Auto sales see 5% growth in FY25; industry seeks GST cut to drive demand

India’s automobile industry is set to close the financial year 2024-25 (FY25) with over 5 per cent growth, almost half of the 10 per cent rate it clocked during FY24, a slide which can partly be attributed to a sharp dip in March sales due to dampened consumer confidence.

 

While the automobile sales are expected to cross 26 million mark in FY25, the electric vehicle (EV) sales too may breach the 2-million mark for the first time in a financial year, up 20 per cent from 1.6 million in 2023-24.

 

A major spoilsport for FY25 was the sales in the month of March, which dropped sharply by almost 14 per cent (as of March 30) against the same period in the previous financial year, according to data available with the government’s Vahan portal. 

 

As of March 30, the total automobile sales for the financial year were seen at 25.9 million units, up from 24.6 million in FY24, and 22.3 million in FY23.

 

The industry is also expecting flat growth in key areas like passenger vehicles in FY26.

The sharp sales dip in March was nothing short of an outlier, as the industry was showing an overall growth of 7 per cent until February, mainly driven by a rise in two-wheeler, three-wheeler, and passenger vehicle sales.

 

Along with its February data, the Federation of Automobile Dealers Associations (FADA) had raised a “cautiously optimistic” outlook for the near future. 

 

“The major challenges for the industry in March were five consecutive months of declining stock markets that dampened consumer confidence, with investors closing more SIPs rather than opening new ones. In addition to this, discretionary spending was also down due to lower economic activity,” said CS Vigneshwar, president of FADA.

 

In a meeting by the Society of Indian Automobile Manufacturers (SIAM) last month, passenger vehicle (PV) players reached a consensus that FY26 may see a sales growth of only 1-2 per cent.

 

This is due to a weak demand, affordability concerns, declining entry-level car sales, the fading post-pandemic surge, inflation, rupee depreciation against the dollar, and geopolitical uncertainties, said an official from a leading PV company.

 

The sector’s overall compound annual growth rate (CAGR) is expected to be around 4 per cent until 2030. A source from a top two-wheeler electric vehicle company said that the coming financial year may see a dip in the pace of growth in EVs too.

“How long can companies and dealers sustain discounts? The state and the Centre governments are making the biggest margin, with a combined GST and road tax of above 50-55 per cent in almost all the states. Hence, the government should consider a reduction in GST to further boost sales,” added an industry source.

 

The convergence of multiple festivals, ranging from Holi and Gudi Padwa to the onset of Navratri and year-end depreciation benefits were expected to provide a much-needed boost to vehicle purchases. Despite this, the demand remained subdued in March.

 

In the case of PVs, vehicle prices have increased by nearly 70 per cent in recent years, owing to the cost of meeting regulatory requirements such as emission norms, while customer incomes have not kept pace.

 

Interestingly, car ownership in India remains low, at just 34 vehicles per 1,000 people. First-time car buyers have also declined, dropping from 47 per cent in 2018-19 to 40 per cent currently.