Car Buyers Slam The Brakes: PV Sales Dip 3.1% in May 2025, Says FADA

India’s automobile retail market posted a modest 5% year-on-year growth in May 2025, buoyed by healthy two- and three-wheeler sales. However, passenger vehicle (PV) sales bucked the trend, slipping 3.1% as rising inventory and cautious consumer behaviour signalled a pause in demand recovery.

According to the data released by the Federation of Automobile Dealers Associations (FADA), PV registrations last month stood at 3,02,214 units, as compared to 3,11,908 units in May 2024. The auto retail body claimed that customers delayed purchases in several states due to the India-Pakistan conflict. This was further compounded by softening demand for entry-level models, as per FADA.

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Mixed Signals across Segments

According to FADA, while rural markets drove gains in two-wheelers, demand for entry-level cars remained muted. Dealers cited weak retail conversions despite steady booking volumes, with many prospective buyers either deferring purchases or facing financing hurdles.

“May offered mixed signals,” said FADA President C.S. Vigneshwar. “Two-wheelers and tractors held firm on the back of strong rural sentiment, but the passenger vehicle segment faced headwinds. Elevated inventory levels, tighter credit, and geopolitical unease in certain regions dampened conversion rates.”

Surging Inventory Levels of PVs

The PV category also saw a sharper 13.6% decline on a month-on-month basis. Inventory levels climbed to 52–53 days—well above the 21-day stock benchmark FADA recommends—raising concerns for automakers and dealers alike. Smaller models, often favoured by first-time buyers, were the hardest hit due to margin money issues and subdued consumer confidence, according to FADA.

Two-Wheelers on an Upswing

Meanwhile, the two-wheeler segment clocked healthy growth, fuelled by demand in semi-urban and rural pockets. Two-wheeler retail sales rose 7.3% year-on-year in May to 16,52,637 units, as against 15,40,077 units in the year-ago period. Favourable factors included a high number of marriage dates, a strong Rabi harvest, and early monsoon traction. However, financing limitations in the budget segment capped some of the potential upside.

CV Sales Down

Sales of commercial vehicles fell 3.7% YoY and 11.25% MoM to 75,615 units, weighed down by a soft freight environment and liquidity concerns. The only bright spot was in bus sales, while truck demand lagged. Dealers also reported a bump in wholesales ahead of the June mandate for air-conditioned driver cabins in CVs.

Business Outlook

Looking ahead, industry stakeholders are pinning hopes on a favourable monsoon and a possible rate cut by the Reserve Bank of India (RBI) to drive demand. The India Meteorological Department (IMD) has predicted rainfall at 106% of the long-period average, likely to bolster rural incomes and lift sentiment in agricultural markets.

“Farm-linked cash flows and festival demand around Rath Yatra are expected to support two-wheeler sales,” Vigneshwar noted. “However, PV dealers continue to grapple with excess stock and hesitant footfalls. Strategic product planning and prudent financing options are now more critical than ever.”

FADA’s internal dealer survey reflects a cautiously optimistic sentiment: while 31% expect growth in June, over half foresee stable volumes, and 13.5% anticipate a decline. Global supply chain issues—especially those tied to rare-earth components in electric vehicles—are also on the radar, with potential to impact urban buyer behaviour and pricing.

As the industry enters a lean season, FADA has advised automakers and financiers to realign strategies, manage inventory more effectively, and offer support to dealerships. “This is a time to stay responsive to ground realities rather than chase wholesale numbers,” Vigneshwar added.