Automotive sales, an important indicator of domestic consumption in India, are experiencing a noticeable decline in urban areas, signalling potential weakening economic growth. The decrease is primarily driven by the sub-Rs 10 lakh segment, which has seen a continuous downward trend over the past few quarters.

The automotive sector’s slowdown mirrors trends in other key growth sectors. Executives from the fast-moving consumer goods (FMCG) industry have also noted early signs of weakness.

Tata Consumer Products Ltd. expressed concerns about declining urban demand, while Nestle India identified megacities and metros as pressure areas, partly attributing this to high food inflation affecting demand.

On Tuesday, RC Bhargava, chairman of Maruti Suzuki India, reported that although overall retail sales in the country increased by 14% compared to last year, urban sales experienced a decline, while rural areas saw growth. He linked the slowdown of urban sales to the upcoming Lok Sabha elections and erratic monsoon patterns.

Despite good traction during the festive season, Bhargava noted that growth in domestic car sales has been “somewhat slower,” with no significant issues related to semiconductors or unexpected events like the pandemic.

He expressed concern over the sharp decline in the market for passenger cars priced under Rs 10 lakh, which once represented 80% of car sales in India around 2018-19. This segment is not growing, and he warned that if the lower end of the market does not improve, it could also impact sales in the upper segment.

According to the Federation of Automobile Dealers Associations (FADA), urban sales of four-wheeler passenger vehicles fell nearly 3% in the first half of 2024-25, while rural sales grew by close to 5%. Sales of two-wheelers, three-wheelers, commercial vehicles, and tractors also declined by 1-12% in urban areas.

The Finance Ministry’s economic review for September noted that rural demand is improving, as seen in rising fast-moving consumer goods (FMCG) sales and increased three-wheeler and tractor sales. However, urban demand is moderating due to weak consumer sentiment, reduced foot traffic from above-normal rainfall, and seasonal trends where people are less likely to make new purchases.

Tired of missing hot stocks? Unicorn Signals provides powerful tools like stock scans and more help you make informed trading decisions. Download now and take control of your portfolio!