Four of the five states in South India – Karnataka, Tamil Nadu, Andhra Pradesh and Telangana – reported passenger car sales declined by 2.5%, 1.5% and 10.9% (AP+Telangana) respectively in fiscal 25. Kerala accounts for 5% of total vehicle sales in India, up 2% in PV sales in FY25 and 6.3% in FY24.
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Demand for passenger cars has declined year-on-year in southern states over the past four quarters.
Total sales in five southern states, including Kerala, were 1.08 million in fiscal 255, down from 1.12 million in fiscal 24, according to data from the Association of Automobile Manufacturers (SIAM), edited by Kodak Institution Stock.
Declining demand for passenger cars has reached growth among the country’s top automakers, including Maruti Suzuki Ltd, Tata Motors Ltd and Hyundai Motor India Ltd.
The headwind of service
Analysts attributed the slowdown in sales in southern states to headwinds in the service industry. “More sales in the southern market–drive. Shruti Saboo, Director of Ratings and Research, India, said: “In the context of global macro headwinds (especially affecting IT sector), slowing down and uncertainty in urban demand are leading to cautious spending, such as automobiles in the South.
Furthermore, car penetration in northern states does provide a lot of room for growth, said Preetesh Singh, an expert at Nomura Research Institute and an alternative powertrain expert. “Macroeconomic factors, such as the slowdown in the service sector, especially the IT sector and the startup economy, may also play a role in slowing down sales in the South.”
Bangalore, Hyderabad and Chennai are some of the top cities in the IT industry and startups. The IT industry’s $238 billion slowed growth due to uncertainty over global economic growth and the emergence of AI generation.
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As a result, IT giants Tata Consulting Services Ltd and Tech Mahindra Ltd have delayed their wage hiking cycle. “When we make the decision on salary hiking, given the uncertain business environment, we will decide in a year when we will achieve this,” said Milind Lakkad, chief human resources officer at TCS.
According to the layoff tracker layoffs, nearly 4,000 employees in southern India left during the fiscal year 25.
India’s sales in fiscal 25 were about 4.3 million passenger cars, up 2% from the previous year. Sales of one-quarter of cars in southern states, the market accounts for a large proportion of overall growth.
“Our analysis of the state demand trends in the Q4FY25 reflects static demand trends in the passenger car sector, driven by weakness in the eastern and southern regions,” analysts at Kotak Institutional Stock noted on May 7.
Fares are better in northern West India
Despite the decline in southern India, the growth rate in the north and west increased by 4.4% and 6.6% during the same period. The total sales in northern states were 1.34 million units, while the sales in western states were 1.4 million units.
The growth of the North Indian market is led by Rajasthan, a combination of Uttarakhand and Uttarakhand reported a 9% increase in the year. The growth in Gujarat and Maharashtra was 5.9% and 4.2% respectively.
Tamil Nadu is an important hub for automobile manufacturing. India’s second largest auto seller Hyundai India and French automaker Renault have manufacturing facilities in the state. Tata Motors has also announced a new factory in the state to build passenger cars.
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India’s largest automaker, Maruti Suzuki India Ltd, reported sales in the domestic market rose only 3% in fiscal 25. Hyundai and Tata Motors reported a 3% decline in sales over the year to 598,666 and 556,263 respectively.
“The growth of the domestic market is very limited. For a country with such low automotive penetration, the 2-3% growth rate will not increase at all. This is a concern,” Maruti Suzuki Chairman RC Bhargava said during the post-media briefing on April 25.
The Nifty Auto Index fell 0.5% in FY25, while the Nifty 50 increased by 5%.
