Domestic passenger vehicle sales stayed almost unchanged from a year earlier.
Two-wheeler sales contracted, snapping a four-year growth streak.
Passenger vehicle sales slid to an 18-month low.
That was the macro mood confronting India’s automobile industry in 2025, through the first half of the year.
After several years of steady expansion, the industry entered this year facing slowing demand and growing caution amongst buyers. Data released periodically by the Society of Indian Automobile Manufacturers (SIAM) showed passenger vehicle volumes flattening on a high base, while sales of mass-market two-wheelers weakened, particularly in rural markets. Executives repeatedly pointed to affordability pressures, uneven income growth and cautious urban consumers as factors weighing on demand.
The softness persisted for months. Passenger vehicle dispatches in July were marginally lower than a year earlier, while sales in the June quarter declined, ending a four-year growth run. SIAM officials flagged subdued sentiment, inventory correction at dealerships and disruptions caused by heavy rainfall and phases considered inauspicious for shopping. While premium utility vehicles continued to post relatively better numbers, stress was visible in entry-level cars and lower-priced two-wheelers, reflecting the pressure on price-sensitive consumers.
Red Fort reset: August 15 brings with it a change
Then, on August 15, one policy promise set in motion the chain of events that would prove to be a tectonic shift in the trajectory of the year, for India Inc.
The promise of reform.
From the ramparts of the Red Fort, Prime Minister Narendra Modi announced a reset of the goods and services tax framework: a policy move that would significantly alter cost assumptions across the automobile value chain.
For an industry that had spent months grappling with stagnation and uncertainty, the announcement marked a decisive break in the narrative.
September’s waiting game: Buyers hold back
The turning point arrived in early September.
On September 3, the GST Council formally cleared a recast of indirect taxes on automobiles, a move that translated into lower prices across vehicle categories and set the stage for a demand revival that had eluded the industry for most of the year. While sales remained muted in the weeks leading up to the transition, automakers and dealers began recalibrating production, pricing and inventory strategies in anticipation of a post-tax reset bounce.
That pause was visible on the ground. Automobile sales stayed subdued through much of September as buyers delayed purchases ahead of the new tax rates, a period that coincided with the start of the festive calendar. The lull, however, proved brief. By September 23 — the first day of Navratri and the effective rollout of the revised GST regime — demand snapped back sharply, catching even seasoned dealers off guard.
Navratri surge: Dealerships on overdrive
Across showrooms in Delhi, Gurugram and Mumbai, vehicle deliveries planned for the day were three to five times higher than normal, The Economic Times reported. “The GST cut has been a big boost. We are seeing huge demand for small cars,” according to Sanjay Passi, chairman of Pasco Group, which operates Maruti Suzuki dealerships in Gurugram. Smaller towns and cities mirrored the trend, with dealers reporting a surge in footfalls and enquiries across both two-wheelers and cars.
Carmakers, too, began reporting early signs of acceleration. Maruti Suzuki secured 75,000 bookings since September 18 after announcing additional incentives over and above the GST cuts, with daily bookings running about 50 per cent higher than usual. “Demand for small cars has been especially strong, with bookings growing by nearly 50 per cent,” Partho Banerjee, senior executive officer (marketing and sales) at Maruti Suzuki, said in a conversation with ET during the year, even as SUVs continued to dominate overall bookings. Hyundai Motor India recorded around 11,000 dealer billings on a single day — its highest in five years — a performance Tarun Garg, whole-time director and chief operating officer, described as “a clear testament to robust festive sentiment and customer confidence.”
October bonanza: Records tumble
What began as a festive spike soon broadened into a sustained recovery. October turned into a landmark month for the industry, with vehicle retail sales hitting an all-time high of about four million units, driven by passenger vehicles and two-wheelers. Registrations surged 40.5 per cent year-on-year, lifted by pent-up demand, lower vehicle prices following the GST cuts and strong festive sentiment, according to data collated by the Federation of Automobile Dealers Associations (FADA). Passenger vehicle registrations touched a monthly record of 557,373 units, while two-wheelers scaled their highest-ever level at over 3.1 million units.
“October ’25 will be remembered as a landmark month for India’s auto retail, where reforms, festivities, and rural resurgence came together to deliver record-breaking results,” C S Vigneshwar, president, FADA, said according to a separate report by ET. He pointed to a sharp improvement in rural demand, noting that passenger vehicle sales in rural markets grew more than three times faster than urban areas, while rural two-wheeler growth nearly doubled urban rates.
November momentum: Wheels in overdrive
By November, the rebound was firmly entrenched. Car sales rose in strong double digits to an estimated 420,000–425,000 units, driven by demand momentum following the GST reset. Maruti Suzuki posted a 21 per cent jump in wholesale volumes to 170,971 units, while retail sales climbed 31 per cent. “Our sales last month is the high-ever we have seen for the month of November in the last 40 years,” Banerjee said, adding that production teams were working through holidays to cut waiting periods. Sales of smaller cars rose faster than larger vehicles, reflecting improved affordability at the mass end of the market.
Other manufacturers echoed the trend. Tata Motors and Mahindra & Mahindra reported volume growth of 22 per cent each in November, while Hyundai Motor India posted a year-on-year increase and cited the GST overhaul as a key driver. “Supported by GST 2.0 reforms, we continue to carry forward sales momentum,” Garg said. Toyota Kirloskar Motor also reported strong growth, with Varinder Wadhwa, vice president for sales and service, saying, “Following a positive festive season supported by the government’s progressive GST reforms, we continue to witness a strong momentum.”
Beyond passenger vehicles: Tractor, CV and two-wheeler sales surge
The demand revival extended well beyond passenger vehicles. Two-wheeler sales jumped across manufacturers, commercial vehicle volumes rose sharply and tractor sales recorded strong growth as improved rural cash flows combined with tax relief. “Government’s progressive measure of GST rate reduction coupled with higher MSP is leading to positive cash flow for farmers and aiding tractor and farm equipment demand,” said Veejay Nakra, president, farm equipment business at Mahindra & Mahindra.
As a result of this monumental shift, industry executives and analysts began reassessing the industry outlook. Carmakers expanded production plans, added shifts and ramped up capacity to meet demand, while forecasters flagged a stronger-than-expected carryover into the new year.
S&P Global Mobility, which had earlier pencilled in modest growth, revised its expectations upward following the tax reset. “We now feel this would be much higher,” said Gaurav Vangaal, associate director at S&P Global Mobility, pointing to the demand surge following the GST cuts.
All in all, 2025 was a year of contrasts for India’s auto industry — a slow start marked by caution and uncertainty, followed by a sudden surge that caught even the most seasoned dealers by surprise. Yet, beneath the numbers, questions linger: Will the momentum hold? Will production, supply chains and affordability keep pace with renewed appetite?
As the industry heads into 2026, one thing is clear: the road-ahead will offer both opportunities and challenges, and how manufacturers, dealers and policymakers navigate it will define the next chapter of India’s auto story.>
