Q1 FY26 Auto Report: Exports Rise, Domestic Sales Fall
The first quarter of the financial year 2025-26 (April-June) presented a mixed picture for the Indian automobile sector. While domestic vehicle sales saw a decline of 5.1%, exports in the Passenger Vehicle (PV) and Utility Vehicle (UV) segments showed strong momentum. As per the latest figures released by SIAM, domestic demand remained subdued, but the global appeal of ‘Made in India’ vehicles continued to strengthen.
Sluggishness in the Domestic Market
According to the Q1 FY26 report, overall vehicle sales in the country dropped by 5.1% between April and June 2025. The primary reason for this decline was the weak performance of the two-wheeler and hatchback segments. Several major automakers also witnessed significant drops in their domestic sales.
Hyundai India recorded domestic sales of 44,024 units in June 2025 — nearly 12% lower than the same period last year. Tata Motors sold a total of 2,10,415 vehicles during Q1 FY26, marking a year-on-year decline of approximately 9.12%. Passenger vehicle sales alone saw a drop of up to 10%.
Key Factors Behind the Decline in Sales
- Weak Consumer Sentiment: Persistently high interest rates and inflation have reduced consumers’ purchasing power.
- Financing Challenges: Financing vehicles has become increasingly difficult, especially in rural and semi-urban areas.
- Inventory-Retail Imbalance: Dealers are holding an average inventory of 55 days — the highest level in the past 18 months.
- Seasonal Impact: A weak start to the monsoon season has directly impacted demand for tractors and rural-market vehicles.
Strength in SUV and UV Segments
Despite the overall decline, the SUV segment continued to show robust performance. Increasing consumer preference for high ground clearance, advanced features, and safety has kept demand for SUVs strong.
- Hyundai Creta emerged as the highest-selling SUV in Q1 FY26 with 47,662 units sold. Other popular models like Maruti Brezza (47,044 units), Mahindra Scorpio (42,675 units), and Tata Nexon (40,155 units) also performed well.
- Mahindra’s SUV portfolio maintained strong traction, particularly in rural and semi-urban markets. During this quarter, SUVs accounted for approximately 49% of total passenger vehicle sales, highlighting the segment’s dominant position.
Two-Wheelers and Commercial Vehicles
Two-wheeler sales fell by 6.2% in Q1 FY26, largely due to a decline in spending capacity among middle-class consumers and limited access to easy financing. Leading companies like Bajaj Auto, Hero MotoCorp, and TVS Motor faced sluggish domestic demand.
The commercial vehicle (CV) segment also remained under pressure. While there was slight improvement in the sales of HCVs and buses, the demand for Small Commercial Vehicles (SCVs) and pickups saw a notable dip.
“Made in India” Shines Globally
India exported over 1.457 million vehicles in Q1 FY26, reflecting a 22.2% increase compared to the same period last year. This quarter witnessed record growth in exports across all three categories — passenger vehicles, two-wheelers, and commercial vehicles.
Two-wheelers led the export chart with 11,36,942 units shipped abroad. Commercial vehicle exports rose sharply by 52.8%, underscoring the growing demand for Indian-made vehicles in developing countries. Indian vehicles are now making deeper inroads in key international markets such as Africa, Latin America, South Asia, and the Middle East.
Pre-Owned Car Market Outpaces New Vehicle Sales
Another notable trend has been the rapid growth of the used car market, which is now outpacing new car sales. Reports suggest that nearly 6 million used cars are sold annually in India — a number higher than that of new vehicle sales.
Digital platforms like Cars24, OLX Autos, and Spinny have helped streamline and organise the used car segment, making it easier and more transparent for buyers to purchase verified vehicles without the need for traditional dealerships.
Dealer Network and Market Sentiment
A recent survey conducted by FADA (Federation of Automobile Dealers Association) revealed that by June 2025, vehicle inventory at dealerships had reached 55 days — the highest level in the past 18 months. This has led to growing uncertainty in the market and increasing dissatisfaction among dealers.
Nearly 69% of dealers surveyed expressed concerns that demand in Q2 FY26 (July-September) might remain weak or decline further.
Strategic Focus of Automakers
In the face of intense competition and uncertain demand, automakers are now concentrating on two clear strategic priorities:
- Boosting Exports: Major players like Tata Motors, Maruti Suzuki, Hyundai, and Mahindra are strengthening their presence in African and Asian markets.
- Pushing Electric Mobility: Companies are stepping up investment in the EV segment and introducing new electric models. Tata Motors, for instance, recorded sales of 16,231 electric vehicles in Q1 FY26.
Forecast for the Coming Months
Experts believe that domestic sales may not see a significant revival in Q2 FY26. However, the festive season — including Ganesh Chaturthi, Dussehra, and Diwali — may help the market regain momentum.
For now, the auto sector’s strongest bets remain the SUV and electric vehicle segments, with several new model launches expected in the coming months.
Conclusion
Overall, Q1 FY26 has compelled the Indian automobile industry to reassess its strategies. While weak domestic demand and consumer sentiment remain causes for concern, the surge in exports and SUV segment performance point toward promising opportunities ahead.
Digitisation, electric mobility, export expansion, and shifting consumer preferences — these four factors are set to reshape the future of this sector. How well government policies, corporate strategies, and customer expectations align will ultimately determine the speed and success of India’s automobile sector in the years to come.
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