Demand slowdown hurts auto sales in Feb, high inventory a challenge: FADA

Automotive sales declined 7% year-on-year in February to 1,899,196 units, hurt by an over 6% fall in two-wheeler purchases to 1,353,280 units, Federation of Automobile Dealers Association (FADA) data showed on Thursday.

All the segments, including cars and commercial vehicles declined, with tractor sales suffering the worst fall of 14.5% to 65,574 units in February.

The dealers’ association attributed the decline in sales to weak consumer sentiment and raised concerns about rising inventory, claiming that automakers pushed products without the consent of the dealers. FADA has also asked auto companies to align wholesale with genuine demand.

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“Entry-level demand remained particularly soft, with dealers citing delayed conversions and challenging targets. Inventory levels stood at 50–52 days, underscoring the importance of aligning wholesale targets with actual retail potential,” the dealers’ association said.

Passenger vehicles sales slipped 10% year-on-year to 303,398 units in February.

Analysts have noted the concerns over inventory and said that the retail sales picture is looking bleak. Amit Hiranandani, research analyst at PhillipCapital, wrote in a note dated 27 February, “Lower discounts in February, pre-buying in December month owing to high discounting & fast slowing urban consumption impacting demand overall. OEMs (original equipment manufacturers) have been filling inventory despite poor retail show.”

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The note pegged inventory levels of Maruti at 25+ days at the end of February. For Hyundai and Tata Motors passenger vehicles, the inventory was at 30-40 days, while Mahindra & Mahindra’s inventory stood at 21-25 days.

The year started on a muted note for India’s auto sector. Sales growth was at 6.63% in January over the same month last year. The sector closed 2024 with over a 9% rise in sales, but the momentum for now appears to be fizzling out.

The dealers’ association has said it is cautiously optimistic, but there are factors that can play a spoilsport. The performance of the stock market being one of them.

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“Five consecutive months of declining stock markets have dampened consumer confidence—with investors closing more SIPs rather than opening new ones and reduced discretionary spending driven by dented profitability,” FADA said in its outlook for the market.

But overall, the association feels there are some positives on the horizon for the sector in the coming months. Festive season in March may help boost sales.

“While mixed sentiments persist, an adaptive market strategy that leverages festive demand and favourable financial incentives is anticipated to drive a recovery in March,” it said.

The benchmark Sensex has fallen by over 5% in 2025 so far. The BSE Auto Index has declined by nearly 10% this year.

A demand slowdown has sparked a fierce competition among automakers. Mahindra had a larger share in the passenger vehicles market than Tata Motors in February, unlike last year.

The commercial vehicles space also saw Mahindra increasing its market share by two percentage points in February from last year. Tata Motors’s market share fell three percentage points in the same period. The gap in commercial vehicles market share between the two companies has reduced to seven percentage points in February, from 12 percentage points last year.