Auto retail sales rise 5% in May; PVs hit hard by border tensions

Business Standard

2 days ago

Automobile retail sales in India posted a modest 5 per cent year-on-year growth in May, led by two-wheeler, three-wheeler, and tractor sales growth triggered by the auspicious marriage season, a strong Rabi harvest, and pre-monsoon demand in rural markets, said monthly data by the Federation of Automobile Dealers Associations (Fada) on Friday.
However, passenger vehicle (PV) sales dipped 3 per cent to 302,214 units due to heightened war-related tensions. Border tensions in regions like Jammu & Kashmir, Punjab, Rajasthan, and Gujarat further prompted buyers to delay purchases. Entry-level models were hardest hit, as constrained financing and subdued consumer sentiment compounded the slowdown. During the month under review, the construction equipment segment witnessed a 6.3 per cent dip, and commercial vehicles (CVs) declined by 3.7 per cent.
Fada estimates that global supply‐chain headwinds — from rare‐earth constraints in electric vehicle components to ongoing geopolitical tensions — may keep urban consumer sentiment in check in June.
The segments that performed well include two-wheelers, which rose 7.3 per cent, three-wheelers with a 6.2 per cent increase, and tractors, which posted a rise of 2.7 per cent.
'In the 2W category, retail volumes fell 2.02 per cent month-on-month but still posted a robust 7.31 per cent year-on-year increase. Dealers attribute this resilience to a higher number of auspicious marriage days, a strong Rabi harvest, and pre-monsoon demand — especially in semi-urban and rural markets. That said, financing constraints in the economy segment capped full upside potential. Looking ahead, stakeholders should continue to monitor liquidity access and model availability to preserve momentum,' said C. S. Vigneshwar, President, Fada.
Passenger vehicle retails contracted by 13.6 per cent month-on-month and 3.1 per cent year-on-year, while inventory days — which had hovered around 50 — have edged up to approximately 52–53 days. 'Although bookings remained fairly healthy, retail conversions lagged on margin-money challenges and deferred decisions. OEMs must adopt a cautious, ground-reality-aligned approach to production planning and channel incentives so that dealers are not burdened by rising carrying costs or forced into excessive discounting,' he added.
Among the top five players, Maruti Suzuki witnessed a dip of 5 per cent to 1,16,899 units, Hyundai Motor around 16 per cent, and Tata Motors around 13 per cent decline in sales. However, Mahindra & Mahindra, which stormed to the number two place in recent times backed by its new launches, gained by 26 per cent during the month.
Commercial vehicle retails declined by 11.25 per cent month-on-month and 3.71 per cent year-on-year amid muted freight cycles, tight liquidity, and adverse geopolitical sentiment. While bus sales offered some relief, passenger carriers and commodity-linked segments (cement, coal) saw sharp de-growth due to delayed financing and softening total industry volume (TIV). Wholesales, however, accelerated as OEMs and dealers built inventory ahead of the June 2025 mandatory air-conditioned driver-cabin regulation.
The industry body predicts cautious optimism in its demand outlook for June. 'Monsoon‐driven rural traction and festival pull‐through should sustain 2W activity, yet persistent financing constraints and selective OEM price adjustments may temper incremental gains. PV dealers report elevated inventory days and legacy product portfolios, limiting retail conversions despite localised Rath Yatra uplifts. In the CV segment, inventory churn remains elevated as OEMs and dealers pre‐empt June '25 A/C‐cabin regulations, while freight demand in coal, cement, and mining continues to be muted by liquidity bottlenecks and early rains,' Vigneshwar added.