Motown's slow ride: Car sales in Gujarat hit speed bump in H1 of 2024

Postponement of Ratha Yatra, unforgiving summer, election season led to saturation

Gujarat has reported stagnant retail car sales in H12024, which was in stark contrast to the 8 per cent year-on-year (Y-o-Y) growth the state witnessed in H12023.

According to data provided by Jato Dynamics, and reviewed by Business Standard, 160,423 units were sold in Gujarat in H12024, a 0.1 per cent year-on-year (Y-o-Y) increase. 

During the same time period, however, the Y-o-Y growth in the other major six states -- Maharashtra, Uttar Pradesh, Karnataka, Haryana, Tamil Nadu and Rajasthan -- stood between six and 13 per cent, data showed.

According to auto executives, dealers and sector experts, multiple factors have led to growth saturation in H1 this year. This includes high car penetration in the state, postponement of Ratha Yatra (chariot festival) from June last year to July this year, extreme heat, election season, customers waiting for more discounts during the festival season as dealer inventory remains high, and customer preference for buying cars in the second half of the year. 

In H12024, Maruti Suzuki, Kia, Honda Cars, Skoda, Volkswagen, and JSW MG Motor saw a Y-o-Y decrease in retail sales, according to data.

Mahindra's sales increased by just 2.1 per cent in Gujarat in H1, compared to the national growth of about 16 per cent. 

In response to the newspaper's queries, Nalinikanth Gollagunta, CEO, Automotive Division, Mahindra and Mahindra, said: “In H12024, unlike the rest of India, the passenger vehicle industry in Gujarat remained constant Y-o-Y. During this period, thanks to close collaboration with our dealer partners, we had positive volume growth and gained share in the market”.

The other six aforementioned car companies did not respond to the newspaper's queries.

Hitendra Nanavati, chairman of the Federation of Automobile Dealers' Association (Fada) Gujarat, told Business Standard that Gujarat conventionally does better in the second half. 

"The festival season would begin from July-end onwards. So, till December, Gujarat would perform well, and would surpass many other major states as well. This is the pattern Gujarat typically follows," he said, asserting that there was no "de-growth" in H1 this year.

"To an extent, Gujarat experienced scorching heat this summer. Gujaratis are also a bit conservative in spending when the elections are on," he added.

Nanavati said the overall sentiment is good as the monsoon in the state was normal this year.

On the issue of high levels of stocks with dealers, he said there is no "dissatisfaction". 

"Every business faces challenges. The dealers right now have inventory for anywhere between 45-70 days, depending upon the brand. In the festival season, this would go down and we could cover up," he added.

Rajeev Singh, partner and consumer industry leader, Deloitte Asia Pacific, said Gujarat has higher penetration of cars among the top five states -- the other four being Uttar Pradesh, Maharashtra, Tamil Nadu and Karnataka.

"Given the higher base, sustaining high growth becomes more difficult. States with relatively lower penetration are driving more growth in the PV (passenger vehicle) market. However, Gujarat still continues to remain a key market and given festival seasons in the second half it should see positive growth in coming times," Singh added.

According to the previous National Family Health Survey (NFHS), conducted between 2019 and 2021, about 17 per cent urban and six per cent rural households in Gujarat own cars. 

Only 1 in 12 households own a car, according to NFHS. The state with the highest car ownership per household was Goa, with 45.2 per cent families possessing a motorised four-wheeler in the state, it added.

Saket Mehra, partner, Grant Thornton Bharat, said Gujarat has experienced lower growth in car sales this quarter due to the election period (customers were postponing sales with an expectation of reliefs in the Union Budget) and market correction after three years of robust growth. 

"The Rath Yatra is a significant sales event in Gujarat, which was postponed to July (from June) this year. The stagnation in June car sales was fuelled due to the customers waiting for the event to place orders. The broader impact of this festival is likely to be reflected in July car sales numbers, expected to lead growth this quarter for the state," Mehra added.

Srikumar Krishnamurty, senior vice-president and Co-Group Head, Corporate Ratings, Icra Limited, told Business Standard: "Historically, Gujarat's PV sales volume growth has moved in line with overall industry trends. While there has been a relatively subdued growth in comparison to the industry, the trend is expected to normalise over the medium to long term."

"Factors like increase in vehicle costs, shift in consumer preferences (e.g. utility vehicles over entry level cars), inventory levels held by dealers, dealers’ financial health influences market growth," he added.

An Ahmedabad-based car dealer said customers are waiting for the festival season, anticipating more discounts due to the already high stock levels.