Pre-buying effect weakens; Retail demand drops in all areas.
Two months into the year, the auto industry’s sales trend remains mixed. January saw strong demand, but it’s now slowing as retail demand weakens. Growth in February was subdued as the pre-buying boost from previous months faded, leading to lower wholesale dispatches. Dealers are cautious about stocking up due to slowing retail sales and rising vehicle prices, which are dampening customer sentiment. Commercial vehicles (CVs) and two-wheelers (2Ws) saw a year-on-year decline, while passenger vehicles (PVs) had a slight increase. The medium and heavy commercial vehicle (M&HCV) segment continued to decline, likely due to price hikes and weak demand, with expected government infrastructure-driven demand yet to show results. Bus sales dropped significantly, signaling slow replacement demand. The auto sector remains under pressure, with concerns about inventory buildup as retail demand stays weak. Current inventory levels are around 40-45 days, much lower than the post-festive peak of 80-85 days, but ongoing demand concerns suggest that discounts will continue. While tax reforms could bring long-term benefits, they are unlikely to drive an immediate demand surge, as most of the population either falls below the taxable bracket or pays minimal taxes, meaning entry-level vehicle sales will recover gradually rather than seeing a sharp rebound.
Passenger Vehicles
February’s wholesale numbers shook up the passenger vehicle (PV) market rankings. Maruti Suzuki (MSIL) kept its top spot, but Mahindra & Mahindra (M&M) moved up to second place, overtaking both Tata Motors and Hyundai. However, on a year-to-date (YTD) basis, Hyundai still holds the second spot, while M&M and Tata Motors remain in close competition for third. M&M is likely to secure third place, given its strong performance and a market share increase of about 200 basis points. MSIL’s wholesale volumes stayed flat as weak domestic demand, especially in entry-level cars, and lower exports hurt sales. Still, its utility vehicles (UVs) performed well, gaining market share to 25.8%, driven by strong demand for models like Ertiga, Brezza, and Fronx. Tata Motors saw weaker wholesale numbers, with total dispatches down 9.4% YoY and 3.4% MoM, reflecting slow PV demand, though its electric vehicle (EV) and export segments showed early recovery signs. New limited-edition Harrier and Safari models could help boost sales. M&M continued to outperform the PV industry, with strong UV demand helping it grow volumes by 18.9% YoY, though slightly down 0.5% MoM. Hyundai’s wholesale volumes fell 5% YoY to 47.7k units, showing some weakness in its performance.
Two Wheelers
The two-wheeler (2W) market saw weak domestic demand in February, with major players like Bajaj Auto and Hero MotoCorp (HMCL) facing lower sales, affecting overall segment growth. However, exports remained strong, with companies seeing double-digit growth due to solid overseas demand. HMCL’s domestic sales dropped 19.8% YoY, while exports grew 32.9% YoY, with weak rural demand slowing entry-level bike sales. Honda is now a strong challenger for the top spot, thanks to its recent volume growth. HMCL is expected to recover with new launches and a stronger scooter lineup. Bajaj Auto also reported lower domestic sales (down 14.3% YoY and 14.7% MoM) but saw export growth of 23.5%. Rural demand weakness continues to impact 100-125cc models. TVS Motor showed growth compared to HMCL and Bajaj, but its pace slowed due to weaker scooter sales, with total volumes at 403.9k units (up 9.6% YoY and 1.6% MoM). Eicher Motors also saw muted demand, especially in its 350cc segment and exports, though demand for higher-powered models remains strong. In electric two-wheelers (e2W), Bajaj Auto took the top spot, followed by TVS and Ather. Vahan data showed Bajaj sold 19.3k units, TVS 17.4k, and Ather 10.7k. Ola Electric dropped to fourth place with 7.9k units, while Greaves Electric Mobility overtook HMCL for the fifth position.
Commercial Vehicles
In February, the commercial vehicle (CV) market saw modest growth, mainly driven by rising demand for light commercial vehicles (LCVs) and strong exports. However, sales of medium and heavy commercial vehicles (M&HCVs) and buses declined, which remains a concern. Slow activity in cement, coal, and infrastructure, along with strict financing rules and weak rural demand, likely affected retail sales. Ashok Leyland’s domestic sales fell 4.5% YoY to 15.9k units, but exports nearly doubled. Tata Motors saw an 8.3% YoY decline, with heavy trucks (-2.0%), buses (-7.2%), and pickups (-20.5%) leading the drop. VE Commercial Vehicles (VECV) had moderate growth, with domestic volumes rising 6.1% YoY to 7.5k units, while its bus segment grew 21.3%. Mahindra & Mahindra (M&M) reported 30.2k wholesale units, up 4.3% YoY but down 3.7% MoM, mainly supported by LCV sales.
Tractors
In February 2025, tractor sales grew 16.3% YoY but dropped 1.6% compared to January. Mahindra & Mahindra (M&M) performed better than the industry, with 18.7% YoY growth, thanks to its strong product lineup, though sales fell 9.2% MoM. Escorts Kubota saw 10% YoY growth and a sharp 31.5% MoM increase, likely due to dealers restocking before the Rabi season. In exports, Escorts Kubota continued strong growth with a 41% YoY increase, while Mahindra’s exports grew moderately by 6% YoY. Overall, demand remains stable, supported by positive rural sentiment, but inventory adjustments may slow growth in the short term.
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