May Sees Dip in India's Retail Car Sales Due to Elections, Weather

Retail sales of cars in India fell 1% in May, tracking slowing wholesale growth, as elections and extreme heat across the country dampened demand and delayed purchase decisions, a dealers' body said on Monday. Sales growth in two-wheelers slowed to 2.6% in May from 33% in April, said the Federation of Automobile Dealers Association (FADA), which tracks monthly retail sales from dealers to buyers. Overall retail sales across segments, which include two-wheelers and commercial vehicles, grew 2.6% in May, compared with a 27% rise in April.

India's auto industry forms 7% of the country's GDP, as per government data. Auto sales are also a key indicator of private consumption in the world's fifth-largest economy.

Sales of passenger vehicles – hatches, sedans and SUVs – by manufacturers to dealers have risen to record high levels over the last two years in India and are estimated to hit new all-time highs in the financial year 2025 as well.

However, data released by carmakers showed sales slowing in May. Dealers across the country have struggled with a rising inventory of slow-selling models, especially small cars, whose prices have grown faster than the rise in the incomes of its target customers.

As a result, retail sales growth has largely lagged that of wholesales, while also straining the dealers' financials. FADA said last month it expected elections to hurt vehicle sales.

Extreme heat conditions dissuaded customers from visiting showrooms, with walk-ins dropping by around 18%, said FADA President Manish Raj Singhania in a statement. A third term for Prime Minister Narendra Modi's government is expected to bring stability and improve market sentiment, the dealers' body said, even as it remained wary of extreme weather conditions.

Liquidity issues and high inventory levels continued to strain profitability for dealerships, FADA said.