Auto Retail Sales Rise 7.71% in 2025; GST 2.0 Rate Cuts Drive Recovery
India's automotive retail sector achieved 7.71% growth in 2025 with sales reaching 2.81 crore units, significantly boosted by GST 2.0 rate rationalization from September onwards. The year was marked by contrasting halves - a subdued January-August period followed by strong recovery driven by improved affordability and sentiment. Passenger vehicles led growth at 9.70%, while the sector also witnessed increased electrification and CNG adoption across categories.
*this image is generated using AI for illustrative purposes only.
India's automotive retail sector concluded 2025 with strong growth momentum, recording a 7.71% year-on-year increase in total sales to 2.81 crore units, according to the Federation of Automobile Dealers Association (FADA). The performance was significantly boosted by the landmark GST 2.0 rate rationalization implemented from September onwards, which helped overcome a subdued start to the year.
Annual Performance Across Vehicle Categories
The 2025 auto retail landscape demonstrated resilience across multiple segments, with each category contributing to the overall growth story despite contrasting market conditions throughout the year.
| Vehicle Category | 2025 Sales | 2024 Sales | Growth Rate |
|---|---|---|---|
| Two-wheelers | 2.03 crore units | 1.89 crore units | +7.24% |
| Passenger Vehicles | 44.75 lakh units | 40.80 lakh units | +9.70% |
| Three-wheelers | 13.10 lakh units | 12.22 lakh units | +7.21% |
| Commercial Vehicles | 10.10 lakh units | 9.46 lakh units | +6.71% |
Two-wheelers maintained their dominance in volume terms, with 2.03 crore units sold, reflecting improving rural demand and stable financing conditions. Passenger vehicles emerged as the standout performer with 9.70% growth, benefiting from sustained SUV demand, new model launches, and improved supply conditions following the GST rate reductions.
GST 2.0: The Game Changer
FADA President CS Vigneshwar highlighted that 2025 was "a tale of two halves," with January to August remaining subdued despite supportive macro cues such as direct-tax relief in the Union Budget and RBI's cumulative rate easing. During this phase, customers stayed value-conscious while financier approvals remained selective in pockets, resulting in uneven conversions across markets.
The turning point came from September onwards with the landmark GST 2.0 rate rationalization, which included meaningful reductions for mass segments like small cars, two-wheelers up to 350cc, three-wheelers, and key commercial categories. This improved affordability and lifted sentiment, leading to a clear upshift through the September-December period.
Electrification and Alternative Fuel Transition
The year 2025 also reinforced the ongoing transition toward electrification, with EV share moving up across two-wheelers, passenger vehicles, and commercial vehicles, while remaining dominant in three-wheelers. Simultaneously, CNG strengthened its presence in passenger vehicles and commercial vehicles, signaling a more diversified mobility mix in the Indian automotive landscape.
Positive Outlook for 2026
Looking ahead, FADA's survey revealed that 74.91% of dealers expect growth over the next three months, with the retail outlook remaining decisively upbeat. Demand is expected to stay supported by post-GST 2.0 sentiment, a packed calendar of festivals and marriage season, and typical financial year-end buying patterns.
| Growth Drivers | Impact |
|---|---|
| Rural Tailwinds | Rabi sowing ahead of last year |
| Weather Forecast | Colder January favorable for winter crops |
| Interest Rates | RBI repo rate at 5.25% provides comfort |
| Policy Expectations | Consumption-supportive Union Budget anticipated |
Rural tailwinds look constructive as official updates show rabi sowing tracking ahead of last year, while IMD's forecast of a colder January is expected to be favorable for key winter crops, potentially improving cash flows and confidence in rural markets.
16
