The domestic passenger vehicle industry is likely to witness only marginal growth in the current financial year. According to a recent report by rating agency ICRA, wholesale volumes are expected to expand by just 1 to 4 percent in FY 2025. Between April and July 2025, the sector has already seen a decline of 1.1 percent.

ICRA highlighted that high dealer inventory levels and a strong base from last year are exerting pressure on growth. Data from the Federation of Automobile Dealers Associations (FADA) shows that by the end of July, dealers were holding an average inventory of 55 days.

Small Cars Could Get a Boost

Despite the sluggish trend, the agency noted that the launch of new models and the government’s proposed GST reforms may revive demand. The central government has suggested reducing the current four GST slabs (5, 12, 18 and 28 percent) to just two – 5 and 18 percent. If implemented, a reduction in tax rates for small cars could help improve their sales.

Passenger Vehicle Sales Trends

Wholesale sales of passenger vehicles rose 8.9 percent month-on-month in July 2025 as automakers dispatched higher stocks to dealers ahead of the festive season. However, volumes remained largely unchanged on an annual basis at around 3.4 lakh units.

Retail sales also climbed 10.4 percent month-on-month in July, but dipped slightly by 0.8 percent compared to last year. SUVs remain the strongest segment, accounting for nearly 65–66 percent of overall passenger vehicle volumes. According to ICRA, utility vehicles will continue to be the main growth driver in the months ahead.

Exports Show Positive Signs

Passenger vehicle exports recorded a 9 percent year-on-year growth in July, with Maruti Suzuki and Hyundai Motor India leading the charge.

Overall, the auto sector is moving at a slower pace this year, but experts believe the upcoming festive season, new product launches, and potential tax reforms could help lift the market momentum.