India’s automobile industry has made significant progress in recent years, especially in the manufacturing sector. India pipped Japan to become the world’s third-largest auto market in 2022, with annual sales surpassing 4.25 million vehicles, behind only China and the U.S. However, vehicle ownership in India remains relatively low, with only 34 cars per thousand people, a figure much lower than other major auto markets. In view of the large population base, the low ownership reflects multiple constraints in terms of purchasing power, infrastructure, and market maturity.

India’s output of autos between January and October 2024 totaled around 3.75 million units, a year-on-year increase of 2.5%; sales reached 3.13 million units, a year-on-year increase of 3.9%. The demand continues to show a steady upward momentum despite the significant slowdown compared to the impressive double-digit growth in 2023. It’s worth noting that SUV sales in India during this period increased by 14% year-on-year, driving the market. As Indian consumers gradually pursue higher-end models and banks have become more popular in providing car loans, SUVs are rapidly replacing traditional small cars with their advantages such as spacious interiors and strong capabilities, further promoting consumer upgrades.

Table: India’s Auto Outputs & Sales in Jan-Oct 2024

Source: Marklines, SIAM

However, behind the rapid market expansion lies significant challenges that cannot be ignored. India’s auto DSI (Days Sales of Inventory) has climbed from the recommended 21 days to over 80 days, and inventory of vehicles reached an all-time high of 790,000 in October, demonstrating inadequate market clearing capacity. The inventory backlog reflects not only weakened consumer demand but also underscores the declining consumer confidence under economic pressures. Meanwhile, factors like heavy rainfalls have exacerbated the decline in car purchasing enthusiasm, while the rise in household debt and warnings from the central bank about unsecured loans have further dampened market sentiment.

Despite significant challenges, the Indian market continues to show huge potential. Continuous infrastructure improvements and the gradual increase in purchasing power will lay the foundation for future market expansion. Electrification and energy-efficient technologies may become the next growth driver in the Indian auto industry. For manufacturers and dealers, adjusting product structures to meet diverse demands while optimizing supply chains and inventory management will be crucial in addressing market fluctuations in the future. In this process, balancing short-term pressures with long-term development will directly determine global competitiveness of India’s auto sector.