The GST-cut-led momentum continues to pan out in the last month of 2025, with automotive dealers likely to end the year with reasonable levels of around 40 days of inventory at their disposal. The passenger vehicle (PV) segment, for instance, is witnessing robust retail with an estimated 15 per cent year-on-year (YoY) growth in vehicle registrations so far in December 2025, compared to last year, as per a top FADA (Federation of Automobile Dealers Associations) representative.
Generous OEM-driven discounting in the month of December, coupled with the momentum already established with the revision of GST rates on automobiles from 28 per cent to 18 per cent earlier this year in September, are the key drivers to this strong performance, which augurs well for the industry to close FY26 with a healthy double-digit growth.
“From growing at around 2.5-3 per cent in the first half of FY26, the industry is set to close the financial year with a robust 10 per cent YoY growth rate by end-March 2026. This is clearly the effect of the GST rate revision, which has brought a new cheer to the industry,” said Saharsh Damani, CEO, FADA.
In October 2025, the GST 2.0 impetus coupled with festive sentiments in the month, uplifted the mood of the entire industry by propelling the PV segment to register record retail sales of 5.57 lakh units, while two-wheelers registered a remarkable 52 per cent YoY growth to 31.5 lakh units. With cumulative sales of 40.24 lakh units, this was India Auto Inc’s best-ever monthly retail performance across segments.
While PV dealers had reported easing off of the inventory levels by 5-to-7 days owing to the record enquiries, higher footfalls, and better conversion rates compared to previous festive seasons, the stock situation persisted at around 53-55 days by end-October.
According to FADA, the stock levels further eased off to around 44 days towards the end of November and is likely to get further reduced to about 40 days by the end of 2025, given that there is no further inventory push from the OEMs’ side. The dealer body has long advocated a 30-35-day stock situation as an optimal inventory level for a seamless working-capital rotation in the automotive retail business.
“Contrary to the opinion of industry watchers, the December performance results from strong momentum achieved after GST 2.0, rather than just being pent-up demand due to the slow sales in the preceding months after the Prime Minister announced a GST overhaul on Independence Day in August 2025,” Damani said.
“The OEMs and dealers are only supporting this retail momentum by offering lucrative schemes in December. We only hope that price hikes in the New Year remain in the 1.5-2 per cent range so as not to impact this momentum,” he added.
However, FADA has cautioned that the upcoming mandate for ABS fitment in all two-wheelers could have a detrimental effect on two-wheeler sales as buyers would be looking at a price increase in the range of ₹5,000-10,000.
While the regulation was initially slated to come into effect from January 1, 2026, industry insiders believe that it is likely to be deferred owing to the lack of industry readiness considering the significant volumes involved in the two-wheeler segment.
