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Indian Automotive Industry: Navigating a steady path amid diverging segment trends (May 2025)
India’s automotive sector continues to chart a resilient path through FY2025–26, underpinned by a stable macroeconomic foundation and supportive policy signals. GDP growth is expected to hover around 6.5%, inflation has moderated to 2.8%, and record-high GST collections signal sustained economic activity. Lower interest rates, thanks to the RBI’s accommodative stance, are further improving vehicle affordability.
However, beneath this steady surface, segment-level divergences are becoming more pronounced.
The Passenger Vehicle (PV) market saw only modest growth in May 2025, with overall volumes up just 2% YTD. While Utility Vehicles (SUVs) remain in high demand—fueled by new launches and increasing hybrid/electric adoption (BEVs accounted for ~4% of May retails)—the compact car segment is struggling, hit by affordability concerns and muted first-time buyer sentiment. OEMs are responding with aggressive discounts to manage inventory levels, which remain elevated at 60+ days in the compact category.
In contrast, Light Commercial Vehicles (LCVs) recorded a healthy growth, supported by expanding urban logistics and infrastructure projects. Heavy Commercial Vehicles (HCVs) also registered a moderate increase, backed by a fleet replacement cycle and public investment in highways and freight corridors.
Tractors remain a bright spot, rising 9% YoY, as rural sentiment improves ahead of the kharif season and ahead of emission regulation changes. Meanwhile, three-wheelers, especially electric variants, are gaining momentum. EVs now make up 30% of 3W retail, and export demand is adding an extra layer of support.
Overall, while demand is not uniform across segments, the industry remains well-positioned for the rest of the fiscal year—with manageable inventory levels, strong fundamentals, and improving buyer confidence.
For deeper insights, detailed charts, and segment-wise analysis, refer to the attached document. Automotive_Market_Update_05.2025
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