Weak earnings, tougher financing norms drive auto retail sales down

PVs dip 10% in Feb; M&M breaks into number two spot for first time

Weak earnings, declining job market, global uncertainty, and tougher financing norms spoiled customer interest in the automobile sector, resulting in a downslide in retail sales. While the passenger vehicle (PV) segment witnessed a 10 per cent dip in sales in February 2025 versus last year, the two-wheeler (2W) market also declined by 6 per cent.

 

Additionally, the meltdown in Dalal Street that wiped out investor wealth to the tune of ₹44 trillion in 2025 also seems to be having a ripple effect on the country’s vibrant automobile retail sales.

 

During the period under review, the entire auto retail sales also weakened by 7 per cent, with other segments like commercial vehicles (CVs), tractors, and three-wheelers (3Ws) declining by 9 per cent, 15 per cent, and 2 per cent, respectively, according to data shared by the Federation of Automobile Dealers Association (Fada).

 

The market capitalisation of BSE-listed companies slipped to ₹398 trillion on Thursday, after touching an all-time high of ₹478 trillion on September 27 last year, leading to a total loss of ₹80 trillion in investor wealth over the last five months.

 

“For the last five months, the stock markets have not been doing well. Because of this, discretionary spending has come down, and customers are holding off on their purchases. People are cautious. The conversion from the enquiry stage to retail is taking a long time, mainly in two-wheelers and passenger vehicles. In addition to this, the availability of finance is also an issue,” said C S Vigneshwar, president of Fada. The decline this year is compared to a 12 per cent rise in passenger vehicles and 13 per cent in two-wheeler sales in February 2024, leading to a 13 per cent rise in total auto retail sales in February last year to 2.05 million units. On the other hand, in February 2025, it came down to 1.89 million.

 

In the passenger vehicle segment, for the first time, Mahindra & Mahindra (M&M) became the number two player. Except for Toyota Kirloskar Motor, which posted a 5 per cent rise in sales, and M&M, which remained flat, all other top players saw a declining trend. Market leader Maruti Suzuki was among the most hit, with an 11 per cent drop in sales, while Tata Motors witnessed a 15 per cent and Hyundai Motor India around a 19 per cent fall. Dealers also raised concerns about the rising inventory levels of 50-52 days, alleging that companies are pushing up inventory without their consent.

 

“While this can support market objectives of original equipment manufacturers (OEMs), aligning wholesale with genuine demand is crucial for healthy dealer viability. Inventory levels should come back to 21 days; anything beyond 30 days will be loss-making for dealers,” Vigneshwar said. He added that sales of entry-level vehicles are still a concern in the segment. According to Fada, rural performance of two-wheelers was better due to better agricultural sentiments and seasonal marriage demand, raising the rural market share to 58 per cent from 56 per cent in January 2025.

 

In CVs, dealers pointed to a challenging commercial environment, with weak sales in the transportation sector, tightening finance norms, and pricing pressures delaying customer decisions — particularly in bulk orders and institutional contracts. “While robust order bookings, notably in the tipper segment driven by increased government spending and steady supplies, offered some relief, the prevailing negative sentiment and structural market shifts call for a more adaptive approach. There is cautious optimism that the market will improve in March as dealers recalibrate their targets to better align with current demand,” he added.

 

On a month-on-month basis, overall retail sales in February dipped by 17 per cent, with passenger vehicles suffering a 35 per cent decline, commercial vehicles around 17 per cent, and two-wheelers an 11 per cent fall. This comes after a stellar performance in January 2025, which witnessed a 59 per cent jump in PV sales, a 27 per cent increase in two-wheeler sales, and a 38 percent rise in CV sales, taking the overall retail sales up by 30 per cent. The January numbers were driven by a lower base in December 2024, which saw a massive 45 per cent decline in monthly sales due to poor market sentiment. In December, two-wheeler numbers were down by 54 per cent, PVs by 9 per cent, and CVs by 12 per cent.