Post-COVID Growth Streak Ends: India’s Auto Sales Drop 5.1% in Q1 FY2026

India’s automobile industry posted a 5.1% year-on-year decline in domestic vehicle sales during the April–June quarter of FY2025, with total volumes falling to 60.75 lakh units (6.07 million) from 64.01 lakh units (6.40 million) a year earlier, according to the Society of Indian Automobile Manufacturers (SIAM).

The muted performance marks a concerning start to the fiscal year, led by continued weakness in the two-wheeler and entry-level car segments. This is the first decline in the overall automotive market since covid. 

Despite overall GDP growth holding steady and inflation moderating compared to previous years, rural and semi-urban consumption remains under pressure. Factors such as unseasonal rainfall, high food price inflation, and stagnant wage growth in the informal sector have curtailed discretionary spending.

At the same time, tight retail lending, particularly from NBFCs, and the absence of strong government stimulus, have compounded demand-side constraints in mass-market automotive categories.

Passenger Vehicle sales declined 1.4% to 10.12 lakh units, largely due to an 11.2% drop in car sales, which fell to 3.03 lakh units. This sharp contraction signals affordability stress in the entry-level segment. In contrast, utility vehicles (UVs) continued to gain ground, growing 3.8% to 6.70 lakh units, driven by sustained urban and semi-urban demand. Van sales remained relatively stable at 38,635 units.

Commercial Vehicles recorded a marginal decline of 0.9%, with total volumes falling to 1.40 lakh units from 1.41 lakh units a year ago. The dip was driven by weak freight activity and muted infrastructure-linked movement.

While passenger carrier sub-segments in both M&HCV and LCV categories posted growth—6.6% and 8.8% respectively—these were offset by a decline in goods carriers, indicating sluggish momentum in mining, logistics, and e-commerce haulage.

Three-Wheeler sales contracted 2.5% to 1.61 lakh units. Passenger three-wheelers managed a modest 1.7% increase, but this was offset by a significant 30.3% fall in electric goods carriers (e-carts), pointing to challenges in financing, fleet adoption, and charging infrastructure.

Two-Wheelers, the largest category, witnessed a sharp 6.2% drop, with volumes falling to 46.74 lakh units. Motorcycles declined 9.2% to 29.03 lakh units, and mopeds fell 10.9% to 1.09 lakh units, both impacted by poor rural sentiment and tightening household budgets. Scooters, at 16.62 lakh units, held steady, slipping just 0.2%, thanks to relatively resilient urban demand.

Quadricycles remained a marginal segment with just 4 units sold, a 94.9% year-on-year decline, underscoring its continued lack of relevance in the broader market.

Segment-Wise Snapshot (April–June 2025):

Segment Q1 FY2025 Sales YoY Change

Passenger Vehicles 10.12 lakh units -1.4%
Commercial Vehicles 1.40 lakh units -0.9%
Three-Wheelers 1.61 lakh units -2.5%
Two-Wheelers 46.74 lakh units -6.2%
Quadricycles 4 units -94.9%
Total 60.75 lakh units -5.1%

Cautious Outlook Ahead of Festive Season

Despite macroeconomic stability at the national level, demand polarisation continues to deepen, with urban premium segments outpacing rural and mass-market recovery. With inventory levels rising and retails slowing, automakers are pinning hopes on a favourable monsoon, government spending pick-up, and festive season promotions to revive momentum in the second quarter. Without these triggers, the broader market could remain under stress well into H2 FY2025.