India’s automobile retail demand remained resilient despite conflict in West Asia, with strong registrations in March indicating that consumer sentiment has not yet weakened on the ground, according to the Federation of Automobile Dealers Associations (FADA).

“There is no slowdown on the ground as of now. Registrations are still strong, and we are seeing double-digit growth,” Saharsh Damani, CEO of FADA, told Autocar Professional. “Demand across passenger vehicles and two-wheelers remains healthy, even as some caution has begun to creep into buyer behaviour.”

“Customers have become slightly cautious, but that has not led to cancellations. Many are advancing purchases before price hikes kick in from April,” he added.

The auto industry has been riding a strong demand cycle since late 2025, aided by GST rate cuts and festive momentum. However, growth is now beginning to normalise.

“We were seeing 18-20% growth for several months. That was abnormal and not sustainable. What we are seeing now is a transition to a more normal growth pace,” Damani said.

Moderation in Demand

While March continues to benefit from pre-buying, the outlook for April is more measured. “We may see some softness coming in from April. People tend to delay purchases in uncertain situations,” Damani said.

He clarified that this does not signal a sharp downturn, but rather a shift to a more sustainable growth trajectory. “You cannot grow at 20-25% for an entire year. A slowdown in growth rate is natural, but that does not mean demand will turn negative,” he added.

The ongoing conflict involving Iran, Israel, and the United States has raised concerns around supply chains and energy prices. Auto industry experts have warned that any escalation could disrupt key shipping routes and push up input costs further.

“The immediate impact of the Iran-linked tensions will be seen in input costs. Lubricants, tyres, and other components are likely to become more expensive,” said VG Ramakrishnan, Managing Partner, Avanteum Advisors.

“Consumers may start feeling the impact not just while buying new vehicles, but also through higher servicing and maintenance costs. However, the extent of the impact on demand is still uncertain. It is too early to assess how strongly this will play out,” he added.

According to Damani, a sustained rise in fuel prices will be the key trigger for demand. “If fuel prices go up meaningfully, it will start affecting customer buying behaviour. That is when we may begin to see softness in demand,” he said.

Headwinds for Entry-Level Segment

The entry-level vehicle segment, which has shown signs of recovery after GST rate cuts, could face renewed pressure due to inflation, according to the FADA CEO.

“There are multiple trigger points for entry-level demand. One is price hikes. Second is fuel prices. Third is the new CAFÉ norms, which could make small cars more expensive,” Damani said. “These factors can act as speed bumps for entry-level growth,” he added.

Despite concerns around the entry-level segment, demand for premium passenger vehicles remains healthy. SUVs continue to outpace entry-level cars, reflecting the ongoing premiumisation trend in the PV market.

Industry experts shared similar concerns for two-wheelers. Ramakrishnan said entry-level segments are likely to feel the impact first if costs rise due to conflict in West Asia.

Meanwhile, rural demand remains stable, supporting two-wheelers and tractors. “As of now, there is no slowdown in rural markets. The next key trigger will be the monsoon outlook,” Damani said.

The industry is closely watching rainfall forecasts, which will play a crucial role in shaping demand in rural and semi-urban regions.

Interest in EVs Rises

Rising fuel price concerns have led to increased interest in electric vehicles (EVs), but the shift remains limited for now.

“People have started enquiring more about EVs compared to ICE or CNG vehicles. But this is a short-term phenomenon driven by external factors,” Damani said.

He added that structural EV demand will depend on pricing and product improvements. “Demand will pick up only when EVs are at par or cheaper than ICE vehicles, and when we get a consistent 500 km range. Charging concerns still remain,” he said.

According to Ramakrishnan, going ahead, there may be a need to rebalance the energy mix in automotive. EVs and hybrid vehicles could play a bigger role as a more stable alternative compared to fossil fuels and gas-based systems.

Dealer Inventories and Supply

Dealer inventory levels remain under control, with signs of normalisation. “Inventory at the end of February was around 27-29 days. It may come down closer to the normal 21-day level,” Damani said.

While some newly launched models are seeing waiting periods, there is no broad-based supply constraint. “Demand and inventory are largely balanced. Variations are more geographical and product-specific,” he added.

From a supply chain perspective, there has been no immediate disruption despite geopolitical tensions. “The supply chain is long and layered. It is too early to see any production impact,” Ramakrishnan said.

However, he cautioned that prolonged disruptions, especially in fuel and gas supplies, could affect manufacturing. “If the war continues and impacts LPG or CNG availability, it could affect production, particularly in ancillaries and paint shops,” he said.

For now, the industry remains on a stable footing, supported by strong domestic fundamentals. “The Indian growth story is strong. Internally, there is nothing that is stopping demand,” Damani said.

He emphasised that current risks are largely external. “If the situation normalises, demand will continue to grow. We will move to a normal growth phase of around 7-9%,” he said.