Passenger vehicle retail sales rose to a record 4.37 million units in calendar year 2025, growing 8.2% year-on-year, as tax cuts announced midway through the year triggered a sharp rebound in demand after a muted first half. The outcome exceeded industry expectations that had pegged growth in low single digits, though it remained below the double-digit expansion recorded in 2022 and 2023.
Sales increased from 4.03 million units in 2024, a year marked by softer demand as higher interest rates, elevated vehicle prices and cautious consumer sentiment weighed on discretionary purchases. In contrast, 2025 saw demand recover decisively after August, when changes to the goods and services tax (GST) structure improved affordability across segments and accelerated purchases during the festive season.
Impact of GST cut
The impact of the tax revision is evident in the sales trajectory through the year. During the first eight months from January to August, average monthly PV retail sales stood at 345,301 units, reflecting growth of just 5.1% over the same period last year. This rose to 398,623 units per month in the September–December period, with growth accelerating to 14% after the GST cut, underscoring the policy’s role in lifting demand.
In September, the government revised GST rates on passenger vehicles, reducing the levy on small cars from 28% to 18%. The move lowered on-road prices for entry-level hatchbacks and compact models, helping revive a segment that had seen prolonged weakness due to price inflation and shifting consumer preferences. At the same time, larger cars and most SUVs were moved to a flat 40% GST, replacing the earlier 28% plus cess structure. While the headline rate appeared higher, the rationalisation simplified pricing and, in several cases, reduced the effective tax burden.
Demand recovery
Demand recovery was broad-based, though SUVs and compact utility vehicles continued to outperform. Automakers said improved price visibility and festive-season discounts helped convert deferred purchases, while early signs of stabilisation emerged in the small car segment.
Maruti Suzuki maintained its leadership position, selling 1.76 million vehicles during the year and accounting for 40.4% of PV retail sales. The easing of GST on small cars supported volumes in its mass-market portfolio, which had been under pressure over the past few years.
Mahindra & Mahindra emerged as the biggest gainer among major manufacturers, overtaking Hyundai Motor India to secure the second position. Mahindra sold 579,858 vehicles, translating into a 13.3% market share, driven by sustained demand for its SUV range. Hyundai slipped to third place with sales of 553,166 units and a 12.7% share.
Tata Motors followed closely with retail sales of 546,475 units and a 12.5% share, highlighting the narrowing gap among the top four players and intensifying competition, particularly in the SUV and electric vehicle segments.
Looking ahead, dealers remain cautiously optimistic. The Federation of Automobile Dealers Associations said 74% of dealers expect growth over the next three months, though the durability of demand will depend on income growth, financing conditions and the industry’s ability to manage inventory as it enters 2026.