The Federation of Automobile Dealers Associations (FADA) has reported a 6.46% year-on-year growth in vehicle retail sales for FY25, reflecting the sector’s adaptability and resilience. However, the performance for March 2025 was mixed—retail sales dipped 0.7% YoY, though they grew 12% sequentially compared to February.
FADA President C S Vigneshwar remarked that FY25 highlighted the industry’s strength in navigating dynamic market conditions.
Despite the overall growth, concerns persist. Dealers flagged unrealistic sales targets set by OEMs, which have strained financial sustainability. Passenger vehicle inventory levels climbed to 50–55 days, adding to carrying costs. Additional challenges include financing hurdles, cautious lending, price hikes due to OBD2 norms, and weak liquidity in rural markets.
Commercial vehicles: According to the report, commercial vehicles (CVs) experienced a slight decline of 0.17 per cent in FY25, indicating a stagnant market for commercial vehicles likely due to various challenges such as unpredictable weather, difficulties in securing financing, and changes in consumer preferences. In March, CVs reported a YoY growth of 2.68 per cent and a robust MoM increase of 14.50 per cent.
Passenger vehicles: In the last financial year, passenger vehicles (PVs) witnessed a growth of 4.87 per cent, which is in line with the FADA growth forecast of 5 per cent. In March, PVs performed better with a YoY increase of 6.26 per cent and a MoM surge of 15.56 per cent on the back of discounts, upcoming price hikes, and festive buying. New model launches and better variant availability also played a role.
Two-wheeler: In March, two-wheeler sales saw a YoY decline of 1.7 per cent. Despite this drop, there was a MoM increase of 11.45 per cent. The decline can be attributed to factors like cautious financing, weak rural liquidity, and the upcoming OBD2-related price hikes.
For the full financial year, there was hope for a significant double-digit growth. However, the actual growth was 7.71 per cent, which, while positive, did not meet their higher expectations.
EV Penetration Continues Upward Trend in FY25: FADA
FADA’s report highlights the steady growth of electric vehicle (EV) adoption across segments in FY25.
- Two-wheeler EV penetration rose to 6.1%, up from 5.4% in FY24.
- Passenger vehicles saw EV penetration increase to 2.6%, from 2.3%.
- Commercial vehicles inched up slightly to 0.9%, compared to 0.8% last year.
- Overall, EVs accounted for 7.8% of total vehicle retail sales in FY25, an improvement from 7.1% in FY24.
The momentum continued into March 2025, where:
- Two-wheeler EV penetration jumped to 8.6%,
- Passenger vehicle EV penetration increased to 3.5%, up from 3.0%,
- Commercial vehicles saw no change in EV adoption.
As a result, total EV penetration across all segments climbed to 9.9% in March 2025, up from 7.6% in February 2025, reflecting growing consumer interest and market acceptance.
Rural vs Urban Auto Market Performance
Rural markets outperformed urban counterparts across all segments. Two-wheelers saw an 8.39% growth in rural areas versus 6.77% in cities. Three-wheelers surged by 8.70% in rural regions, vastly exceeding the 0.28% urban growth. Similarly, passenger vehicles registered 7.93% growth in rural belts, more than double the 3.07% seen in urban markets.
Auto Industry Outlook: Cautious Optimism with Underlying Challenges
The auto industry maintains a tone of cautious optimism in both the near and long term, though signs of fragility remain.
In the near term (April), dealer sentiment is mixed—46.23% expect flat sales, 38.70% foresee growth, while 15.07% anticipate a decline. However, nearly 60% of dealers report weak booking pipelines, highlighting concerns around sustained demand. Key factors shaping this outlook include the IMD’s heatwave warning, which may dampen footfalls and delay operations; a potential festive and marriage season boost; and global trade tensions, which could impact disposable incomes through market volatility and weaker investment returns.
Looking ahead to FY’26, FADA projects mid to high single-digit growth for two-wheelers, and low single-digit growth for passenger and commercial vehicles. This cautious optimism is backed by new model launches, expanding EV portfolios, and rising rural incomes.
Yet, headwinds remain: financing constraints, driven by high borrowing costs and strict credit norms, continue to challenge both buyers and dealers. Additionally, global tariff uncertainties threaten to erode consumer confidence, while the PV segment faces a limited product pipeline, and CV demand is tied to a much-needed revival in freight activity.
