India SUV sales: SUVs to continue steering PV sales to record high in FY25, but overall demand scenario a concern

The overall demand for cars in India will continue downward trajectory in the upcoming financial year, even as SUV thirst is likely to push passenger vehicle (PV) sales to record high, a report showed on Monday.

Sport utility vehicles (SUVs) are likely to propel overall PV volumes to record high at 5-7 per cent in FY25, growing from a high base of 6-8 per cent estimated for FY24, CRISIL Ratings wrote in a note on Monday.

Auto cos may see improvement in operating margin to 11.5-12.5 per cent in FY25, thanks to a healthy volume growth in the SUV segment which traditionally offers higher margin, analysts said.

“Better cash generation, along with strong balance sheet and robust liquidity will support funding of sizeable capital expenditure to set up additional capacity, obviating the need for material debt addition and keeping credit profiles of PV makers stable,” CRISIL said.

The nation has been saying an increased appetite for SUV cares in recent years even as entry-level vehicles have seen subdued demand. The market share of SUVs jumped to 60 per cent of domestical volume in this financial year, up from around 28 per cent in pre-pandemic FY19.

For example, Thar & Scorpio-maker Mahindra & Mahindra booked record sales multiple times in 2023. It saw 20-57 per cent sales growth in each month this financial year till December. For Maruti, SUV sales formed 36 per cent of their overall domestic PV sales in this financial year till December, up from 22 per cent in FY23. Analysts feel this number would go higher owing to a healthy pipeline of new model launches across price points, including electric variants, and normalised availability of semiconductors after a prolonged period of short supply.“While the overall PV volume is seen rising 5-7% next fiscal, we expect demand for SUVs to accelerate at twice the pace at over 12% driven by array of feature-laden launches at competitive price points, varied technology options including hybrid and electric, and increased access to credit,” said Anuj Sethi, Senior Director, CRISIL Ratings.

Overall demand scenario still worrying

The weakness in rural market continues to be a drag for automobile companies.

Commodity prices shot up following the breaking out of the Covid-19 pandemic, in addition to tougher regulations.

Automobile companies have been passing on these increased prices to the customers over the last 3-4 years, affecting affordability at the entry level.

Exports too have slowed, with the share of PV exports likely slowed to 14 per cent this financial year, down from 17 per cent in FY19.

“This is mainly due to inflationary headwinds and limited availability of foreign exchange in key export markets — Latin America, south-east Asia and Africa — in the past two years. This trend is expected to continue next fiscal,” CRISIL said.

(You can now subscribe to our Economic Times WhatsApp channel)

FOLLOW US ON GOOGLE NEWS

Read original article here

Denial of responsibility! Swift Telecast is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – swifttelecast.com. The content will be deleted within 24 hours.

Leave a Comment