Car companies may hit road to robust sales next year

New Delhi: Sales of passenger vehicles are expected to grow by 5% in calendar year 2025 against a high base, indicating healthy consumer demand on the back of a pick-up in government spending, good monsoon rain and strong consumer sentiment in rural markets due to robust crop yields, several senior industry executives ET spoke to said.

While sales of SUVs will remain strong, carmakers expect demand for entry-level small cars to rise as indicated by a spurt in two-wheeler sales in recent months.

After six months of slow growth in this fiscal year, car sales grew by about 1% in October and 4% in November. Passenger vehicle sales grew by 3% in the first quarter.


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In fact, India is one of the few markets globally where auto sales have rebounded sharply post the pandemic. That pushed car sales over the 4-million mark for the first time in 2023, and then again in 2024.

With general elections having got over, automakers expect an uptick in government spending and the better-than-expected monsoon to boost sales in the coming year.

"I feel next year the industry will grow by 5%. Government investments will be back. IT layoffs are behind us," said Hardeep Singh Brar, senior vice-president and head, sales and marketing, Kia India. "There are early signals of revival in the sector with leading companies announcing fresh hiring plans recently. Good monsoons too will play a big role in boosting growth in the year ahead."

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Economic activity is expected to rise in the coming year led by rural consumption and the anticipated increase in government spending, HDFC Securities said in its latest report on Sunday.

"India will largely be an outlier in the GDP growth compared to its global counterparts," said Dhiraj Relli, CEO, HDFC Securities. "We anticipate the growth for FY26 to be volume-led, with BFSI, industrials, cement, energy and IT sectors being the engine drivers."

The Indian economy is expected to expand by 6.7% in FY26.

"Car sales in the upcoming year will depend on pure-play economy as the market in terms of demand and supply is normal," said an industry veteran "While the percentage growth is likely to be small, it is important to factor in the fact that this growth is coming on a very high base of about 4.3 million units. One factor (for healthy growth ahead) seems to be an expectation that the slide in small car sales may have seen bottoming out judging by two-wheeler sales."

Sales of motorcycles, scooters and mopeds rose by as much as 16.2% to 18.44 million units between January and November CY2024, according to Society of Indian Automobile Manufacturers (SIAM) data.

In December, dispatches of cars from factories to dealerships are estimated to have gone up by 10-12% to 315,000-322,000 units with manufacturers replenishing stocks at dealerships after robust sales in the festive season.