2W, PV and CV sales decline in May as tepid demand, high financing costs linger

M&M, Tata Motors, Bajaj Auto, Eicher Motors, and TVS Motor Company were the major drags on the index.

Automobile sales across two-wheelers, passenger vehicles, and commercial vehicles declined in May, according to data from the Federation of Automobile Dealers Associations (FADA), as tepid demand and elevated financing costs continued to dampen consumer sentiment.

Two-wheeler sales slipped 2 percent month-on-month to 16.5 lakh units. While the decline was relatively mild compared to other segments, limited financing availability capped any potential upside. However, FADA noted that factors like auspicious marriage days, a strong Rabi harvest, and a favourable monsoon could support demand in semi-urban and rural areas in the months ahead.
"Looking ahead, stakeholders should continue to monitor liquidity access and model availability to preserve momentum," FADA said in its recent report.

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In their Q4 earnings calls, Hero MotoCorp and TVS Motor pointed to rural recovery and stable input costs as key growth drivers. Demand has been strong during the ongoing wedding season, especially in rural markets where gifting two-wheelers is a tradition. While new OBD-2 emission norms have pushed up prices by roughly 2 percent, companies said this has not yet derailed demand momentum.

However, two-wheeler EV production faces an emerging risk. Recent export curbs by China on rare earth magnets—critical components for EVs—could disrupt production as early as July, Bajaj Auto and TVS Motor have warned.

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Passenger vehicle (PV) sales fell sharply by nearly 14 percent to 3 lakh units in May, as dealers reported elevated inventory levels and sluggish retail conversions, particularly for legacy models.
After a strong post-pandemic run, India’s PV market is showing signs of fatigue. Industry estimates project muted growth of just 1–2 percent in FY26, down from 3 percent in FY25. Affordability issues, macroeconomic uncertainty, and shifting buyer behaviour are weighing on sentiment.

To revive sales, automakers have reintroduced discounts across several models. “The industry is taking a cautious view,” said Maruti Suzuki Chairman RC Bhargava, citing SIAM’s forecast of low single-digit growth for the current fiscal year.

Commercial vehicle (CV) sales declined 11.25 percent to just over 75,000 units in May. According to FADA, the segment continues to grapple with elevated inventory levels as OEMs and dealers prepare for the June 2025 deadline mandating air-conditioned cabins in trucks. Meanwhile, freight movement in key sectors such as coal, cement, and mining remains muted due to early monsoon rains and liquidity constraints.

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Adding to the sector’s troubles, experts warn that the government’s 12 percent safeguard duty on steel imports could sharply raise input costs, with the steepest impact likely on CV manufacturers such as Ashok Leyland, Tata Motors, and Mahindra & Mahindra.

The pressure on margins is expected to begin showing in Q1 FY26 earnings, with a sharper impact in Q2 as companies exhaust lower-cost steel inventories and start buying at higher rates.

At about 12:33 pm, the Nifty Auto was trading at 23,246, lower by 0.52 percent from the last close.
M&M, Tata Motors, Bajaj Auto, Eicher Motors, and TVS Motor Company were the major drags on the index.

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