Automobile retail sales in India rose six per cent to 2,61,43,943 units in FY25 with rural areas performing better than urban regions across passenger vehicle and two-wheeler segments, dealers’ body FADA said on Monday.

The last financial year saw growth in sales of passenger vehicles, two-wheelers and three-wheelers. Registrations of commercial vehicles and tractors however saw a dip in FY25 as compared to FY24. Overall retail sales stood at 2,45,58,437 units in the 2023-24 fiscal.

As per FADA, passenger vehicle retail sales witnessed an increase of 5 per cent to 41,53,432 units last fiscal as compared to 39,60,602 units in FY24. Two-wheeler registrations rose eight per cent to 1,88,77,812 units as compared to 1,75,27,115 units in 2023-24 fiscal. “FY25 truly showcased how adaptable and resilient India’s auto retail sector can be. Key highlight this year was the strong performance in rural areas,” FADA President C S Vigneshwar said in a statement.

In the two-wheeler space, rural markets grew by eight per cent, comfortably outpacing the urban growth, he added. In the passenger vehicle vertical, rural sales growth stood at eight per cent as compared to three per cent in urban areas, he said. Three-wheeler sales rose five per cent to 12,20,981 units last fiscal as compared to FY24. Three-wheelers saw a rural growth of nine per cent last fiscal as compared to flat sales growth in cities. Commercial vehicle sales declined marginally to 10,08,623 units last fiscal as compared to 10,10,324 units in the 2023-24 fiscal. Tractor sales declined one per cent year-on-year to 8,92,410 units last fiscal as against 8,83,095 units in FY24. The industry body said that dealers across India are cautiously optimistic looking ahead to FY26, with FADA projecting mid – to high single-digit growth in the two-wheeler segment and low single-digit growth for both PV and CV segments. Many dealers pin their hopes on a combination of upcoming model launches and renewed interest in electric vehicles, it said.

“Yet, significant headwinds dampen overall optimism. Financing remains a persistent challenge. Dealers note that credit norms have tightened in recent months, and the need for further rate cuts by the RBI to bring down borrowing costs,” it added. Adding to the uncertainty is the looming spectre of a global tariff war, which could spark stock market turbulence and erode returns on mutual fund SIPs, FADA said.

If investors see their disposable incomes shrink in tandem with market volatility, discretionary spending -- like auto purchases -- may well suffer, it added .

Within the PV segment, new launches and strategic marketing can offer a lift, but widespread concerns remain about subdued consumer sentiment, it noted.

In the CV segment, the dealers expect only a modest pickup in segments like school buses and passenger carriers while freight demand remains patchy, FADA stated.

“Overall, despite the prospect of incremental growth, lingering caution colours the outlook for FY26 as the health of the auto sector will hinge on how effectively stakeholders manage financing challenges, adapt to a shifting global trade environment and better inventory management,” it added.

In March, overall automobile sales saw marginal year-on-year dip at 21,26,988 units.

Passenger vehicle registrations rose 6 per cent year-on-year to 3,50,603 units in March.

Two-wheeler sales declined 2 per cent year-on-year to 15,08,232 units as compared to 15,35,398 units in March 2024.