It's been a good year for the passenger vehicle (PV) industry. Driven by strong demand for sports utility vehicles (SUVs), PV sales remained in the fast lane for much of 2023. A leading industry executive believes the market is at the start of a long bull run, with premiumisation likely to be a key driving force.
According to data from the Federation of Automobile Dealers Associations, in November 2023, PV sales rose over 17 per cent. So far in 2023, sales are up close to 9 per cent; this is on top of the 26 per cent growth reported in 2022. More than 34.85 lakh PVs were sold between January and November 2023, versus 32 lakh units in the first 11 months of 2022.
"After two years (2021, 2022) of strong double digit growth, we heard this word 'pent up demand' quite a lot. But, there is no such thing. It is a structural change that we are looking at," said Sanjay Thakker, promoter and executive chairman of Landmark Cars.
The company is the only listed automobile dealership in India currently. It has dealerships of several brands, including Mercedes-Benz, Honda Cars, Volkswagen, Jeep, BYD, Mahindra and Mahindra, Ashok Leyland and MG.
"The car ownership in India is only around 2.2 per cent. In America, for instance, that is 70 per cent. With the kind of population we have, and car being among the sought-after asset class after a home, we believe this is the start of a long bull run in India. This is something that we believe will play out for a few decades," said Thakker.
Landmark started operations in 1998 as a dealer for Honda cars. It is currently present across 117 locations in nine states, which includes showrooms and workshops. It is the largest dealer in the country for Mercedes, Honda, Volkswagen, Jeep, and BYD.
Come 2024, Landmark will enter Telangana, its tenth state of operations, with a facility for Mercedes in Hyderabad. Close to 30 per cent of its current operation has been driven by the acquisition of other dealers. Thakker said the company would continue to seek acquisition opportunities to grow its business in the future too.
Thakker sees a growing trend of young buyers opting for premium and luxury vehicles, driving the industry growth over the next few years.
"Just under one per cent of all vehicles sold in India are luxury vehicles. Last year, that number was around 38,000 vehicles, this year it will be around 45,000 units. China, in a typical year, sells around two million luxury vehicles. The number of millionaires and billionaires in India is growing. Look at the stock market, there is an enormous amount of wealth generation that is happening. So, apart from more people owning cars, more number of people percentage wise will go buy luxury cars," he said.
India is among the only sizeable markets that is going to see strong growth, said Thakker, adding that with what was happening in Russia (the war with Ukraine) and China (economic slowdown), all eyes are now on the Indian market.
Pre-owned cars business will also drive the overall growth in the passenger vehicle market, he believes. Many companies, including luxury car makers, have invested in building their used car business over the last few years. Pre-owned cars business is currently 1.3 times the overall new car market and is expected to grow at a faster clip.
According to a recent report by OLX, India's used car market is expected to touch Rs 5 lakh crore (85 lakh units) by financial year 2028 from Rs 2.1 lakh crore (46 lakh units) in 2022-23.