Tata Motors and Hyundai Motor India reported decline in sales while Mahindra & Mahindra continues to grow its numbers. Automobile stocks will be in focus this week as US President Trump has announced tariffs on automobile and auto components imports at 25 percent. Automobile companies will need some time to adjust to the new tariffs and changing business environment. Last week, automobile companies witnessed sharp selling as Trump announced tariffs. This week, some of the stocks could see re-rating from analysts as sales numbers are anything but impressive in passenger vehicles and commercial vehicles segments.

Passenger Vehicle Sales Struggle in FY25 as Tata Motors, Hyundai Underperform; Mahindra Shines Amid Discount-Driven Market

Passenger vehicle manufacturers are set to end FY25 on a subdued note, as retail demand remains sluggish despite aggressive discounting and promotional efforts. Tata Motors and Hyundai India have both underwhelmed during the fiscal year, with Tata Motors reporting a 3.5% decline in sales over the first 11 months. March, typically a key sales month for automakers, is expected to close on a similar muted trend, according to industry analysts.

However, brokerage firm Nomura expects a mild improvement in volumes toward the month’s end, buoyed by earlier Navratri festivities—set to begin March 30 this year—and pre-buying behavior ahead of price hikes planned by several automakers in April.

Mahindra Continues to Outpace Industry Despite Cooling Growth

While much of the passenger vehicle (PV) segment has grappled with inconsistent performance, Mahindra & Mahindra has remained a bright spot, consistently outperforming broader industry growth rates. Although the company’s sales growth has moderated to low double digits in recent months, it still surpasses the industry average, driven by strong demand for its SUV lineup and continued supply-chain stability.

Analysts suggest Mahindra’s product mix and rural market penetration have helped cushion it against the sector-wide softness seen in urban demand.

Dealer-Level Discounts Soar as Inventory Piles Up

Discounts in the PV segment have reached elevated levels across manufacturers, with dealer-level incentives up nearly 75% to 80% year-over-year, according to brokerage firm Motilal Oswal. The sharp increase reflects automakers’ efforts to clear inventory amid tepid retail momentum.

Maruti Suzuki, the country’s largest carmaker, has seen inventory levels balloon, with dealer stock rising from 1–2 weeks in January 2025 to 5–6 weeks currently. While the company has managed to align with the industry’s modest 5–6% growth, the expansion of its SUV portfolio has been the key factor behind its sales stability.

Commercial Vehicle Segment Falters as Truck Sales Lag

The commercial vehicle (CV) segment is expected to end the month flat, with little-to-no sales growth projected for March, putting further pressure on listed CV players. The bus segment remains the lone bright spot, with demand expected to increase by 1–2% year-over-year, aided by continued fleet replacement in institutional and public transport markets.

In contrast, truck sales continue to struggle, weighed down by slow infrastructure-related capital expenditure during 2024. The lack of fleet expansion by transporters and subdued freight movement have stalled incremental truck purchases.

Freight Rates Drop, but Fail to Lift Truck Sales

Motilal Oswal noted that fleet operators have lowered freight rates in a bid to put underutilized trucks back on the road. However, this has not translated into new vehicle demand, as most operators remain focused on improving fleet utilization rather than expanding capacity.

With the CV segment highly sensitive to economic cycles, the industry awaits a meaningful pickup in government-led infrastructure spending and private sector logistics capex to revive demand for medium and heavy commercial vehicles.

Outlook: Margin Pressures and Inventory Risks Loom Large

As FY25 concludes, automakers remain caught in a difficult balancing act—facing rising inventory costs, mounting dealer discounts, and cautious consumer sentiment. With April set to bring a wave of price hikes across the board, the final days of March may offer a temporary sales push. However, without sustained demand revival or policy tailwinds, the broader outlook for the auto sector appears cautious heading into the new fiscal year.

Investors and analysts alike will be closely watching how early festival demand, interest rate trends, and input costs shape the operating environment in FY26.