, at rates 200-250 basis points below those of banks. “When a car costs Rs 1 crore and your EMI is a couple of lakhs a month, these attractive rates really do add up.” This is a common practice by luxury carmakers these days, in addition to offering more innovative forms of ownership such as leasing and assured buyback schemes.
But he mentions a more sinister form of sales manipulation by some carmakers. “Often dealers are made to pick up cars to show ‘monthly volumes’ and those cars are then sold off, not quite as ‘second-hand’ cars because they were never registered at massive discounts.” He proceeded to show me WhatsApp forwards from rival carmakers offering previously unregistered vehicles, some five-six months old with discounts as high as Rs 8-10 lakh over a new car.
The executive explained that this is just a small sliver of the luxury segment, adding that sales pressure, non-existent a year ago, is now apparent in India, mirroring global trends of slowing markets in China and the US. In China, several luxury brands have seen their rivals catch up and overtake them in terms of features, and thanks to Tesla, they are caught in a price war. In the US, sales for luxury electric vehicles seem to have hit a speed breaker as well. “Indian buyers are not dumb, they know that the government will offer sops to Tesla to enter the market in India and will have to offer similar sops to existing carmakers, which could allow them to offer cheaper products. This is something that even we have been studying closely,” he said. This is corroborated by Hyundai’s Garg, who says if sops are offered for EVs, the Korean carmaker will definitely take advantage for some low-volume models.
In fact, some executives privately admit that it is the shift towards electric vehicles that has confused the Indian consumer. With limited choice in the current EV market, popular offerings from Tata Motors, while getting better, are retrofitted variants of their internal-combustion engine cars. The real influx of EVs in India is expected in the 2025-26 timeframe when purpose-built electric vehicles, avoiding the compromises of retrofitting, are set to hit the market. Notable examples include Tata Motors’ new ‘Avinya’ platform, which the company recently announced will share its internal architecture with Jaguar-Land Rover; Mahindra’s BE05, whose production ready prototype I saw in South Africa a few months ago; Maruti-Suzuki EVX, showcased earlier this year at the Greater Noida Auto Expo and whose interiors were revealed recently at the Japan Mobility Show; and upcoming EVs from Hyundai and Kia.
Garg expects some economic uncertainty after the 2024 Lok Sabha election, but remains committed to Hyundai’s plans for a ‘Made In India’ EV by 2025, which will be akin to a ‘C-Segment’ SUV. So, if you are looking to buy a new car, the next few months might not be a bad time to get a deal. But the question remains: will you be buying a vehicle that could become extinct in a few years?
@kushanmitra is an automotive journalist based in New Delhi. Views are personal.
(Edited by Prashant)