The recent crisis in West Asia is proving to be a major threat to the global economy and industries. Prior to this, heightened tensions between India and Pakistan started to affect businesses and the economy. Now, this war-like situation has started to take its toll on the sale of automobiles in India as well.
Retail sales in India’s passenger vehicle (PV) segment fell by 13.6% in May 2025, dropping to 3,02,214 units from 3,49,939 units in April. According to credit rating agency ICRA, the decline was largely attributed to weak consumer sentiment amid escalating geopolitical tensions following the India-Pakistan conflict in northern regions and the recent West Asia criris.
Despite automakers offering discounts, PV demand remained subdued. In contrast, the two-wheeler segment showed resilience, recording a 7% year-on-year increase in retail volumes, bolstered by strong rural demand and a favorable harvest.
Passenger Vehicle Segment: Growth Challenges Ahead
Passenger vehicle wholesale volumes held steady at around 3.4 lakh units in May. However, inventory levels rose slightly to 52–53 days, according to the Federation of Automobile Dealers Associations (FADA). The SUV category remained dominant, accounting for 64–65% of total PV sales.
Exports saw a robust 24% year-on-year growth, led by Maruti Suzuki and Hyundai. However, challenges persist in select African markets due to limited forex availability and inflationary pressures.
ICRA revised its FY2026 PV wholesale growth forecast downward to 1–4% (from 4–7%), citing elevated inventory levels and supply constraints. A particular concern is the availability of rare earth magnets—critical for EV production—due to export restrictions from China. Nonetheless, continued model launches by OEMs are expected to provide some relief.
Two-Wheeler sales stagnant
Wholesale two-wheeler volumes remained flat at 1.58 million units in May 2025, with residual impact from April’s supply chain-related production shutdowns. However, retail sales grew 7% year-on-year, aided by strong demand in semi-urban and rural areas. Factors such as favorable agricultural yields and auspicious wedding dates supported the uptick.
Electric two-wheelers (e2Ws) also posted growth, with volumes rising 9% month-on-month to 1,00,266 units. Looking forward, ICRA projects 6–9% wholesale volume growth in FY2026, supported by replacement demand, urban market recovery, and healthy rural incomes—contingent on a normal monsoon season.
