Passenger car sales fell to an 18-month low.
That was the confrontation with the macro mood The Indian automotive industry in 2025, during the first half of the year.After several years of steady expansion, the sector faced declining demand this year and increasing caution among buyers. Data released periodically by the Society of Indian Automobile Manufacturers (SIAM) shows passenger car volumes leveling off at high levels, while mass market two-wheeler sales weakened, especially in rural markets. Executives repeatedly pointed to affordability pressures, uneven income growth and cautious urban consumers as factors weighing on demand.
The softness lasted for months. The number of passenger cars sold in July was marginally lower than a year earlier, while sales fell in the June quarter, ending a four-year period of growth. SIAM officials flagged subdued sentiment, inventory corrections at dealers and disruptions caused by heavy rains and phases considered unfavorable for shopping. While premium commercial vehicles continued to post relatively better numbers, tension was visible in entry-level cars and cheaper two-wheelers, reflecting pressure on price-sensitive consumers.
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Reset of the Red Fort: August 15 brings a change
Then, on August 15, a policy promise set in motion the chain of events that unfolded for India Inc. would prove to be a tectonic shift in the trajectory of the year.
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 change cost assumptions across the automotive value chain.
For a sector that had struggled with stagnation and uncertainty for months, the announcement marked a decisive break in the story.
September Waiting Game: Buyers Hold Back
The turning point came in early September.
On September 3, the GST Council formally approved a recast of indirect taxes on automobiles, a move that translated into lower prices across all vehicle categories and paved the way for a revival in demand that had eluded the sector for most of the year. While sales remained subdued in the weeks leading up to the transition, automakers and dealers began recalibrating production, pricing and inventory strategies in anticipation of a post-tax overhaul rebound.
That break was visible on the ground. Car sales remained subdued for most of September as buyers postponed their purchases in anticipation of the new tax rates, a period that coincided with the start of the festive calendar. However, the silence turned out to be short-lived. On September 23 – the first day of Navratri and the effective introduction of the revised GST regime – demand fell sharply, catching even seasoned dealers off guard.
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Navratri wave: Dealers are running at full speed
At showrooms in Delhi, Gurugram and Mumbai, scheduled vehicle deliveries for the day were three to five times higher than normal, The Economic Times reported. “The GST cut has given a big boost. We are seeing huge demand for small cars,” said Sanjay Passi, chairman of Pasco Group, which operates Maruti Suzuki dealerships in Gurugram. Smaller towns and cities reflected the trend, with dealers reporting an increase in footfall and inquiries for both two-wheelers and cars.
Automakers also began reporting early signs of acceleration. Maruti Suzuki has raked in 75,000 bookings since September 18 after announcing additional incentives on top of the GST cuts, with daily bookings about 50% higher than normal. “Demand for small cars has been particularly strong, with bookings growing by almost 50%,” said Partho Banerjee, senior executive officer (marketing and sales), Maruti Suzuki, speaking to ET during the year, even as SUVs continued to dominate overall bookings. Hyundai Motor India recorded around 11,000 dealer invoices in a single day – the highest in five years – a feat that Tarun Garg, full-time managing director and chief operating officer, described as “clear evidence of robust festive sentiment and customer confidence.”
October Bonanza: Records Tumble
What started as a celebratory peak quickly expanded into a sustainable recovery. October became a landmark month for the industry, with vehicle sales reaching a record high of around four million units, driven by passenger cars and two-wheelers. Registrations rose 40.5% year-on-year, thanks to pent-up demand, lower car prices post the GST cuts and strong festive sentiment, according to data compiled by the Federation of Automobile Dealers Associations (FADA). Passenger car registrations reached a monthly record of 557,373 units, while two-wheelers reached their highest ever level with over 3.1 million units.
“October ’25 will go down as an important month for Indian auto retailing, where reforms, celebrations and rural revival came together to deliver record-breaking results,” said CS Vigneshwar, president of FADA, according to a separate report by ET. Pointing to a sharp improvement in demand in rural areas, he noted that sales of passenger cars in rural markets grew more than three times faster than in urban areas, while the growth of two-wheelers in rural areas almost doubled urban figures.
November Momentum: Wheels in overdrive
By November the recovery was firmly established. Car sales rose by strong double digits to an estimated 420,000-425,000 units, driven by demand momentum post the GST reset. Maruti Suzuki posted a 21% jump in wholesale volumes to 170,971 units, while retail sales rose 31%. “Our sales last month are the highest we have ever seen in the month of November in the last four decades,” Banerjee said, adding that production teams continued to work during the festive season to reduce waiting times. Sales of smaller cars increased faster than those of larger cars, reflecting improved affordability to the mass segment of the market.
Other manufacturers repeated the trend. Tata Motors and Mahindra & Mahindra reported volume growth of 22% 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 drive the sales momentum,” Garg said. Toyota Kirloskar Motor also reported strong growth, with Varinder Wadhwa, vice president for sales and service, saying, “After a positive festive season, supported by the government’s progressive GST reforms, we continue to witness strong momentum.”
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In addition to passenger cars: sales of tractors, CVs and two-wheelers are increasing enormously
The revival in demand extended far beyond passenger cars. Two-wheeler sales rose among manufacturers, commercial vehicle volumes rose sharply and tractor sales showed strong growth on the back of improved rural cash flows coupled with tax relief. “The government’s progressive move to reduce GST rates, coupled with a higher MSP, will lead to positive cash flow for farmers and help drive demand for tractors and farm equipment,” said Veejay Nakra, President of Farm Equipment Business at Mahindra & Mahindra.
As a result of this monumental shift, industry executives and analysts began reassessing the industry’s prospects. Automakers 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 previously achieved modest growth, has revised its expectations upward after the tax overhaul. “We now think this would be much higher,” said Gaurav Vangaal, associate director at S&P Global Mobility, pointing to the surge in demand after the GST cuts.
All in all, 2025 was a year of contrasts for the Indian auto industry: a slow start marked by caution and uncertainty, followed by a sudden surge that caught even the most seasoned dealers by surprise. But questions linger beneath the numbers: Will the momentum hold? Will production, supply chains and affordability keep pace with the renewed appetite?
As the industry heads into 2026, one thing is clear: the road ahead will present both opportunities and challenges, and how manufacturers, dealers and policymakers navigate it will define the next chapter of the Indian automotive story.
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