Auto Puzzle: Why Car Sales Are Holding Strong Even as Factory Dispatches Drop

The wholesale dispatches in the passenger vehicle (PV) segment—a key metric of supply-side strength—fell significantly in June. According to industry estimates, domestic PV wholesales dropped 6.4% year-on-year to 3,20,277 units, down from 3,42,174 units in the same month last year. The slowdown in wholesales reflects broader weakness in underlying demand, with consumer sentiment dampened by global uncertainties, inflationary pressures, and rising economic concerns.

Amid declining consumer confidence, retail sales of PVs still managed to inch up 2.45% year-on-year. PV retail volumes rose to 2,97,722 units last month, compared to 2,90,593 units in June 2024. However, retail numbers declined 1.49% from May, according to data shared by the Federation of Automobile Dealers Associations (FADA).

FADA President C.S. Vigneshwar noted that heavy rains and tight market liquidity affected footfalls and conversion rates, although increased incentive schemes and fresh bookings offered selective support.

“Some dealers indicated that certain PV OEMs have introduced compulsory billing procedures—such as automatic wholesale debits—to meet volume targets; inventory consequently stands at around 55 days. June thus painted a picture of modest but steadfast PV performance amid varied market cues,” Vigneshwar said.

Also Read: Car Buyers Slam The Brakes: PV Sales Dip 3.1% in May 2025, Says FADA | Republic World

Overall auto sales up

Automobile retail sales in India rose around 5% year-on-year in June, with all vehicle segments—including passenger vehicles and two-wheelers—showing growth, according to FADA.

Overall automobile registrations last month stood at 20,03,873 units, up 4.84% from 19,11,354 units in June 2024.

Two-wheelers hold ground

The two-wheeler segment, a key barometer of rural and middle-income demand, posted a 4.73% increase in sales, reaching 14,46,387 units in June compared to the same month last year. However, compared to May, sales dropped sharply by 12.48%.

While festival and marriage-season demand gave a temporary boost, financing constraints and intermittent variant shortages slowed momentum, according to FADA.

“Early monsoon rains and rising EV penetration also shaped buying patterns. Several dealers cited compulsory billing and forced stock lifts—often via auto-debit wholesales—leading to mandated high days of inventory aligned with festive-season targets. Overall, June demonstrated a resilient two-wheeler performance amid mixed market signals,” Vigneshwar stated.

CV Sales also fare better

Commercial vehicles performed better in year-on-year comparisons, with sales rising 6.6% to 73,367 units in June. However, monthly performance slipped by nearly 3%.

Early-month deliveries helped push up volumes, but monsoon-induced slowdowns and liquidity constraints weakened enquiries and conversions, according to FADA.

“Members pointed to the impact of new CV taxation and mandatory air-conditioned cabins, which have elevated ownership costs, alongside muted infrastructure demand. Overall, June reflected a resilient CV segment adeptly navigating cost pressures and a softening economy,” Vigneshwar added.

Near-term outlook

In the short term, above-normal monsoon rains—expected to exceed 106% of the long-period average (LPA) in July—are likely to boost rural demand, though regions experiencing very heavy rainfall may face logistical challenges, FADA said. Early Kharif sowing has increased 11.3% year-on-year to 262.15 lakh hectares, pointing to stronger farm incomes that could support two-wheeler sales in rural markets.

“Simultaneously, robust government capital expenditure through June–August—targeting roads, railways, metros, and green-energy projects—will underpin demand in the CV and construction equipment (CE) segments. However, evolving geopolitical tensions and possible spillover from U.S. tariff measures warrant careful supply chain management and may dampen consumer sentiment. In addition, challenges in securing rare-earth materials have stalled component production, further constraining supply and retail volumes,” Vigneshwar concluded.