Job cuts, tariff uncertainties drag retail auto sales by 4.3% in July

New Delhi: Automobile retail sales dipped by 4.3% year-on-year in July as job cuts in the IT sector and uncertainty about the impact of US tariff on the Indian economy hit consumer sentiments, data released by the Federation of Automobile Dealers Association (FADA) showed on Thursday.

Two-wheelers segment was the worst hit, reporting a 6.48% decline year-on-year and a 6.28% dip month-on-month basis.

Sales of passenger vehicles in July were 0.81% lower when compared with the same month last year. However, on a month-on-month basis it was 10.38% higher.

There was a marginal 0.23% growth in the commercial vehicle segment. Tractors emerged as the best-performing category in July, with a sharp 10.96% increase year-on-year and 14.9% sequential growth.

“After three consecutive months of growth, India’s auto retail sector applied the brakes in July, with overall retails declining by 4.31% year-on-year. This pullback largely stems from a high-base effect in July 2024,” said FADA President C S Vigneshwar.

Passenger car segment was dragged down by poor urban demands even though volumes in the rural areas grew helped by targeted schemes and marketing efforts.  Urban demand, however, remained muted due to low enquiry and restrained customer sentiment.

Urban demands have been dampened due to growing insecurity about jobs. India’s largest private sector employer Tata Consultancy Services (TCS) recently announced that it will cut over 12,000 jobs, mostly from the middle and senior management levels. There are also concerns about job losses in export-focused sectors due to imposition of high tariffs by the US.

“The resulting wealth erosion and import-cost pressures on exporters could erode consumer confidence, trigger a precautionary rise in household savings and exert downward pressure on discretionary spending—including on vehicles—over the near term,” FADA said in a statement.

As per the industry lobby data, inventory level in the passenger vehicle segment in July stood at 55 days.

“With inventory levels steady at around 55 days, calibrated discounting, streamlined finance facilitation and intensified urban outreach will be crucial for sustaining festive-season growth,” FADA said.

The two-wheeler sales were dampened due to crop-sowing and heavy monsoon rains. “Dealers are nevertheless confident of a post-monsoon uptick, with several purchase decisions deferred to August ahead of the festive season—making strategic stock alignment and focused rural–urban engagement imperative for reviving momentum,” the industry lobby said.

Dealer sentiment for the near-term (July–September) remains broadly positive, with 63% of dealers forecasting growth, 27% expecting flat performance and only 9% bracing for degrowth.

Two-wheelers dealers anticipate that the convergence of four major festivals—Rakhi, Janmashtami, Independence Day and Ganesh Chaturthi—alongside targeted promotional schemes, aggressive rural engagement and healthy stock levels will drive incremental sales in August and September.