The Indian automobile industry is roaring into the new year on an unprecedented high, shattering all-time sales records for both two-wheelers and passenger vehicles in 2025. This landmark achievement marks a year of multiple firsts for the sector, driven by policy support and shifting consumer preferences.
Unprecedented Numbers: A Double Record Year
According to the latest data from the government's Vahan portal, which tracks vehicle registrations at dealerships, the industry witnessed phenomenal growth. Two-wheeler registrations surged by 7% to reach a historic 20.2 million units in 2025, eclipsing the previous peak of 19.6 million set in 2018. In the four-wheeler segment, passenger vehicle registrations, encompassing cars, SUVs, and vans, grew by 9% year-on-year to 4.38 million units, also setting a new benchmark.
This explosive growth translated into significant investor confidence. The Nifty Auto index outperformed the broader market, rallying 22% during the year compared to the 10% gain of the benchmark Nifty 50.
Key Drivers: GST Rationalization and Segment Shifts
Analysts point to a major policy intervention as a primary catalyst for the demand surge. In September 2025, the Union government implemented a significant rationalization of the Goods and Services Tax (GST) on vehicles. The tax rate on small passenger vehicles and two-wheelers was slashed from 28% to 18%, while rates on larger vehicles were reduced from 45-50% to 40%. This move led to immediate price cuts by automakers, stimulating demand across the board.
"Following the GST rationalization, demand has picked up across segments and seems to have remained intact even after the festive season. A notable trend is that entry-level vehicles, both two-wheelers and passenger vehicles, are seeing a marked pickup in demand," noted analysts from Motilal Oswal Financial Services in a report dated 30 December.
The sector also witnessed a notable reshuffle in the passenger vehicle rankings. Mahindra and Mahindra clinched the number two spot for the first time in at least a decade, surpassing Hyundai Motor India, which slipped to third place. Maruti Suzuki retained its leadership with 1.7 million units sold.
Electric Momentum and the Road Ahead
The year 2025 was also pivotal for electric mobility. Total EV sales across all categories, including two-wheelers, three-wheelers, cars, and commercial vehicles, crossed the two-million mark for the first time, registering a 15% increase to 2.2 million units. In a significant shift, legacy manufacturers TVS Motor Company and Bajaj Auto emerged as leaders in the electric two-wheeler space, with their EV sales jumping 35% and 39% respectively.
This remarkable growth occurred despite geopolitical headwinds, including China's restrictions on exports of rare earth magnets crucial for both conventional and electric vehicles.
Looking forward, with sales momentum strong, analysts anticipate a change in strategy. Companies are expected to offer smaller discounts in the coming months to protect their profit margins, which face pressure from rising costs of raw materials like base metals and platinum group metals. The demand outlook remains robust, particularly for SUVs and premium models, setting a positive tone for the industry's entry into the next fiscal year.
