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India’s passenger vehicle market displayed contrasting trends in July 2025, with wholesale volumes growing 8.9% sequentially while year-over-year growth remained flat at 340,000 units, according to a recent report by credit rating agency ICRA.
Original equipment manufacturers (OEMs) are strategically building inventory ahead of the upcoming festive season, resulting in dealer stock levels rising to 55 days, as reported by the Federation of Automobile Dealers Association (FADA). Meanwhile, retail sales increased 10.4% compared to the previous month but declined marginally by 0.8% year-over-year, indicating continued demand-side challenges.
Sport utility vehicles and utility vehicles continued their dominance, accounting for 65-66% of total passenger vehicle volumes. Industry analysts expect this segment to remain the primary growth driver in the near term, reflecting evolving consumer preferences toward larger, more versatile vehicles.
The SUV segment’s growth comes as manufacturers increasingly introduce electric and hybrid variants in this category, aligning with the government’s push for cleaner mobility solutions. Several automakers have announced plans to launch electric SUVs during the festive season, potentially benefiting from both the segment’s popularity and growing environmental consciousness among buyers.
The export segment recorded 9% year-over-year growth in July 2025, though from a relatively low base. Maruti Suzuki India Limited maintained its position as the leading exporter, followed by Hyundai Motor India Limited.
Modest Growth Outlook for FY2026
ICRA projects wholesale volume growth of 1-4% for fiscal year 2026, despite a 1.1% contraction recorded in the first four months of the current fiscal year. The rating agency believes potential GST rate cuts could stimulate demand in specific vehicle segments, providing much-needed momentum to the market. Additionally, manufacturers have planned steady new model launches throughout the year, which could attract buyers across different price points.
However, the industry faces challenges from elevated inventory levels at dealerships, which may pressure margins and limit wholesale growth. The high base effect from the previous year’s performance also poses a challenge for achieving significant year-over-year growth rates.
Electric Vehicle Integration Gains Momentum
While traditional internal combustion engine vehicles dominate current sales, the electric vehicle transition is gradually influencing market dynamics. The potential GST rate cuts being considered by the government could include preferential treatment for electric vehicles, particularly in the popular SUV segment. Industry observers note that any policy support combining lower GST rates with existing EV incentives could accelerate adoption rates, especially as charging infrastructure continues to expand in urban centers.
As the festive season approaches – traditionally a strong sales period for the automotive industry – market participants will be watching whether increased inventory levels translate into robust retail performance or whether demand-side challenges persist. The interplay between conventional vehicle sales, electric vehicle adoption, and government policy changes will likely shape the industry’s trajectory through FY2026.
Based on ICRA’s Passenger Vehicle Industry Report for July 2025
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