March blow for retail auto sales, may face headwinds

The only silver lining in March's performance -- which otherwise dragged down the financial year's momentum -- was a 6 per cent year-on-year (Y-o-Y) growth compared to March of the previous year. This is largely due to incentives, festival-driven gains, and new launches.

Automobile retail sales grew 6.5 per cent in financial year 2024–25 (FY25), driven primarily by a 5 per cent rise in passenger vehicle (PV) sales, an 8 per cent increase in two-wheeler numbers, and a 5 per cent uptick in commercial vehicle (CV) sales.

This compares to a growth of 10 per cent for the industry in the previous financial year (FY24).

However, concerns emerged in March, as retail sales declined for the second consecutive month -- down 0.7 per cent compared to March 2024.

The fall was attributed to a 2 per cent slide in two-wheeler sales, a 6 per cent drop in three-wheeler sales, and a 6 per cent decline in tractor sales, according to data from the Federation of Automobile Dealers Associations (Fada).

The only silver lining in March's performance -- which otherwise dragged down the financial year's momentum -- was a 6 per cent year-on-year (Y-o-Y) growth compared to March of the previous year. This is largely due to incentives, festival-driven gains, and new launches.

In February, industry sales were down by 7 per cent, with all categories falling into the red.

In absolute numbers, the country saw sales of 26 million vehicles in FY25, versus 24.5 million in FY24.

"The first three weeks of March were notably weak, largely due to the Kharmas period, but sales accelerated significantly last week, driven by positive triggers such as Navratri, Gudi Padwa, Eid, and year-end purchasing influenced by depreciation benefits," said C S Vigneshwar, president, Fada.

Though passenger vehicles posted a good show in March, the dealers' body warned original equipment manufacturers (OEMs) about a higher inventory level of 50–55 days.

"Unrealistic targets, liquidity challenges, and regional pockets of low demand are resulting in PV inventories rising to about 50–55 days. Incentives and festival-driven gains pushed overall results higher, but dealers remain cautious about high-stock levels and target pressures as the new financial year begins," Vigneshwar added.

Dealers across India are cautiously optimistic, looking ahead to FY26, with Fada projecting mid-to-high single-digit growth in the two-wheeler segment and low single-digit growth for both PVs and CVs.

Another cause for concern for the government and the industry is the static growth in the penetration level of electric vehicles (EVs).

While EV penetration moved marginally up from 7.1 per cent in FY24 to 7.8 per cent in 2025, in March 2025 it came down to 9.9 per cent compared to 10.3 per cent last March.

In PVs, market leader Maruti Suzuki posted a 3 per cent rise in sales in March to 132,423 units.

However, a healthy competition is going on between three majors -- Tata Motors, Mahindra and Mahindra (M&M), and Hyundai Motor -- for the second slot.

In February, M&M had unseated Hyundai Motor to become the number two player in the market, while in March it was Tata Motors' turn, which clocked sales of 48,462 units, up 4 per cent compared to the same period last year.

M&M saw sales go up by 17 per cent to 46,297 units in March versus last year, while Hyundai Motor was hit in the number two race with sales of 42,511 units, down 5 per cent.

CV dealerships reported moderate 2.68 per cent Y-o-Y growth, due to Gudi Padwa deliveries, supportive financing, and infrastructure activity that elevated customer footfall.

However, major hurdles for the segment included aggressive targets and uneven product availability, Fada added.