The Business Bytes
THEBUSINESSBYTES BUREAU
NEW DELHI, MARCH 6, 2025
The Indian automobile retail sector witnessed a significant slowdown in February, registering a 7% decline in overall sales across various vehicle categories, as per data released by the Federation of Automobile Dealers Associations (FADA). The total retail sales in the domestic market stood at 18,99,196 units, compared to 20,46,328 units in the corresponding period last year.
FADA President C S Vigneshwar attributed the downturn to sluggish market sentiment and highlighted a broad-based decline across all vehicle categories. He noted that the two-wheeler (2W), three-wheeler (3W), passenger vehicle (PV), tractor (Trac), and commercial vehicle (CV) segments recorded negative year-on-year (YoY) growth of 6%, 2%, 10%, 14.5%, and 8.6%, respectively. He also pointed out concerns among dealers regarding excessive inventory being pushed onto them without their consent, stressing the need for aligning wholesale allocations with actual demand to ensure sustainable inventory management.
The passenger vehicle segment reported a sharp 10% decline in retail sales, amounting to 3,03,398 units in February. Dealers expressed concerns over weak market sentiment, especially in the entry-level category, along with delayed conversions and challenging sales targets. The segment, despite recording a modest 4% growth in year-to-date (YTD) figures, continues to struggle with excessive inventory levels, which stood in the range of 50-52 days. Dealers emphasized the need for Original Equipment Manufacturers (OEMs) to avoid overburdening them with excessive stock, given the cyclical nature of the industry.
In the two-wheeler segment, despite an 8.57% YTD growth, retail sales fell by 6.33% YoY. Urban areas experienced a sharper decline of 7.38%, while rural markets saw a comparatively lower dip of 5.5%, supported by favorable agricultural sentiment and seasonal wedding demand. Dealers cited multiple factors, including inventory imbalances, aggressive post-OBD-2B pricing adjustments, weak consumer sentiment, lower inquiry volumes, and limited financing availability, as reasons for the downturn. Additionally, slow-moving models and external economic pressures, such as inflation and liquidity constraints, further aggravated the challenges faced by the segment.
The commercial vehicle segment experienced an 8.6% YoY decline in February, despite a marginal YTD contraction of 0.5%. Dealers pointed to weak demand in the transportation sector, tightening finance norms, and pricing pressures delaying customer decisions—especially for bulk orders and institutional contracts. However, certain positive factors, including strong order bookings in the tipper segment driven by increased government spending, provided some relief. Nonetheless, the segment remains cautious, with structural market shifts necessitating a more adaptive strategy to counter the prevailing negative sentiment.
Meanwhile, the tractor segment suffered the most, with a sharp 14.5% YoY decline in retail sales. Dealers attributed this to a high base effect, adverse weather conditions, and changing farm input costs impacting rural purchasing power. The segment’s performance underscores the need for supportive policy measures to revive rural demand and stabilize sales trends in the coming months.
Despite February’s downturn, the outlook for March remains cautiously optimistic. FADA’s dealer survey suggests that nearly 45% expect growth, 40% foresee flat sales, while only 14% anticipate further decline. However, persistent economic challenges, including a five-month stock market slump, weakened consumer confidence, and reduced discretionary spending, continue to weigh on the industry. The decline in Systematic Investment Plan (SIP) contributions further signals a cautious approach by investors, impacting big-ticket purchases such as automobiles.
Nevertheless, the convergence of multiple festivals, including Holi, Gudi Padwa, and the onset of Navratri, along with year-end depreciation benefits, is expected to provide a boost to vehicle sales. Segment-specific insights suggest potential recovery, with the two-wheeler market likely to benefit from positive agricultural output and festive demand, despite a slowdown in booking momentum towards the end of February. The commercial vehicle space is projected to gain from increased government spending and institutional buying, albeit amid lingering liquidity concerns. The passenger vehicle segment is also expected to witness improved traction, driven by attractive promotional schemes, preponed festival sales, and fiscal year-end advantages.
Overall, while challenges persist, an adaptive market approach leveraging festive demand and financial incentives is likely to support a recovery in March, offering a glimmer of hope for the automobile sector.
