FADA Reports Modest Gains in Vehicle Retail Sales for FY’25 Amid Economic Uncertainty

The Federation of Automobile Dealers Associations (FADA) recently released vehicle retail data for the fiscal year 2025, revealing a 6.46% overall growth. Passenger Vehicles (PV) saw a 4.87% increase, aligning closely with FADA’s earlier estimate of approximately 5%, indicating stability in this segment as predicted.

Two-wheelers (2W) experienced a growth of 7.71%, falling short of initial expectations for double-digit growth. This modest uptick suggests challenges such as limited financing options and cautious consumer spending continue to present significant obstacles. Commercial Vehicles (CV), on the other hand, reported nearly stagnant performance at -0.17%, influenced by unpredictable weather conditions, restrictive lending environments, and fluctuating consumer confidence.

Rural markets have displayed a stronger growth trajectory compared to urban markets, particularly in the 2W and three-wheeler (3W) categories. Two-wheelers in rural areas witnessed an 8.39% growth, outpacing the 6.77% growth in urban regions. Three-wheelers showed an even more significant preference for rural markets, with an 8.70% increase compared to a mere 0.28% growth in urban areas. Passenger vehicles also demonstrated a stronger momentum in rural markets, growing by 7.93% versus a modest 3.07% rise in urban areas.

In March 2025, the retail market experienced a slight YoY decline of -0.7%, but saw a significant MoM improvement of 12%. A slow start due to the Kharmas period was offset by a robust surge in the final week, driven by festive buying during Navratri, Gudi Padwa, and Eid, as well as year-end incentives.

Segment-wise analysis for March revealed a decline in two-wheelers by -1.7% YoY, a -5.6% drop in three-wheelers, and a -5.7% decrease in tractors. However, passenger vehicles showed resilience with a 6% YoY growth, while commercial vehicles improved by 2.6%.

Dealers across India expressed concerns regarding the ambitious sales targets set by Original Equipment Manufacturers (OEMs) without consultation. Inventory levels, particularly in passenger vehicles, have increased to approximately 50-55 days, leading to elevated holding costs and financial strain. Issues surrounding financing, cautious lending practices, impending price hikes due to upcoming OBD2 regulations, and liquidity constraints in rural areas have contributed to subdued consumer sentiment and a cautious market outlook.

Looking ahead to April and the fiscal year 2026, the outlook remains cautiously optimistic, with a majority of dealers expecting stable or growing sales. Factors influencing April’s prospects include potential disruptions from heatwaves, seasonal boosts from festivals and marriages, and global trade tensions. In the long term, FADA anticipates mid-to-high single-digit growth for two-wheelers and low single-digit improvements for passenger and commercial vehicles during FY’26, driven by new model introductions, EV expansion, and anticipated growth in rural income levels. However, stringent credit norms, cautious consumer sentiment, and global economic uncertainties could moderate this growth.

The EV market has shown incremental progress, with growth in two-wheelers, three-wheelers, commercial vehicles, and passenger vehicles, indicating a gradual yet consistent acceptance of EVs in the market.