The Indian passenger vehicle sector is anticipated to experience a restrained growth trajectory in the current fiscal year. ICRA forecasts that the wholesale volume growth for the sector will likely range from 1 to 4 percent in fiscal year 2025. This forecast follows a 1.1 percent contraction observed from April to July 2025.
ICRA indicates that elevated inventory levels and a robust base from the previous year are contributing to the current growth pressures. Data indicates that dealers had approximately 55 days of inventory at the close of July.
Despite these challenges, the agency suggests that ongoing new model launches by automakers, coupled with potential reforms to the Goods and Services Tax (GST) by the government, could spur demand in the upcoming months. The central government has proposed streamlining the GST structure, which could lower taxes on smaller cars and potentially stimulate sales.
In July 2025, wholesale sales of passenger vehicles increased by 8.9 percent month-on-month, primarily due to automotive companies increasing stock deliveries to dealers ahead of the festive season. However, on a year-over-year basis, volumes remained relatively flat, at approximately 3.4 lakh units.
Retail sales also saw an upswing, rising by 10.4 percent MoM in July, despite a modest 0.8 percent year-over-year decrease. According to ICRA, the SUV segment continues to be the dominant force, accounting for 65-66 percent of the overall passenger vehicle volume. Utility vehicles are poised to remain the primary drivers of growth in the coming months.
Exports of passenger vehicles saw a robust 9% year-over-year increase in July. Maruti Suzuki and Hyundai Motor India were the key contributors to this growth. Overall, the auto sector is currently navigating a slower pace of expansion. However, the upcoming festive season, the introduction of new models, and potential tax reforms could offer substantial support to the market in the months ahead.