India auto retail sales rise 7.7% in 2025 as GST 2.0 sparks second-half rebound: FADA

India’s automobile retail sales rose 7.71% to 2.81 lakh units in calendar year 2025, helped by GST rate rationalisation in the second half of the year that improved affordability, industry body Federation of Automobile Dealers Associations (FADA) said on Tuesday.

Describing the year as a “two-half” story, FADA said the sales were muted from January to August but picked up sharply from September after the rollout of “GST 2.0”, which cut taxes for mass segments such as small cars, two-wheelers and three-wheelers.

Two-wheeler sales rose 7.24% year-on-year, passenger vehicles climbed 9.7% and commercial vehicles grew 6.71%, while tractor sales increased 11.52%.

Construction equipment was the only laggard, falling 6.67%.

Rural demand outperformed in PVs during the year, growing 12.31% compared with 8.08% in urban markets

“The turning point came from September onwards, when the landmark GST 2.0 rate rationalisation… improved affordability and lifted sentiment,” FADA President C S Vigneshwar said in a statement.

Electric vehicles accounted for about 61% of three-wheeler retail sales, while EV penetration stood at 6.31% in two-wheelers and 3.95% in passenger vehicles. Compressed natural gas (CNG) vehicles made up over a fifth of passenger vehicle sales.

Strong finish in December

Retail sales rose 14.63% year-on-year in December to 20.28 lakh units, marking a strong year-end finish.

Passenger vehicle sales jumped 26.64% in the month, while commercial vehicles rose 24.6% and three-wheelers surged 36.1%.

Passenger vehicle inventory levels eased to about 37–39 days, down around a week from November, FADA said.

Dealers expect momentum to continue into early 2026, aided by festival and wedding-season demand.

“That said, we continue to flag financing turnaround time and approval selectivity as a friction point in parts of the market—something that needs sharper focus to sustain momentum,” Vigneshwar said.

Nearly 70% of dealers expect sales growth in January and about three-quarters expect growth over the January–March period, FADA’s survey showed.

“Demand should stay supported by the post-GST 2.0 sentiment, a packed calendar of festivals and the marriage season, and typical financial-year-end buying,” FADA said on the outlook.