Mahindra and Toyota drive gains as Maruti’s flat performance and rising inventory levels trigger industry caution.
30 May 2025 | 9457 Views | By Ashutosh Radhey Shyam and Kiran Murali
India’s passenger vehicle (PV) market is showing early signs of fatigue after a record-breaking start to 2025. According to industry estimates, wholesale dispatches in May are expected to be in the range of 350,000 to 355,000 units, translating to a marginal year-on-year growth of just 0.22% to 1.65%. This would ...
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India’s passenger vehicle (PV) market is showing early signs of fatigue after a record-breaking start to 2025. According to industry estimates, wholesale dispatches in May are expected to be in the range of 350,000 to 355,000 units, translating to a marginal year-on-year growth of just 0.22% to 1.65%. This would mark the slowest pace of growth in eight months and the lowest monthly volume recorded so far this calendar year.
The moderation follows a high in January when dispatches hit an all-time peak of 403,100 units. Between January and April, automakers collectively dispatched 1.523 million vehicles, averaging nearly 381,000 units per month. May’s addition would bring the five-month total to around 1.87 million units, still 3% higher than the same period last year, but with clear signs that demand is tapering.
“Retail sales, excluding two-wheelers, are currently facing challenges due to border disruptions, unseasonal rainfall, a lack of festivals, and no model launches. Stock levels have increased, along with discounts,” PhillipCapital said.
Nomura, which expects a marginal decline in overall sales, also noted that their dealer surveys indicate that retail demand is showing signs of slowness and channel inventory has likely gone up.
Mahindra and Toyota Hold the Line
Amid this industry-wide cooling, Mahindra & Mahindra and Toyota Kirloskar Motor continue to stand out as key growth drivers. Mahindra is projected to post dispatches of 52,000 to 53,000 units in May, reflecting a strong 20% increase year-on-year. The company, which achieved a record 15% market share in April, has further solidified its position as India’s second-largest passenger vehicle manufacturer.
Toyota is expected to report a more modest 5% year-on-year increase, bolstered by strong traction for models like the Innova HyCross, Fortuner and Glanza.
In contrast, Maruti Suzuki, India’s largest carmaker, is forecast to deliver flat or marginal volume growth, with dispatches in the 135,000-to-145,000-unit range. This stagnation at the top is being closely monitored by analysts, given the brand’s significant impact on overall industry figures.
“Maruti’s dispatch decisions will dictate Final May numbers. The overall market has become extremely top-heavy and overly dependent on a handful of brands to deliver growth,” noted an industry executive.
The month is also expected to witness another close contest between Hyundai Motor India and Tata Motors for the third spot, continuing their evenly matched volume trajectory through the year.
Inventory Build-Up Raises Red Flags
While cumulative growth remains positive, the build-up of unsold stock is now a growing concern across the ecosystem. Industry insiders indicate that inventory levels at dealerships and OEM stockyards have reached between 40 and 65 days—well above the desirable threshold.
“Passenger vehicles are suffering greatly, with reduced foot traffic and longer conversion times. Inventory levels have risen above the normal threshold of 45 days, and discounts saw a slight uptick in May,” PhillipCapital said.
This has prompted automakers to resort to more aggressive discounting to maintain momentum. Hatchbacks and entry-level sedans are seeing per-unit discounts of ₹20,000 to ₹45,000, while SUVs, traditionally better insulated, are now also being offered with benefits of ₹20,000 to ₹50,000.
“Inventory is building faster than expected, and it’s clear that May volumes are more supply-pushed than demand-driven,” said a senior dealer principal. “Discounting is back across the board.”
Cautious Outlook for Second Half
The underlying softness in demand stems from a range of macro and structural factors. Persistently high interest rates, inflationary pressures, and delayed vehicle replacement cycles have weighed on buyer confidence. Additionally, a lack of compelling new launches in the first half of the year has negatively impacted showroom traffic, particularly in mature urban markets.
Automakers are now pinning their hopes on a stronger second half, backed by the festive season and a series of anticipated new product launches. However, analysts remain guarded in their optimism.
“The market needs a strong trigger to reignite buyer sentiment,” said a Mumbai-based auto sector analyst. “Otherwise, the second half of 2025 could be a grind.”
With Mahindra and Toyota shouldering much of the incremental volume growth and Maruti’s contribution flattening, the burden of sustaining momentum is becoming uneven. Unless a broader market revival takes hold—through renewed consumer interest, innovative financing, or strategic product refreshes—the remainder of 2025 may prove to be more challenging than automakers had anticipated.
“One potential risk to monitor is the possibility of production impact from June due to China’s export restriction on rare earth magnets. We believe this could impact not only EVs but also ICE cars, as magnets are used in components such as e-axle, various sensors (brakes, wheels, oxygen, engine), steering assembly, speedometer, speakers, etc,” Nomura added.