SUV allure lifts passenger vehicle sales past 4 million in 2023

Consumers flocked to sport utility vehicles (SUVs) to drive passenger vehicle (PV) sales beyond four million in 2023, a top industry executive said, as they continued to disengage from sedans and hatchbacks. This, even as the vehicles themselves turned costlier by an average of 10% during the year. Over two million SUVs were sold last year, fetching 49% of total sales compared to 42% in 2022, said Shashank Srivastava, senior executive director at Maruti Suzuki, the country’s top carmaker.

According to Srivastava, the average PV carried a price tag of 11.5 lakh in 2023, 40% more than 8.2 lakh in 2019, and 9.5% higher than 10.5 lakh in 2022. Apart from higher production costs due to costlier inputs and mandatory safety tech, a higher share of costlier SUVs and customer preference for top models have also been driving up average purchase prices in 2023.

A total of 287,904 passenger vehicles were dispatched from factories to dealerships in December, Srivastava said, the highest ever for the month, crossing the previous record of 276,000 units in December 2020. This was also a 4.4% growth over last year’s dispatches of 275,680 units. At Maruti Suzuki, December dispatches fell 6.5% to 104,778 units from a year earlier, while ’ dispatches rose 8.6% to 43,470, and Mahindra & Mahindra’s increased 23.7% to 35,174 .

Some manufacturers including Toyota and Kia are yet to release their December numbers. Retail sales were higher than wholesales in December, as manufacturers tried to clear out stocks after three festive months ending November, by slashing production and offering hefty discounts on models with high inventories.

Citing data on the government’s Vahan website, Jay Kale, senior vice president at Elara Capital, said December retail sales grew at a slower pace than the 7% growth seen in FY24 so far. “We are seeing some moderation in PV growth. The real situation of pending order books reported by companies is getting tested as capacities ramp up post chip shortage at the start of the year.

While the SUV segment continues to outperform, the recovery in the cars segment on a low base will be keenly watched," Kale said. Maruti Suzuki and Hyundai Motor India said their stocks are near two week levels at the beginning of 2024, down to half of the levels seen at the beginning of December.

Industry wide, PV retail numbers stood at a record 442,800 units in December, Maruti’s Srivastava said, up 7.8% over last year, compared to 287,904 wholesales in the same month. To be sure, official wholesale and retail sales numbers will be separately released by the auto industry body Society of Indian Automobile Manufacturers (SIAM) and dealers’ body Federation of Automobile Dealers Associations of India (FADA) later in the month.

Vehicles with electrified powertrains, including electric vehicles (EVs) and hybrid vehicles, saw a 90% and 358% increase, respectively, albeit on a relatively low but expanding base. This has benefitted companies including Tata Motors and MG Motor India, which are leaders in the EV segment, as well as Toyota and Maruti Suzuki, which have introduced hybrid models in some segments of SUVs.

New SUV models have been selling like hot cakes; new micro SUV Exter pushed up Hyundai’s overall SUV sales to account for 60% of its portfolio, while Honda’s new SUV Elevate already accounts for half of its sales in India. Hyundai expects as much as 65% of its sales to come from SUVs next year, and sees SUVs as a segment growing to 53 54% of total PV sales.

Meanwhile, Maruti Suzuki is chasing a 25% share in the segment by the end of FY24, and currently draws over 23% of its sales from SUVs. SUV focused Mahindra & Mahindra continues to see a strong inflow of new orders, even as supply chain challenges for some products are still leading to long waiting periods.

Automakers also reported healthy rural sales in 2023, highlighting an income divide even within the rural population as sales of most consumer goods makers suggest a slowdown in rural consumption. For Maruti Suzuki, rural sales at 776,000 units in 2023 was its highest ever, Srivastava said. “Strong minimum support prices, improving road infrastructure and good monsoons translated into a very good growth in rural sales," said Tarun Garg, chief operating officer, Hyundai Motor India.

“For Hyundai, rural contribution to our sales was at its highest ever at 19.1% in 2023. Going forward in 2024, we feel the industry growth could be in the low single digits, maybe 3 4%, but that is also very good considering that we are sitting on two years of back to back highest ever growth years", Garg said.

According to Srivastava, three factors will contribute to a moderation in growth rate in 2024: “There’s no longer any pent up demand or pending bookings that’ll drive sales as that has been fulfilled this year. We are entering 2024 with optimal stock levels and the pass through of the high repo rate will result in high auto loan rates, which can potentially adversely affect demand," he said..