India’s passenger vehicle (PV) industry is projected to grow at a modest 1.5% in FY25, according to a recent report by Nomura. The anticipated low single-digit growth stems from subdued consumer demand, despite a strong start to the year driven by channel filling and low inventory levels in December.
On the other hand, the two-wheeler (2W) segment could see better prospects, as weak domestic demand might be offset by a recovery in exports. Meanwhile, the tractor industry is expected to witness a 7% year-on-year (y-o-y) growth, and the outlook could improve further if demand remains strong. The government’s continued financial support for farmers through rural development schemes and agricultural subsidies may encourage higher tractor sales, boosting the sector.
Among key manufacturers, Mahindra & Mahindra’s SUVs and light commercial vehicles (LCVs), along with TVS Motor’s scooters, performed better than expected. However, Tata Motors’ passenger vehicles failed to meet market estimates. Moving forward, discounts on passenger vehicles are expected to rise, potentially impacting profitability.
The Union Budget’s revisions in personal income tax are seen as a positive for the automobile sector, but their actual impact may be limited. Since 60% of India’s 80 million tax filers do not pay any tax, the effect of tax cuts on overall vehicle sales is expected to be minimal. While higher-income individuals under the New Tax Regime may benefit from increased savings, most taxpayers still follow the Old Tax Regime, where deductions reduce their disposable income.
This means that the boost in automobile sales will likely be concentrated in the premium segment. SUVs, which are already a growing market, could see higher demand, whereas budget cars may not experience significant sales growth. The evolving market trends indicate a shift toward larger vehicles, aligning with consumer preferences among those with higher disposable incomes.
