India’s Auto Retail Sector Ends FY’25 with 6.46% Growth; PV Inventory Climbs to 50–55 Days: FADA

The Federation of Automobile Dealers Associations (FADA) released the vehicle retail performance data for fiscal year 2024–25 (FY’25) and March 2025, highlighting a year marked by modest growth, regional divergence, and mounting operational pressures. The auto retail sector posted an overall growth of 6.46 per cent in FY’25, with passenger vehicles (PV) growing by 4.87 per cent, two-wheelers (2W) expanding 7.71 per cent, and commercial vehicles (CV) remaining nearly flat at -0.17 per cent.

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A notable development in FY’25 was the strong performance of rural markets across all major categories. Two-wheeler sales in rural regions grew by 8.39 per cent, outpacing urban growth of 6.77 per cent. Three-wheelers showed an even greater rural-urban divide, growing 8.70 per cent in rural areas against a mere 0.28 per cent uptick in cities. Passenger vehicle sales followed suit, with 7.93 per cent growth in rural belts compared to just 3.07 per cent in urban markets. 

March 2025 retail data painted a more nuanced picture. Overall sales declined by 0.7 per cent year-on-year (YoY) but increased by 12 per cent month-on-month (MoM), thanks to a surge in the final week of March due to festivals like Navratri, Gudi Padwa, and Eid, coupled with last-minute depreciation-linked purchases. Segment-wise, PV and CV recorded YoY gains of 6 per cent and 2.6 per cent respectively, while 2W, 3W, and tractor sales contracted by 1.7 per cent, 5.6 per cent, and 5.7 per cent.

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Despite the March recovery, dealer sentiment remained strained. Many reported that automakers had set ambitious and often unilateral sales targets, which failed to reflect actual market conditions. In the PV segment, inventory levels have swollen to 50–55 days, significantly raising carrying costs for dealers. Financing continues to be a major hurdle across segments, with tightened credit norms, cautious lending by banks, and low rural liquidity dampening retail momentum. These issues, coupled with upcoming price hikes due to stricter OBD2B emission norms, are expected to further impact affordability and customer sentiment.

Two-wheeler sales in March posted an 11 per cent MoM rise, largely due to festive incentives and last-minute buying. However, the YoY decline of 1.7 per cent underscored structural issues—ranging from the burden of network over-expansion and rising operating costs to increased competition from electric vehicles. In contrast, the PV segment fared better, thanks to discounting, new model availability, and a seasonal spike in demand, posting a 15.5 per cent MoM and 6 per cent YoY increase. Even so, many dealerships flagged concerns over stagnant booking pipelines and uneven regional demand. 

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In the commercial vehicle space, March saw a 2.68 per cent YoY increase and a robust 14.5 per cent MoM jump, aided by festival-related demand and school bus deliveries. However, these gains were tempered by inconsistent product availability and concerns about freight movement, which remains patchy across many regions.

Looking to April, dealer expectations are cautious. FADA’s internal survey revealed that 46.23 per cent of dealers foresee flat sales, while 38.70 per cent expect growth. Nearly 60 per cent reported weak booking pipelines, which suggests that any optimism for April is tentative at best. Extreme weather warnings from the Indian Meteorological Department (IMD), particularly heatwaves, may further dampen showroom footfalls and impact rural infrastructure activities. At the same time, domestic festivities and the wedding season are expected to lend some short-term support to demand.

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FADA’s outlook for FY’26 is cautiously optimistic. The association projects mid to high single-digit growth in the 2W segment and low single-digit growth in the PV and CV categories. Dealers are hopeful that new model launches, rising interest in electric vehicles, and a potential improvement in rural incomes could drive demand. However, significant challenges remain. Financing constraints continue to loom large, with calls for the Reserve Bank of India to reduce lending rates growing louder. Rising input costs and the burden of OBD2B-linked price increases also risk eroding affordability, especially in lower-tier markets.

Additionally, global trade tensions have resurfaced, with the possibility of tariff disputes triggering stock market volatility. This could affect consumer confidence and mutual fund SIP returns, potentially curbing discretionary spending, including vehicle purchases. Within the PV segment, limited product pipelines and high vehicle prices are limiting the pace of recovery. In the CV sector, dealers expect only modest gains, mainly from institutional purchases like school buses and infrastructure-linked projects, as freight-related demand remains subdued. 

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