Small car sales in India plunge 75% as rural incomes decline

India’s small car sales fell sharply as rural buyers’ incomes diminished following the country’s weakest monsoon in five years.

The sales of entry-level cars slumped 75% to 35,000 units in the three months through September from a year earlier, according to the Society of Indian Automobile Manufacturers. Sales of motorcycles and scooters — favored modes of transport in villages due to their affordability — also fell 39% and 25% respectively. 

Farm wages have remained subdued after a ban on wheat and rice exports hurt rural incomes. India’s June-September rainfall, which waters half of the country’s farmland, also remained deficient, threatening crop harvests and adding to rural stress.

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Rural income levels are lower than before, said SIAM president Vinod Aggarwal on Monday. “Prices of entry-level cars have increased due to regulatory changes,” he said. “Because of this gap, the demand for entry-level segment is low.” 

While the small car market shrinks, demand for bigger sport utility vehicles among India’s aspirational middle class is increasing. Domestic utility vehicle sales rose 23% to 639,552 units during the quarter.

Passenger vehicle sales rose to 361,717 in September from 359,228 units in August. 

Rajesh Menon, director general, SIAM said, “Sales of both Passenger Vehicles and Three Wheelers in Q2 of FY2023-24 has been the highest ever in Q2. Passenger Vehicles have posted a growth of 4.7% and Three Wheelers have posted a growth of 62.2%, compared to Q2 of last year. The Passenger Vehicle segment crossed 2 million units sales for the first time, in the first half of current financial year. Commercial Vehicles also posted a decent growth of 6.9% in this Quarter, compared to Q2 of last financial year, driven by good growth in Medium and Heavy Commercial Vehicles. Two-Wheelers segment have declined by (-)1.6% in this Quarter, as compared to last year.”