India’s automobile retail sales rose by 5.11% year-on-year in May 2025, according to the latest data from the Federation of Automobile Dealers Associations (FADA). The growth was largely powered by strong demand for two-wheelers and tractors in rural and semi-urban areas, even as the passenger and commercial vehicle categories reported negative growth amid inventory pressures and sluggish retail conversions.

Retail volumes stood at 22.13 lakh units in May 2025, compared to 21.05 lakh units a year earlier. However, on a month-on-month basis, total vehicle sales fell by 3.33%, reflecting a seasonal dip and dealer-level caution due to growing inventory burdens in the passenger vehicle (PV) segment.

Rural resilience lifts two-wheeler and tractor sales

The two-wheeler segment posted a healthy 7.3% year-on-year growth, aided by strong Rabi harvest cash flows, auspicious wedding dates, and early monsoon activity. However, entry-level demand was capped due to tight financing availability. Hero MotoCorp retained leadership with a 30.2% market share, followed by Honda (23.8%) and TVS (18.7%).

Tractor retails grew 2.75% year-on-year, driven by robust agri sentiment and pre-monsoon buying. Mahindra & Mahindra led the segment, accounting for over 41% market share across its main and Swaraj divisions.

Passenger vehicles’ dealer inventories at 52–53 days

Passenger vehicle sales declined 3.1% year-on-year and 13.6% month-on-month, weighed down by poor conversions in entry-level models and subdued sentiment in border states like Punjab and Jammu & Kashmir. Rising inventory—hovering above FADA’s recommended 21-day norm—continues to be a major concern. Maruti Suzuki maintained its dominance with a 38.7% share, though its year-on-year volumes dipped 5.2%.

CV and CE segments falter ahead of regulatory changes

Commercial vehicles declined by 3.7% year-on-year amid muted freight activity and delayed financing. Anticipation of new A/C cabin regulations coming into effect in June led to higher wholesale dispatches despite weak demand. Tata Motors led with a 34.5% market share, followed by Mahindra (26.2%) and Ashok Leyland (18.2%).

FADA also began reporting construction equipment (CE) data separately, recognising its growing relevance. CE sales fell 6.3% year-on-year, led by a 17% drop in JCB volumes—the market leader with a 40.6% share.

Cautious optimism for June

FADA President C.S. Vigneshwar expressed guarded optimism for June, citing potential tailwinds from an expected repo rate cut, a forecasted above-normal monsoon (106% of LPA), and higher MSPs for kharif crops. “While rural buoyancy could drive 2W and tractor sales, the PV segment must address inventory rationalisation and retail conversion challenges,” he said.

In FADA’s internal survey, 55.5% of dealers expect flat sales in June. 31% see growth, and 13.5% expect a decline. Liquidity remains neutral for nearly half the network, with 31% reporting poor conditions.

With EV adoption steadily growing—particularly in the three-wheeler and PV categories—fuel mix trends indicate a shifting consumer preference, even as OEMs prepare for tighter supply chains and margin pressures in the months ahead.