Auto Retail Sales Decline 7% in February 2025, Dealers Raise Inventory Concerns : FADA

The Indian automobile industry experienced a slowdown in February 2025, with overall vehicle retail sales declining by 7% year-on-year (YoY), according to data released by the Federation of Automobile Dealers Associations (FADA). All key vehicle segments—two-wheelers (2W), three-wheelers (3W), passenger vehicles (PV), commercial vehicles (CV), and tractors—reported negative growth, reflecting sluggish demand and ongoing market challenges. 

The two-wheeler segment recorded a 6.3% YoY decline, with urban markets (-7.38%) experiencing a steeper drop than rural areas (-5.5%). Rural demand was relatively better, supported by a favourable agricultural outlook and the ongoing wedding season. Despite an 8.57% YTD growth, concerns remained over inventory imbalances, aggressive pricing post-OBD-2B regulations, and limited financing options. 

In the passenger vehicle category, retail sales dropped 10.3% YoY, despite a 4% YTD growth. The entry-level car segment faced significant challenges, with slow customer conversions and mounting dealer stock levels, which ranged between 50 and 52 days. Many dealers also raised concerns over OEMs pushing excess inventory, leading to rising financial strain and unsold stock accumulation. 

The commercial vehicle segment reported an 8.6% YoY decline, attributed to weaker demand in the transportation sector, tightening finance availability, and pricing pressures on bulk and institutional orders. However, one bright spot was the tipper sub-segment, which saw strong demand fueled by government infrastructure spending. 

Meanwhile, the tractor segment suffered the steepest decline, plummeting 14.5% YoY. This downturn reflected broader rural distress and reduced purchasing power among farmers, factors that continue to affect sales in India’s agrarian economy. 

FADA also highlighted dealer concerns regarding OEMs pushing inventory beyond market demand, a strategy that, while benefiting manufacturers, risks disrupting dealer viability. 

Looking ahead, 45% of dealers expect growth in March, while 40% foresee flat sales, and 14% anticipate further decline. Several factors could contribute to an improvement in sales, including the upcoming festive season—with Holi, Gudi Padwa, and Navratri expected to lift consumer sentiment—and fiscal year-end incentives, such as depreciation benefits, which may boost fleet sales in the CV and PV segments. Additionally, a strong rabi crop season could drive rural demand, benefiting two-wheelers and tractors. 

However, macroeconomic challenges persist. A five-month stock market downturn has dampened consumer confidence, leading to lower discretionary spending. Inflationary pressures and liquidity constraints are also weighing on overall buyer sentiment. According to FADA’s dealer survey, 51.9% of dealers rated liquidity conditions as neutral, while 28.3% described them as bad, and 19.8% as good. Market sentiment was similarly divided, with 44% remaining neutral, 30.8% viewing it negatively, and 25.1% expressing optimism.