Indian PV industry set for moderate growth at 3 pc-5 pc in FY25 despite economic headwinds

New Delhi [India], June 24 : The passenger vehicle (PV) industry in India is anticipated to witness moderate growth in the fiscal year 2025, with sales volumes expected to expand by 3 per cent to 5 per cent, according to CareEdge.
According to the report. this forecast comes in the wake of a 7.4 per cent increase recorded in FY24, reflecting a noticeable slowdown from the preceding years.
Analysts attribute this deceleration to several factors including stabilizing pent-up demand post-Covid recovery, escalated vehicle prices, and the lingering impact of high interest rates.
Throughout FY24, the PV sector navigated a landscape marked by fluctuating consumer sentiment and economic conditions.
Initially bolstered by strong order books and robust demand for new model launches, particularly in the sports utility vehicle (SUV) segment, the industry's growth momentum gradually tapered.
The high base effect from the previous fiscal year compounded these challenges, leading to a moderation in overall volume growth.
In their outlook for FY25, CareEdge Ratings projects a continuation of this tempered growth trajectory.
"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. 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", noted Arti Roy, Associate Director at CareEdge Ratings.
Factors contributing to this forecast include the persistently subdued demand for entry-level variants, a shrinking order book, and the expectation of interest rate cuts in the latter half of the fiscal year.
A notable trend observed in recent years has been the ascendant popularity of SUVs, which have outperformed other segments within the PV category.
In FY24, SUV sales surged by 22.4 per cent, underscoring a clear preference shift among consumers towards vehicles offering greater utility and perceived safety benefits. This trend is expected to persist, further consolidating the SUV's dominance in the market.
Additionally, the electric vehicle (EV) segment continues to gain traction, recording a remarkable 90 per cent year-on-year growth in FY24.
Electric car volumes are projected to reach between 1.3 to 1.5 lakh units in FY25, buoyed by improving infrastructure and growing consumer acceptance of environmentally friendly alternatives.
Despite these positive indicators, challenges remain for the PV industry, particularly concerning entry-level vehicles.
Hardik Shah, Director at CareEdge Ratings, said, "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. 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."
Looking ahead, the industry anticipates a bifurcated market landscape, with premium vehicle segments expected to thrive on heightened demand for luxury and high-end models. This divergence reflects evolving consumer preferences, shaped by economic conditions and demographic shifts.