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The Indian passenger vehicle market is set to reach a new high of 4.33 million units in the fiscal year 2025. However, growth momentum is slowing, with the growth rate dropping to the low single digits—the lowest in four years—due to rising inventory levels and increasing discounts. Automakers are grappling with an aging product lineup and shrinking discretionary income among consumers.
The passenger car industry is projected to grow by just 2% in FY25, following growth rates of 13%, 27%, and 8.7% in FY22, FY23, and FY24, respectively. FY25 will mark the fourth consecutive year of year-on-year growth for the industry.
On a quarterly basis, the fourth quarter of FY25 recorded the highest wholesale volume for the passenger car industry, with a total of 1.168 million units, surpassing the previous quarter’s high of 1.13 million units from the same period last year.
March 2025 Performance and Retail Trends
The final month of FY25 is expected to end on a subdued note, with wholesale volume growth limited to just 3%. The industry is projected to dispatch approximately 380,000–385,000 units to dealers, according to a source familiar with the development. This slowdown is primarily attributed to weakening retail demand and inventory levels stabilizing at optimal levels.
On a month-on-month basis, wholesale volumes are expected to remain largely unchanged, prompting automakers to increase discounts significantly to boost sales. The primary driver of volume growth in March is likely to be Mahindra & Mahindra (M&M), which is expected to maintain its position as India’s second-largest passenger car manufacturer. M&M is projected to achieve a sales volume of around 50,000 units, reflecting robust year-on-year growth of over 20%. Meanwhile, market leader Maruti Suzuki is anticipated to record sales of 160,000–165,000 units, translating to 8% growth at the upper end of the range.
Retail Sentiment and April Challenges
A senior executive from a leading multinational car manufacturer stated that retail sentiment is expected to improve toward the end of March due to the Navratri festival and some pre-buying ahead of a scheduled price hike in April 2025. However, he added that underlying demand remains weak, largely sustained by attractive consumer offers.
“April will be a more challenging month for carmakers,” he noted. “This year, a portion of the festival-driven sales has already been captured in March, unlike last year when Navratri began on April 9. Additionally, there will be a net increase in vehicle prices for consumers, even after factoring in discounts.”
The expected price hike is primarily due to the implementation of new safety regulations mandating six airbags in passenger vehicles. These regulatory changes, coupled with broader macroeconomic factors, are likely to put further pressure on automakers. The Society of Indian Automobile Manufacturers (SIAM) estimates sales volume growth of only 1–1.5% for FY26, while analysts project a long-term industry growth rate of around 5%.
Competitive Landscape: Market Position Battles
With M&M solidifying its position as the second-largest player, competition for the third and fourth spots in India’s passenger vehicle market is expected to intensify, leading to heightened market volatility. Market rankings among other automakers will likely shift based on new product launches, pricing strategies, and evolving consumer demand trends.
For March 2025, wholesale volumes are expected to be capped at approximately 385,000 units, bringing the total fiscal year volume to just under 4.3 million units. This represents modest growth of 1.76% in FY25—the slowest pace in the last four years. However, on a five-year compound annual growth rate (CAGR) basis, passenger vehicle sales are projected to grow at 9%, marking the highest growth in eleven years. The last comparable period of similar growth was in 2014, when the industry recorded a 10% CAGR.
Over a ten-year CAGR period, however, the Indian passenger car market has grown at a slower rate of 5%, lagging behind the country’s GDP growth. This sluggish performance is largely attributed to steep price increases driven by new regulatory norms and a sharp decline in the entry-level car segment. Rising costs and affordability concerns have significantly impacted demand in the budget segment, which traditionally drove high volumes.
Car Penetration and Market Trends
Daily car sales in FY25 increased to 11,860 units, up from 9,253 units in FY19 and 6,846 units in FY14, indicating steady long-term growth. However, despite these gains, car penetration in India remains low at just 26 vehicles per 1,000 people—nearly half the global average. Most Indian states have car penetration levels below 40 per 1,000 people, with Delhi being the only exception, where penetration has exceeded 100 per 1,000.
The low penetration rate underscores the significant growth potential of the Indian automobile market. However, affordability, high vehicle ownership costs, and evolving mobility trends continue to pose challenges to rapid expansion. Industry experts suggest that unless automakers introduce more affordable and fuel-efficient models, penetration levels may not rise substantially in the near future.
Retail Sales Performance: Slowdown in Registrations
On the retail front, industry growth has been lackluster. As of March 30, total vehicle registrations stood at 319,358 units, marking a slight contraction of 1.09% compared to the previous year. This includes 296,546 motor car registrations and 22,812 motor cab registrations.
For FY25, total retail registrations are expected to surpass the four-million mark, with an average monthly registration of approximately 339,034 units. However, this growth remains subdued compared to previous years, reinforcing concerns over demand stagnation.
According to Vahan data as of March 30, Maruti Suzuki’s retail registrations stood at 124,341 units, reflecting a slight decline in volumes. The company remains the dominant market leader with a 38.93% share, followed by M&M, which holds a 13.79% market share. Increasing competition among automakers is evident, with companies deploying aggressive marketing strategies, launching new products, and offering attractive financing options to sustain sales momentum.
Outlook for FY26 and Beyond Looking ahead, the industry faces both opportunities and challenges. While regulatory changes and price hikes may dampen demand in the short term, long-term growth prospects remain promising, driven by rising income levels, infrastructure development, and increasing consumer preference for personal mobility. The electric vehicle (EV) segment also presents a significant growth opportunity, with automakers investing heavily in EV product lines and charging infrastructure.
However, the short-term outlook remains uncertain, with analysts closely monitoring macroeconomic factors, inflationary pressures, and consumer sentiment. The coming months will be crucial in determining whether the industry can regain momentum or continue facing a period of stagnation.
While FY25 is expected to close with muted growth, the Indian passenger vehicle market continues to evolve, shaped by shifting consumer preferences, regulatory changes, and intense competition among key players.
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