Indian Auto Industry Sees Mixed Trends Amid Geopolitical Tensions

The Indian passenger vehicle industry observed a significant downturn, with retail sales contracting by 13.6% in May 2025. This decline is attributed to decreased consumer confidence amid geopolitical tensions following the India-Pakistan conflict, according to ICRA, a leading credit rating agency. The reduction in demand came despite continued discount schemes by automakers, dropping from 3,49,939 units sold in April 2025 to 3.02,214 units in May.

In contrast, the two-wheeler segment exhibited robust growth, with a year-on-year increase of 7% in retail sales, driven by strong rural demand and a bountiful harvest. The Federation of Automobile Dealers Association (FADA) reported a slight rise in PV inventory levels to 52-53 days. SUVs continue to dominate the PV landscape, constituting 64-65% of the segment's sales. However, challenges remain, including a potential shortage of critical components like rare earth magnets, primarily due to restrictions from China.

Facing these issues, ICRA revised its growth forecast for PV wholesale volume to 1-4% for FY2026, down from an initial 4-7%, due to high inventory and component shortages affecting production, particularly for electric vehicles. Meanwhile, the two-wheeler industry's wholesale volumes remained flat in May, but retail sales grew moderately, encouraged by favorable market conditions. Looking ahead, steady model launches and diversified demand sources are expected to buoy the industry.

(With inputs from agencies.)