Automobile dealers on Thursday said challenges remain, as five consecutive months of declining stock markets have dampened consumer confidence—leading to more SIP closures than new openings and reduced discretionary spending due to lower profitability.

The negative sentiment was reflected in February sales as well, which witnessed a broad-based downturn across all categories—a trend anticipated in the Federation of Automobile Dealers Associations’ (FADA’s) previous survey, which projected a ‘flat to de-growth’ outlook for the month.

Overall, the market closed with a 7 per cent year-on-year (y-o-y) decline, with two-wheelers (2W), three-wheelers (3W), passenger vehicles (PV), tractors, and commercial vehicles (CV) falling by 6 per cent, 2 per cent, 10 per cent, 14.5 per cent, and 8.6 per cent, respectively.

PV retail sales declined to 3,03,398 units in February, compared with 3,38,390 units in the corresponding month last year, the monthly data shared by FADA said.

Similarly, 2W sales declined to 13,53,280 units last month, compared with 14,44,674 units in February 2024.

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The 3W sales declined to 94,181 units, compared with 96,020 units in February last year, while CV sales declined to 82,763 units during the month, compared with 90,551 units in the corresponding month last year.”

“During the month, dealers began expressing concerns about inventory being pushed to them without their consent. While such initiatives may serve broader business objectives, it is critical to align wholesale (dispatches to dealers) allocations with genuine demand to protect dealer viability and ensure healthy inventory management,” C S Vigneshwar, President, FADA, said.

Dealers noted weak market sentiment, which continues especially in the entry-level category, along with delayed conversions and challenging targets. They stressed that original equipment manufacturers (OEMs) should avoid overburdening dealers with excessive inventory—a practice that risks creating unmanageable stock levels given the cyclical nature of the industry, he said.

“This feedback underscores the need for greater alignment between national strategies and local dealer insights. Inventory levels in this segment remained in the range of 50-52 days,” Vigneshwar said.

In the 2W segment, urban areas experienced a sharper decline of 7.38 per cent compared to a 5.5 per cent drop in rural markets. Rural performance was better due to better agricultural sentiments and seasonal marriage demand, he said.

“Dealers attributed this to inventory imbalances, aggressive pricing adjustments (notably post-OBD-2B), weak consumer sentiment, lower enquiry volumes and limited finance availability. Concerns over slow-moving models and external economic pressures, such as liquidity constraints and inflation, further intensified these challenges,” the FADA President said.

In the CV segment, dealers pointed to a challenging commercial environment, with weak sales in the transportation sector, tightening finance norms, and pricing pressures delaying customer decisions—particularly in bulk orders and institutional contracts, he added.

Therefore, such weak sentiments led to overall sales across vehicle categories declining to 18,99,196 units in February, compared with 20,46,328 units in February 2024.

Going forward, there is cautious optimism that the market will improve in March as dealers recalibrate their targets to better align with current demand, FADA said.

“The convergence of multiple festivals—ranging from Holi and Gudi Padwa to the onset of Navratri—and year-end depreciation benefits is expected to provide a much-needed boost to vehicle purchases,” Vigneshwar said.