Top Indian carmakers anticipate another sluggish year for passenger vehicle sales in the financial year 2025-26 (FY26) after reporting low single-digit growth in FY25.
The warning came during a Society of Indian Automobile Manufacturers (SIAM) event attended by executives from Maruti Suzuki, Hyundai India, Mahindra & Mahindra, Kia, and Tata Motors, among others.
In an internal presentation, automakers estimated that passenger vehicle sales—including cars, SUVs, and vans—may grow by just 1% to 4%, according to a report by The Economic Times (ET).
High Base Effect at Play
India’s passenger vehicle market has experienced slowing volume growth since FY23. According to SIAM data, post-pandemic pent-up demand drove a 27% sales surge in 2022-23, but the growth rate dropped to 8.4% in 2023-24, with total sales at 42.19 lakh units. Automakers had projected 2.5%-4% growth for 2024-25, but nine-month data shows just 1.8% growth so far.
The slowdown is largely due to declining demand for entry-level hatchbacks, which typically attract first-time buyers from the two-wheeler market. Rising car prices, inflation, and challenges in the IT sector have weakened buyer sentiment, reducing the share of first-time buyers to around 42%, the reports noted.
While a recent RBI repo rate cut and tax rebate hikes in the Budget 2025-26 offer hope for increased consumption, affordability remains a major concern for automakers.
According to Motilal Oswal Financial Services, India’s passenger vehicle sales grew 4% in January 2025. Maruti Suzuki and Mahindra outperformed others, with Maruti’s sales rising 6.5% to 212,000 units, driven by strong demand for compact cars like the new Dzire—its best performance in the past 29 months.
Mahindra’s SUV sales grew 18% to 50,659 units, while Tata Motors saw a 10.6% decline to 48,300 units. Hyundai’s sales fell 3% to 65,600 units due to weaker domestic demand, though exports increased 10.5%, and its new Creta EV saw record sales of 18,522 units.
Maruti’s strong sales were also supported by dealerships restocking after reducing inventory in December, the Motilal Oswal report noted.
