Auto Sales Rise 6.6% in January, Dealers Cautious About Future: FADA

The Indian automobile retail sector saw a strong start to 2025, with overall sales increasing by 6.6 per cent year-on-year (YoY) in January, according to the latest report by the Federation of Automobile Dealers Associations (FADA). Despite the positive numbers, the association noted that auto dealers have mixed expectations for the coming months. Nearly half (46 per cent) anticipate further growth in sales, while 43 per cent believe sales will remain steady.

However, 11 per cent of dealers foresee a decline, reflecting the industry's complex landscape. Many expect a stable or slightly elevated sales trend in February, supported by government policies and an improvement in consumer sentiment following the Union Budget.

FADA says "Riding on the momentum of a promising start to 2025, the Auto Retail sector enters February with cautious optimism. According to our latest survey, nearly half of dealers (46 per cent) anticipate growth in the coming month, while 43 per cent expect sales to stay flat and 11% foresee a dip".

It also highlighted that all vehicle categories registered growth in January. Two-wheeler sales rose by 4.15 per cent YoY, driven by new model launches, wedding season demand, and improved financing options.

However, challenges such as rural liquidity issues, rising interest rates, and overall market uncertainty persist.

Three-wheeler sales increased by 6.8 per cent YoY, while passenger vehicles saw the highest growth at 15.53 per cent YoY. A portion of December's purchases spilt into January as buyers waited for the "2025 model year" advantage.

In the commercial vehicle segment, sales grew by 8.22 per cent YoY, supported by higher freight rates and strong demand for passenger carriers.

However, sluggish activity in cement, coal, and infrastructure sectors, along with strict financing policies, remained obstacles. Tractor sales also rose by 5 per cent YoY, indicating stable demand in rural areas.

Passenger vehicle inventory levels decline slightly, down by about five days to 50-55 days, indicating a better balance between supply and demand.

Urban passenger vehicle sales increased slightly, from 60.8 per cent to 61.8 per cent, while rural areas recorded stronger growth, with sales rising by 18.57 per cent YoY compared to 13.72 per cent in urban markets.

Looking ahead, the FADA noted that the industry remains hopeful for stable or improved sales in February, driven by supportive policies and seasonal demand. However, challenges such as rural financial constraints and weak demand in certain sectors may impact overall growth in the coming months.