May 2025 auto sales preview: Nomura expects tepid volumes amid supply risks

Analysts at Nomura also flagged a looming production risk starting June, arising from China's export restrictions on rare earth magnets-used across both EV and ICE components.

May auto sales preview: Indian automakers are likely to announce May 2025 auto sales data on June 1, and early estimates suggest continued sluggishness in volume trends across key segments. 

 

While two-wheelers and tractors may provide some cushion, analysts said passenger vehicle (PV) and medium and heavy commercial vehicle (MHCV) categories appear to be under pressure. 

 

Analysts at Nomura also flagged a looming production risk starting June, stemming from China's export restrictions on rare earth magnets—used across both electric vehicle (EV) and internal combustion engine (ICE) components. 

FOLLOW STOCK MARKET LIVE UPDATES TODAY

PVs: Demand softens, inventory rises

Passenger vehicle (PV) sales in India saw a slowdown in May 2025, with wholesales estimated to dip by 1 per cent year-on-year (Y-o-Y) to around 344,000 units. Despite expectations of support from easing interest rates and lower income taxes, retail demand remained weak, declining by 8 per cent Y-o-Y. The decline in retail performance has contributed to an increase in dealer-level inventory. Analysts suggest that any meaningful recovery in PV demand is likely to take shape only in the second half of calendar year 2025.

 

 

An emerging concern for the industry is the risk of production disruptions from June onwards due to China's restrictions on the export of rare earth magnets. These magnets are critical not only for electric vehicles (EVs) but also for internal combustion engine (ICE) vehicles, as they are used in various essential components such as sensors, steering systems, and motors. Nevertheless, analysts continue to maintain a 5 per cent Y-o-Y growth forecast for the PV industry in FY26, banking on demand normalisation and minimal production impact.

 

Among key players, Maruti Suzuki’s domestic PV wholesales (excluding OE and LCV) are projected to fall about 5 per cent year-on-year to 137,000 units, supported partially by channel filling. Mahindra & Mahindra is likely to see a 13 per cent Y-o-Y increase in utility vehicle (UV) volumes to approximately 49,000 units, backed by robust demand for new models including the BE 6, XEV 9e, Thar ROXX, and XUV 3XO. Its electric SUVs saw encouraging traction, with around 30,000 bookings on the first day. The company has further outlined plans to launch seven ICE SUVs, five BEVs, and five LCVs by 2030, with several new models expected in FY26. 

 

Tata Motors' PV sales are estimated to grow about 1.5 per cent Y-o-Y to 46,000 units, while Hyundai Motor India may see domestic sales decline around 8 per cent Y-o-Y to 45,000 units.  

Check Prostarm Info Systems IPO allotment status

2Ws: Rural tailwinds aid modest growth

The two-wheeler (2W) segment showed modest growth in May 2025, with wholesales likely up by 2 per cent Y-o-Y. Retail performance was stronger, with a 6 per cent increase over the same period, supported by strong rural sentiment and seasonal demand driven by weddings. The outlook for the segment remains positive, with analysts forecasting volume growth of 7.0 per cent in FY26 and 6.5 per cent in FY27.

 

Bajaj Auto is expected to post a 13 per cent Y-o-Y increase in total sales to around 402,000 units, driven by strong export growth in both 2W and 3W segments and a 6 per cent uptick in domestic 2W demand. However, weak domestic 3W sales, estimated to fall by 5 per cent to 35,000 units, could partially offset gains. The company continues to benefit from its growing EV portfolio, supported by affordable product offerings, expanding distribution, and improving export conditions. 

 

TVS Motor is projected to post overall growth of 19 per cent Y-o-Y, with domestic volumes rising 22 per cent and exports increasing 9 per cent. Hero MotoCorp’s volumes are expected to remain flat Y-o-Y at around 500,000 units. Meanwhile, Royal Enfield is set to post a robust 21 per cent increase in volumes to approximately 86,000 units.

MHCVs: Demand remains subdued

The medium and heavy commercial vehicle (MHCV) segment continued to face headwinds in May, with wholesales expected to decline by 5 per cent Y-o-Y and retail sales down by 3 per cent. Although freight rates remained stable, weak near-term demand has weighed on overall segment performance. Analysts, however, remain cautiously optimistic and expect the MHCV industry to grow at 5 per cent annually over FY26 and FY27, supported by replacement demand and anticipated improvement in infrastructure and capital expenditure.

 

Short-term recovery in demand will depend on the pace of infrastructure investments and project execution. On the company front, Ashok Leyland’s wholesale volumes are likely to fall 8 per cent Y-o-Y, while Tata Motors’ MHCV volumes may decline about 4 per cent. 

 

Despite the current softness, analysts believe there is potential for margin improvement among original equipment manufacturers if broader economic activity picks up in the coming quarters.

Tractors: Strong momentum intact

In contrast, the tractor segment is expected to report robust growth, with wholesales up 11 per cent Y-o-Y in May 2025. Positive triggers such as better crop prices and healthy reservoir levels continue to drive demand. Nomura retains its 5 per cent growth forecast for the tractor industry in FY25F and FY26F.

Steel prices to edge higher

Nomura’s Commodity Cost Index remains largely stable for now. However, in the near term, steel prices could see a modest increase of ₹3–4/kg due to the imposition of a safeguard duty, which may add to cost pressures for OEMs in the coming quarters.