India’s PV industry was on track for a year-on-year decline when the sudden cut in GST breathed new life into sagging sales, putting it on track for a modest growth for the year.
22 Dec 2025 | 6931 Views | By Darshan Nakhwa
India’s passenger vehicle industry spent 2025 navigating policy shifts, supply disruptions and evolving consumer priorities, yet still found its way back to growth. Retail volumes for January-October edged up by 4% despite months of muted sentiment, disrupted EV supply chains and a fragmented powertrain landscape.
The turning point came ...
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India’s passenger vehicle industry spent 2025 navigating policy shifts, supply disruptions and evolving consumer priorities, yet still found its way back to growth. Retail volumes for January-October edged up by 4% despite months of muted sentiment, disrupted EV supply chains and a fragmented powertrain landscape.
The turning point came in September with the rollout of GST 2.0. The reform reset vehicle affordability across segments and coincided with the festive season, pulling buyers back into showrooms and restoring momentum after a prolonged period of hesitation.
From January to August, the industry moved through an uneven stretch. Consumer sentiment stayed muted in the early months as liquidity remained tight and interest rates stayed high. The mood weakened further amid geopolitical tensions and a prolonged monsoon.
Many buyers also held back purchases after Prime Minister Narendra Modi signalled upcoming GST reforms in his Independence Day address. EV manufacturers, meanwhile, dealt with the lingering impact of China’s rare-earth export curbs, which disrupted magnet and motor supplies. Inventory levels fluctuated across models and OEMs, adding to the volatility.
The implementation of GST 2.0 in September created a decisive turning point for the PV industry. With a rebalanced tax structure that lowered effective pricing for many small and midsize ICE models and simplified rates for SUVs and premium vehicles, affordability improved meaningfully.
This triggered the release of pent-up demand, with new customers returning to showrooms and existing buyers upgrading to higher variants. Channel inventories, which had climbed to an alarming 60 days by the end of September, also began to correct as retail momentum strengthened.
In September, retail sales climbed 5.8%, followed by a record-setting 11.3% growth in October, marking the strongest festive period in the history of India’s car market. Rural sentiment, held back by an extended monsoon, also recovered strongly in October as economic conditions stabilised and festive spending peaked. The combination of policy clarity, rationalised pricing and festive sentiment brought the market back to growth, setting up a stronger base for the final quarter of the year.
OEM Performance
From January to October, Mahindra & Mahindra Ltd posted one of the strongest performances among major OEMs, growing 12.5% to 462,400 units. In the first half of the year, the introduction of its BEVs added to already strong demand for its ICE SUVs. Backed by a clear roadmap that includes global expansion, new vehicle platform and expansion of electric SUV portfolio, Mahindra entered the final quarter of 2025 with strong momentum.
Maruti Suzuki India Ltd retained its dominant position, retailing 14,52,988 units, up 4.2% year-on-year, as per data from the Federation of Automobile Dealers Associations India. Demand for Brezza, Baleno, Ertiga, Fronx and other high-volume models helped stabilize its market share. Strong CNG acceptance supported Maruti’s lower and mid-segment performance, even as the company prepared for its first electric launch.
Toyota Kirloskar Motor emerged as another standout performer, growing 13% YoY to 247,209 units. Strong sales of Innova Hycross, Urban Cruiser and hybrid variants lifted Toyota’s trajectory as supply constraints eased.
Tata Motors Passenger Vehicles retailed 451,981 units, a marginal 1.25% decline. The Nexon and Punch continued as core volume drivers across ICE and EV segments. However, the market’s shift back toward ICE vehicles after GST reforms, coupled with earlier EV supply constraints and model transitions, contributed to the slight contraction.
Hyundai Motor India, at 447,151 units, saw a 6% decline. Some of this stemmed from anticipated updates to its existing products, along with inventory adjustments early in the year. However, Hyundai regained traction through the festive period as supplies normalised.
Wholesale Volumes
The passenger vehicle (PV) industry moved through 2025 with moderate wholesale growth, as the first ten months reflected the effects of shifting demand patterns, tax reforms and supply-side changes. Between January and October, domestic PV wholesales stood at 34,68,928 units, up just over 1% year-on-year, according to data from the Society of Indian Automobile Manufacturers. The overall trend appeared stable, but segment-level data showed clear changes in buyer behaviour through the year.
Excluding UVs, car wholesales—comprising hatchbacks and sedans—fell nearly 5% to 10,81,341 units in the January-October period. Price increases, muted demand, and channel inventory affected volumes across several models. Utility vehicles (UVs), however, remained the key growth driver. UV volumes rose 5% to 22,64,975 units, supported by steady demand for compact, mid-size and three-row SUVs across price points. Vans saw a slight decline, with volumes slipping to 1,22,612 units.
The environment changed noticeably once GST 2.0 was implemented, leading to an immediate improvement in demand and wholesale scheduling. Domestic wholesales in September and October rose 8% year-on-year to 7,12,396 units, reversing the subdued trend seen earlier. UVs grew 10% in this two-month window, while passenger cars increased 5%.
This contrasted sharply with the January-August period, where domestic PV wholesales fell marginally to 27,56,532 units. Passenger cars during this time were down almost 7%, reflecting weak sentiment in the value end of the market. UVs saw modest growth of around 3%.
Exports
Exports played an increasingly strategic role through 2025, both as a buffer against domestic cycles and as a structural pathway for future growth. Between January and October, outbound shipments grew 17%, rising to 702,644 units from 603,218 units a year earlier.
The growth was not uniform across segments. Utility vehicles once again delivered the highest lift, with exports rising 33% year-on-year, reflecting rising global appetite for compact crossovers and midsize SUVs--categories in which Indian manufacturers have built considerable strength. Passenger car exports grew 4%, a slower pace that mirrored global shifts away from entry hatchbacks and budget sedans. Vans, a smaller base, posted a 29% rise, supported by demand from African and Middle Eastern fleet operators.
OEM performance through the year highlighted a widening export ambition across the industry. Maruti Suzuki remained the largest exporter, shipping over 321,000 units between January and October, supported by sustained demand for models like the Baleno, Fronx and Dzire in Latin American and African markets. Hyundai Motor India also posted steady gains with 153,742 units exported.
Mahindra, though smaller in scale, more than doubled its exports to 19,552 units as it positioned products like the Scorpio-N, XUV700, and XUV 3XO for new global markets. Tata Motors PV also registered sharp export recovery with 7,924 units. With almost every major OEM outlining larger export targets for the next three to five years, the pivot toward making India a global production base became a defining strategic theme of 2025.
Utility-Vehicle Boom
India’s shift toward utility vehicles remained one of the defining structural trends of the year. UVs accounted for 65% of all PV sales, reflecting a shift in consumer priorities toward ground clearance, versatility, space efficiency and road presence. The UV segment is poised to reach 2.8 million units in CY2025.
Demand patterns broadened: compact SUVs attracted first-time urban buyers, midsize SUVs remained aspirational for growing households, and premium hybrids gained popularity among affluent customers seeking efficiency without range anxiety.
OEMs responded with SUV-dominant pipelines, making the UV segment the principal battleground for market share. Virtually every major launch calendar in 2025 revolved around SUVs, reinforcing their central role in the future of India’s automotive market.
Policy Interventions
If GST 2.0 defined the year’s demand recovery, it was far from the only policy force at play. China’s rare-earth crisis reshaped supply-chain dependencies, pushing OEMs to accelerate localisation and explore alternative motor technologies. The CAFE 3 debate exposed one of the sharpest divides in the industry, with Maruti Suzuki and Renault supporting weight-based relief for small cars while most other OEMs opposed it, arguing it distorted market incentives and weakened emissions ambition.
After initial resistance, the E20 implementation progressed across the country, prompting renewed calls from automakers and sugar manufacturers for a shift toward flex-fuel vehicles instead of incremental blending targets. Flex-fuel hybrids were positioned as a viable long-term alternative that could reduce emissions and dependence on imported oil. These debates ensured that powertrain strategy remained fluid through the year, with OEMs adjusting future product plans based on regulatory signals.
Reinventing Equilibrium
By late 2025, the contours of the year became clear. The Indian passenger vehicle industry managed to navigate supply disruptions, evolving policy frameworks and shifting consumer behaviour with resilience. Retail growth remained modest on paper, but the underlying narrative was more compelling, a market re-establishing equilibrium after a year of volatility.
Utility vehicles solidified their dominance. ICE powertrains regained affordability advantages. EVs entered a period of rationalised, steady growth rather than explosive expansion. Exports strengthened. Policy debates sharpened strategic differences among OEMs. And GST 2.0 provided the trigger that aligned pricing, sentiment and timing for the strongest festive season on record.
India’s passenger vehicle market is likely to close 2025 with cautious optimism for 2026. With interest rates declining, new launches scheduled across segments, and supply stability improving, the industry is expected to enter the new year with clearer visibility and stronger market fundamentals.