Auto retail sales rise 17.6% YoY to 2.72 million in January

New vehicle sales rose 17.61% year-on-year to 2.72 million units in January, supported by healthy rural cash flows, sustained freight activity and continued affordability gains following the Goods and Services Tax (GST) rollout. Two-wheelers and allied segments led the expansion, while passenger vehicles posted moderate growth, aided by SUVs, rising non-metro demand and tighter inventory management at dealerships.

“January 2026 has delivered a strong, broad-based start to the calendar year. Growth was powered by continued post-GST momentum, healthy rural cash flows on the back of harvest and weddings, and sustained demand across mobility and freight,” Federation of Automobile Dealers Associations president C S Vigneshwar said.

Vigneshwar on GST-led price rationalisation

Vigneshwar said GST-led price rationalisation has had a structural impact on demand. Year-to-date retail growth for April–January stood at about 10.8%, up from 9.5% during April–December, indicating sustained momentum. Small car prices, he added, have effectively returned to 2019 levels, boosting replacement demand and expanding the addressable market.

Unlike earlier cycles, when demand was largely concentrated around festivals and the marriage season, growth has now become more linear through the year, supported by GST-driven affordability and steady rural incomes.

FADA said sentiment for February, and the next three months remains positive, supported by strong enquiry levels, continued wedding demand and supportive macro conditions.

Two-wheeler retail sales

Two-wheeler retail sales rose 20.82% YoY to 1.85 million units, emerging as the biggest contributor to overall growth. Rural markets remained the backbone, accounting for around 56% of volumes, supported by harvest income, Pongal festivities and wedding-season demand.

Urban markets, however, showed a faster recovery, with growth of 22% YoY, compared with 20% in rural areas, signalling demand normalisation beyond seasonal buying. Improved affordability and a shift toward higher-value motorcycles aided momentum, though dealers flagged selective supply constraints and aggressive discounting in some models.

Passenger vehicle retail sales grew 7% YoY to 0.51 million units. While the segment remains urban-led, rural PV demand expanded 14.43% YoY, sharply outpacing 2.75% growth in urban markets, driven by compact SUVs, entry-level revival and improved schemes. Inventory levels eased to 32–34 days, reflecting better channel discipline.

Vigneshwar added that inventory levels, which were elevated earlier, have been coming down steadily. “We need to be at around 21 days, which would be a reasonable level. All brands have worked to reduce inventory, and if this continues, we could reach that level in the next three to four months,” he said.

Commercial vehicle retail sales rose 15% YoY to 0.11 million units, supported by improving freight sentiment, infrastructure activity and replacement demand, with growth seen across light and heavy trucks.

Three-wheeler sales climbed 18.8% YoY to 0.13 million units, aided by last-mile mobility demand and rising EV penetration. Tractor sales surged 22.89% YoY to 0.12 million units, backed by strong rural liquidity. Construction equipment declined 21.09% YoY due to a high base.