Major Indian carmakers are preparing for sluggish domestic PV sales growth of just 1-2 per cent in FY26.
Passenger vehicle (PV) sales are expected to end the 2024-25 fiscal year on a flat note, with wholesale figures reaching 3.82 million units by February.
In 2023-24, PV volumes hit an all-time high of 4.2 million units. Between April 2024 and March 2025, PV wholesales grew by 2.12 per cent, reaching 3.82 million units in YTD FY25, compared to 3.74 million units in the same period the previous year.
In February, PV wholesales were the highest ever for the month at 377,689 units, according to data from the Society of Indian Automobile Manufacturers (Siam).
With March sales expected to be at a similar level, the overall number for FY25 is projected to be close to 4.2 million units, indicating flat growth.
Analysts have accordingly predicted stagnant growth for the fiscal year. Icra estimated industry growth in FY25 at around 0-2 per cent.
“Most of the demand drivers for the industry -- disposable incomes, new model launches, cost of ownership, etc -- remain neutral or favourable. Accordingly, even as the base for the industry continues to remain high, Icra estimates PV industry volumes to grow at a moderate pace of 4-7 per cent in FY26," the ratings agency said.
However, automobile original equipment manufacturers (OEMs) have forecast even slower growth for FY26.
Major Indian carmakers are preparing for sluggish domestic PV sales growth of just 1-2 per cent in FY26, constrained by weak demand, a stagnant first-time buyer base due to affordability concerns, declining entry-level car sales, the fading post-pandemic surge, inflation, rupee depreciation, and geopolitical uncertainties.
At a recent internal meeting, Siam members reached a consensus that PV sales would grow by just 0.07 per cent in FY25, with only a marginal increase of 1-2 per cent in FY26.
PV prices have risen by nearly 70 per cent in recent years, largely due to changes in regulatory requirements, such as emission norms.
At the same time, customer income levels have remained relatively stagnant.
Entry-level cars have been hit the hardest, as declining affordability has shifted growth within the PV segment towards utility vehicles (UVs).
According to a senior executive at a leading PV OEM, despite these challenges, the Indian market still holds promise, with vehicle penetration at just 34 vehicles per 1,000 people.
At a recent Siam internal meeting, Maruti Suzuki Head of Marketing and Sales Partha Banerjee pointed towards a decline in first-time car buyers, which has dropped from 47 per cent in FY19 to 40 per cent now.
OEMs like Hyundai have highlighted the shifting landscape of the PV market, where customer aspirations are rising, and SUVs have firmly taken the lead.
Within Hyundai's lineup, 45 per cent of first-time buyers are opting for SUVs, and even hatchback customers are increasingly leaning towards premium models.
With passenger vehicle retail sales falling by 10 per cent in February, discounts have returned to car dealerships in March, ranging from ₹35,000 to over ₹4 lakh, varying with the model.
According to dealers, discounts this March are higher than previous year, and automakers also admitted that incentives are necessary to push volumes.
“These incentives are not merely seasonal tactics but symptoms of deeper structural issues affecting the automobile sector. The middle class, traditionally the backbone of India's automotive market, is under unprecedented pressure. With real incomes effectively halving over the past decade and stagnant earnings, their purchasing power has eroded significantly,” said Ravi Bhatia, president of market research firm Jato Dynamics, had told Business Standard earlier this month.
What makes this situation particularly concerning is the confluence of multiple adverse factors: regulatory-driven price increases from safety and emission standards, inflationary pressures, fluctuating fuel costs, and increased taxation, he added.
These have collectively reduced disposable income precisely when vehicle affordability is declining.
The average weighted price of new vehicles has gone up from ₹8 lakh in 2018 to ₹13 lakh today.
“Income didn't go up that much and adjusted for inflation was even worse. So, savings and discretionary spending gets impacted,” he added.
Price sensitivity has reached critical levels, especially in the entry-level segment, industry watchers felt.
Feature Presentation: Rajesh Alva/Rediff.com
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