China’s rare earth materials supply curb, US tariffs to hit auto sales in July: FADA

New Delhi: China’s restrictions on rare earth materials supplies and the uncertainties over the US tariffs are likely to hit auto sales in India in the current month after posting near 5% year-on-year growth in June, the Federation of Automobile Dealers Association (FADA) said on Monday.

“As we enter July 2025, dealer sentiment appears tilted towards slowdown,” the auto dealers’ lobby saidin its monthly report.

Around 69% dealers expect either decline or no growth in auto sales in July, while only 31.1% forecast growth. Out of the total dealers that participated in the FADA survey, 26.1% forecast decline in sales while 42.8% expect no growth.

Evolving geopolitical tensions and potential spill-over from US tariff measures warrant vigilant supply-chain management and could temper consumer sentiment. Also, challenges in securing rare-earth materials have stalled component production, further constraining supply and retail volumes, FADA said.

The Indian auto sector is heavily dependent on Chinese supply of rare earth materials, which have been disrupted since April. China controls over 90% of global processing capacity for the rare earth magnets, which are crucial for the auto sector, especially electric vehicles.

Several automakers have already reported adverse impact on their production and the situation is likely to aggravate if the Chinese curbs are not eased.

Retail sales of passenger vehicles increased by 2.45% year-on-year to 2.97 lakh units in June. Two-wheeler sales jumped by 4.73% to 14.46 lakh units during the month under review while there was a sharp increase of 55% in sales of construction equipment and 6.6% jump in the commercial vehicles segment.

The overall automobile retail sales in June increased by 4.84% year-on-year to 20,03,873 units.

“While festival and marriage-season demand provided a boost, financing constraints and intermittent variant shortages moderated sales. Early monsoon rains and rising EV penetration also shaped buying patterns,” said FADA President C S Vigneshwar.

Several dealers cited compulsory billing and forced stock lifts—often via auto-debit wholesales—leading to mandated high days of inventory aligned with festival season targets. Overall, June demonstrated a resilient two-wheeler performance amid mixed market signals, Vigneshwar said.

On a month-on-month basis, retail sales of two-wheelers as well as passenger vehicles were sharply lower. Two-wheeler sales in June were 12.48% lower when compared with the previous month, while retail sales of passenger vehicles dropped by 1.49% on a month-on-month basis.