In FY22 and FY23, the PV industry experienced substantial year-on-year volume growth due to pent-up demand post-Covid recovery and new product introductions, it said.
Utility vehicles played a significant role, with volumes increasing by 41 per cent in FY22 and 33.2 per cent in FY23. The industry benefitted from lower interest rates and an increased desire for personal mobility in the wake of the pandemic, CareEdge said.
According to CareEdge, utility vehicles contributed 10-15 per cent of total passenger vehicle sales until FY12. It grew at a compound annual growth rate (CAGR) of 15.51 per cent between FY13 and FY24, as consumer preference shifted towards utility vehicles that offered better and innovative designs, new models, technological, functional and safety features.
For the past decade, the utility vehicles segment has consistently outperformed the passenger vehicle industry growth rate. In FY24, for the first time utility vehicles sales volume stood higher than passenger cars and vans, it said.
Currently, utility vehicles account for over 55 per cent of all new PV sales and its share in overall passenger vehicle (PV) sales is expected to further rise over the medium-term, CareEdge said. “The PV industry is expected to exhibit moderate volume growth of around 3-5 per cent in FY25 on account of a high-base effect of FY24, shrinking orderbook and expectation of persistently subdued demand for entry-level variants in FY25,” said Arti Roy, Associate Director at CareEdge Ratings. Strong demand for new model launches and SUVs coupled with the expectation of interest rate cuts in the second half of FY25 is expected to keep the sales momentum rolling, she added.
However, in line with CareEdge Ratings’ expectation of volume growth of around 7-9 per cent in FY24, the PV industry volumes grew by 7.4 per cent in FY24, the ratings said.
This moderation in year-on-year volume growth in FY24 was due to the levelling off of pent-up demand amid a hike in vehicle prices, high base effect of FY23 and the high-interest rate environment, it said.
Strong order book in FY24, robust demand for new model launches and increasing demand in the sports utility vehicle (SUV) segment kept the sales momentum rolling, as per the report.
“While the market for premium vehicles is predicted to thrive, driven by a surge in demand for luxury and high-end models, entry-level variants are likely to see continued diminished demand due to a downturn in both rural and urban markets,” said Hardik Shah, Director at CareEdge Ratings.
The rural sector is feeling the pinch as entry-level vehicles are becoming more expensive, whereas urban consumers are increasingly opting for SUVs, reflecting a shift in market preferences, Shah added.