India's Auto Retail Sector Posts 7.71% Growth in CY'25

India's automobile retail sector concluded calendar year 2025 with total sales of 2.82 crore units, marking a 7.71% year-on-year increase, according to data released by the Federation of Automobile Dealers Associations (FADA) on Monday.

The year exhibited a distinct two-phase pattern, with subdued performance from January through August followed by significant acceleration in the September-December period. FADA President C S Vigneshwar attributed the upturn to the GST 2.0 rate rationalization implemented in September, which improved affordability across mass segments including small cars, two-wheelers up to 350cc, three-wheelers, and commercial vehicles.

December 2025 recorded particularly robust growth at 14.63% year-on-year, with retail volumes reaching 20.29 lakh units. The month benefited from continued post-GST sentiment, year-end promotional offers, and pre-buying ahead of anticipated January price revisions.

Rural Markets Outperform Urban Centers

A notable trend during CY'25 was the outperformance of rural markets, particularly in passenger vehicles. Rural PV sales grew 12.31% compared to 8.08% in urban areas, signaling expanding personal mobility beyond metropolitan regions. This pattern intensified in December, with rural PV growth reaching 32.40% against urban growth of 22.93%.

Overall, urban retail expanded 8.20% while rural markets grew 7.31% for the full year.

Category Performance and Market Shifts

Two-wheelers, the largest segment, grew 7.24% to reach 2.03 crore units. Passenger vehicles posted 9.70% growth at 44.75 lakh units, while commercial vehicles expanded 6.71% to 10.10 lakh units. Tractors recorded the highest growth rate at 11.52%, reaching 9.97 lakh units. Three-wheelers grew 7.21% to 13.10 lakh units, though construction equipment declined 6.67%.

The transition toward alternative fuels strengthened throughout the year. Electric vehicles captured 60.91% of the three-wheeler market, while achieving 6.31% penetration in two-wheelers and 3.95% in passenger vehicles. CNG captured significant share in passenger vehicles at 21.30% and 11.81% in commercial vehicles.

Dealer Sentiment and Outlook

FADA's member survey indicated positive liquidity conditions, with 59.78% of dealers reporting good liquidity and 64.94% expressing positive sentiment. For CY'26, 77.86% of dealers expect growth.

Near-term projections remain constructive, with 70.48% of dealers anticipating growth in January 2026 and 74.91% expecting positive performance over the next three months. The outlook is supported by festival and marriage season demand, financial year-end buying patterns, and continued rural traction following robust rabi sowing progress.

However, dealers identified financing turnaround times and timely availability of in-demand stock as operational challenges requiring attention to sustain momentum.

Inventory Management

Passenger vehicle inventory levels stood at 37-39 days in December, representing a reduction of approximately seven days from the previous month. Dealers utilized December to liquidate model year 2025 stock through attractive schemes and improved model availability.

The data was compiled from 1,401 out of 1,459 regional transport offices across India in collaboration with the Ministry of Road Transport and Highways, though figures from Telangana state were not included in the release.