Festive-led stocking drives growth; Inventory concern looms
The broader picture for August 2025 was better than expected, with overall YoY/MoM growth reported at 19.5%/17.8%. The growth was broad-based, with expansion seen across segments. PV majors posted mixed trends, while 2Ws, particularly TVS and Eicher, led the momentum. Tractor volumes surged on the back of rural recovery, while CVs remained steady. The improvement in wholesale dispatches was primarily driven by increased dealer stocking ahead of the festive season, supported in part by a lower base in the previous year. While wholesale dispatches indicated strong momentum, retail trends painted a softer picture, with VAHAN data showing a 3% MoM decline in August retail sales to 1.9 million units. The weakness was primarily attributed to GST-related uncertainties, deferment of purchases, and slower demand for high-ticket ICE vehicles (priced above Rs. 15 lakh). This also led to weaker retail traction for OEMs such as Maruti and Hyundai. Dealer inventory levels remained elevated at 55-65 days, above the historical comfort zone, suggesting that a portion of the wholesale strength reflected channel stocking rather than end-demand. The near-term outlook remains cautious, with further purchase deferments likely in September and October 2025 due to the recent GST reforms, raising the risk of an inventory overhang given the elevated stocking. However, the medium to long-term outlook remains optimistic, with demand expected to pick up from H2FY26 onwards, supported by a combination of policy measures, rural recovery, and new product launches. We expect 2Ws and entry-level PVs to be the key beneficiaries of this dynamic shift, aided by potential rate cuts, improved liquidity, and GST rationalisation
Passenger Vehicles
The PV segment reported a steady mid-single-digit decline (-7.9% YoY) in domestic sales in August 2025, while exports presented a sharp contrast with strong double-digit growth (43.1% YoY). The month, which is typically favourable for PV OEMs given festive-led buoyancy, saw softer domestic volumes due to demand-side uncertainty following the government’s GST rationalisation measures, leading to deferred purchases. MSIL posted muted overall performance, with domestic weakness partly cushioned by robust export growth and a modest uptick in compact cars. The Mini segment continued to underperform, while an early-teen decline in UVs further weighed on volumes. The bigger drop in SUV sales, from -6.3% in July 2025 to -13.8% in August 2025, underscored intensifying competition in its UV portfolio. Tata Motors’ domestic sales continued to face pressure from muted demand in the ICE portfolio, particularly in the mass-market segment. However, improved traction in EVs along with a healthy export performance helped cushion the overall impact, partly offsetting the weakness on the domestic front. M&M, in contrast, reported considerable volume decline (-7.2% YoY), marking a reversal from its strong run in prior months, as the company consciously curtailed wholesale dispatches to align dealer inventory ahead of GST rationalisation. HMIL reported total sales of 60,501 units in August 2025, comprising 44,001 units in the domestic market and 16,500 units in exports. In the near term, domestic PV sales are likely to remain cautious and somewhat volatile, as the recent GST rationalisation has introduced uncertainty, prompting deferment of purchases – particularly in the mid- to premium ICE segments. Elevated dealer inventory levels also suggest that wholesale growth could moderate in the coming months as OEMs focus on channel alignment.
Two Wheelers
In August 2025, the two-wheeler segment remained the primary growth engine for the auto industry, delivering strong double-digit gains in both domestic and export markets. Domestic volumes rose 11.5% YoY and surged 25.1% MoM, aided by festive-led channel stocking, improving rural sentiment, and the successful ramp-up of new model launches. Hero MotoCorp posted a modest 5.5% YoY rise but delivered a sharp 25.9% sequential jump, primarily driven by better scooter traction following the introduction of models like the Destini 125 and Xoom 125. Exports for Hero surged 72.1% YoY, adding further cushion to overall volumes. A disparity between total dispatches (553,727 units) and VAHAN registrations (344,000 units) suggests elevated channel inventory levels, which is largely on account of inventory buildup ahead of the festive season. TVS continued to outperform its peers, with 27.6% YoY growth in domestic sales and over 35% expansion in exports, with a higher mix of scooters being the key highlight for the month. Royal Enfield registered a 54.8% YoY jump, achieving its highest-ever monthly volumes on the back of growing demand for its refreshed portfolio. Bajaj Auto, however, reported an 11.7% YoY drop in domestic volumes, though this was partly offset by a 24.7% jump in exports.
Commercial Vehicles
Commercial vehicles continued to extend their gains from the previous month, with a healthy uptick (6.2% YoY / 4.0 MoM) being observed in both domestic and export markets. M&M primarily fueled the growth, as strong traction in LCVs continued to benefit the company. Tata Motors (+6.3%) and VECV (+4.5%) also posted steady gains, while Ashok Leyland (+2.1%) registered modest improvement. On a MoM basis, the trend remained largely positive with M&M (+6.1%) and Tata Motors (+4.0%) supporting momentum, while VECV (-0.2%) stayed flat, reflecting some channel adjustment.
Tractors
The tractor industry reported a robust performance in August 2025, with domestic volumes rising 32.6% YoY, led by Escorts Kubota (+51.8%) and M&M (+27.7%). The growth momentum was underpinned by favourable rural conditions such as timely and widespread monsoon rains, strong reservoir levels, and an early onset of the festive season. On a MoM basis, domestic volumes remained steady (+1.5%), reflecting healthy channel stocking. Exports too maintained strength, registering 36.6% YoY growth and 9.9% MoM rise, driven by broad-based traction across both M&M and Escorts Kubota. With kharif sowing exceeding last year’s acreage and expectations of GST rate reduction on farm equipment, industry sentiment remains upbeat, pointing towards sustained demand in the coming months.
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