Consultants Review Team

Domestic passenger vehicle (PV) sales set a new high for the third consecutive month in October, aided by robust festival-season demand and economic momentum, while GST collection rose to the second-highest level ever.  However, there were significant concerns about manufacturing activity and joblessness, particularly in rural India.

While the monthly PV wholesale number of 391,472 units in October, up 16.3 percent year on year (Y-o-Y), surpassed the September record of 363,733 units, the GST mop-up at Rs 1.72 trillion, up 13% Y-o-Y, trailed only the April high of Rs 1.87 trillion.

In October, UPI transactions reached a new high of Rs 17.16 trillion, up 9% from Rs 15.8 trillion in September. Volume hit a new high of 11.41 billion, up 8% from 10.56 billion in September. According to research conducted by credit rating firm S&P Global, manufacturing activity in India fell to its lowest level in eight months in October. 

In October, the Manufacturing Purchasing Managers' Index (PMI) decreased to 55.5 from 57.5 in September. It is the lowest level since March, when the PMI stood at 56.4. According to S&P Global, total new orders, output, exports, buying levels, and purchase stockpiles increased at a slower pace. Hiring activity and company optimism have also fallen to a five-month low.

According to the Centre for Monitoring Indian Economy (CMIE), a private research agency, the unemployment rate rose to its highest level in more than two years in October, as joblessness in rural areas soared. The overall rate increased to 10.5% last month from 7.9% in September, the highest since May 2021. Rural unemployment rose to 10.82 percent from 6.2 percent, while urban unemployment fell marginally to 8.44 percent.

Nonetheless, there were hints of improvement in semi-urban markets, where demand for entry-level vehicles increased. Car dealers raised their supply during the peak festival season and the ever-increasing demand for SUVs. The increase in automotive wholesale numbers could also be related to increased chip availability. Last month, two-wheeler sales increased in anticipation of Diwali.

Maruti Suzuki India (MSIL) senior executive officer (marketing and sales) Shashank Srivastava told reporters that the auto industry's merchants now have roughly 30 days of PV stock, which is "quite high." He stated that even if stock levels fall in the following 15 days, given that Diwali falls on November 12, the industry's confidence will stay high. However, if they do not fall significantly, the industry's wholesale results may suffer in the following months.

In October, MSIL's domestic PV wholesale figure increased 19.7 percent year on year to 168,047 units. According to Srivastava, demand for SUVs is still high. SUVs' proportion of total PV sales increased from around 42% in FY23 to roughly 48.7% in the first seven months of FY24.

He said that the semiconductor scarcity situation has "faded away," allowing the sector to raise output. He further stated that the fortunate season, which included Navratri and Dussehra celebrations, contributed to the increase in sales in October. "Diwali this year is in the first 15 days of November, so a lot of dealers are stocking up vehicles," he added.

Hyundai, India's second-largest automaker, increased its domestic wholesale number by 14.8% year on year to 55,128 units last month. "In 2023, it appears that volume growth for the industry will be around 7.5 percent," Tarun Garg, chief operating officer (COO), Hyundai Motor India, told Business Standard. Growth is forecast to be comparable this fiscal year (FY24), at around 7-7.5 percent, which is respectable given that last year's figure was the highest ever."