Dealers were hesitant to stock up due to anticipated GST cuts. Customers postponed purchases, and dealers were cautious about increasing their inventory, influenced by the potential for reduced prices after a possible change in tax rates. Currently, small cars and two-wheelers are subject to 28% GST, while larger cars face a 43-50% GST.

In contrast, the two-wheeler segment performed well year-on-year. The Onam, Navratri, and Durga Puja seasons further boosted demand. Experts believe that the potential tax cuts would benefit four-wheelers more, potentially increasing demand by 5-10%.

Hero MotoCorp saw a significant contribution from motorcycles, with sales of 5,01,523 units, up 4.87% from August 2024’s 4,78,215 units. The company’s scooter segment saw sales of 52,204 units, a 52.89% increase from the previous year’s 34,145 units.

Meanwhile, TVS has established a strong presence in the EV market. In August 2025, the company sold a total of 25,138 electric vehicles, exceeding the 24,779 units sold in August of the previous year.

The SUV segment continues to dominate the PV market, accounting for approximately 65-66% of total sales. However, the top four vehicle manufacturers experienced a decline in August deliveries compared to the previous year. Domestic PV dispatches are estimated to be around 3.3 lakh units, about 7% less than the 3.5 lakh units from the previous year.

Maruti Suzuki reported approximately 1.5 lakh pending orders and about 50 days of stock in its dealer network. Sales of mini cars decreased by 36%, while compact cars saw a slight increase. The SUV segment experienced a 14% decline.

ICRA noted that high inventory levels and a strong base from the previous year are putting pressure on growth this year. Data from the Federation of Automobile Dealers Associations (FADA) indicates that dealers had an average inventory stock of 55 days at the end of July.

Nevertheless, the agency believes that the continuous launch of new models by automobile companies and potential GST reforms by the government could lead to increased demand in the coming months. The central government has proposed reducing the GST slabs from the current 5, 12, 18, and 28% to only 5 and 18%. If taxes are reduced on the small car segment, an improvement in sales could also be seen.

Wholesale sales of passenger vehicles increased by 8.9 percent month-on-month in July 2025. This rise was due to companies sending more stock to dealers before the festive season. However, volumes remained stable at approximately 3.4 lakh units year-on-year.

Retail sales also increased by 10.4 percent MoM in July, but there was a slight decline of 0.8 percent year-on-year. According to ICRA, the SUV segment continues to dominate, contributing 65-66 percent of the total passenger vehicle volume. Utility vehicles are expected to remain the main drivers of growth in the coming months.

Passenger vehicle exports recorded a 9% YoY increase in July. Maruti Suzuki and Hyundai Motor India contributed the most to this. Overall, the auto sector is progressing at a slower pace this year. However, the festive season, new launches, and potential tax reforms could provide strong support to the market in the coming months.

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