Vehicle Sales in India Surge in 2025: What’s Driving the Growth?
Strong Growth in Vehicle Sales
New Delhi: In 2025, vehicle retail sales in India saw a remarkable increase of 7.71%, reaching a total of 28,161,228 units compared to 26,145,445 units in 2024. This growth was significantly aided by the implementation of GST 2.0, according to the Federation of Automobile Dealers Associations (FADA).
Passenger vehicle sales rose to 4,475,309 units in 2025, marking a 9.7% increase from 4,079,532 units in the previous year, as reported by FADA.
Two-wheeler sales also experienced a boost, climbing by 7.24% to 20,295,650 units last year, up from 18,924,815 units in 2024.
Three-wheeler sales reached 1,309,953 units in 2025, a rise of 7.21% compared to 1,221,886 units in 2024.
Commercial vehicle sales grew by 6.71%, totaling 1,009,654 units in 2025, up from 946,190 units in the previous year.
FADA President CS Vigneshwar commented that 2025 was characterized by two distinct phases. The first half of the year was lackluster despite favorable macroeconomic indicators, such as direct tax relief in the Union Budget and the Reserve Bank of India's rate cuts throughout the year.
During this period, consumers were cautious about spending, and financing approvals were selective, leading to inconsistent sales across different markets.
A turning point occurred in September, when the GST 2.0 rate adjustments, which included significant reductions for popular segments like small cars and two-wheelers (up to 350cc), improved affordability and boosted consumer sentiment, resulting in a noticeable increase in sales from September to December.
Vigneshwar also noted that 2025 highlighted the ongoing shift towards electrification, with electric vehicle (EV) sales rising in two-wheelers, passenger vehicles, and commercial vehicles, while CNG vehicles gained traction in passenger and commercial segments, indicating a more varied mobility landscape.
"The year ends on a positive note, with stronger demand visibility, healthier inquiry rates, and a more confident consumer base as we approach 2026," Vigneshwar added.
Looking ahead, FADA's outlook for the next three months remains optimistic, with 74.91% of dealers anticipating growth.
"Demand is expected to be supported by the positive sentiment following GST 2.0, a busy festival calendar, the wedding season, and typical year-end purchasing trends," the organization stated.
Additionally, rural market conditions appear favorable, with reports indicating that rabi sowing is ahead of last year's pace, and the India Meteorological Department's forecast of a colder January is expected to benefit key winter crops, enhancing cash flow and consumer confidence.
On the macroeconomic front, the RBI's repo rate at 5.25% offers some relief on borrowing costs, while discussions around a consumption-friendly, tax-relief-oriented Union Budget could further stimulate discretionary spending.
"Price adjustments by original equipment manufacturers (OEMs) are likely to maintain urgency in purchases, even as discounts may stabilize on select 'model year 2025' inventory," FADA concluded, emphasizing that overall sentiment is positive and improving, contingent on timely supply, quicker financing processes, and disciplined inventory management.