The Indian automobile industry is looking forward to the upcoming marriage season and also recovery of public infrastructure projects. The auto industry believes that it will lead to growth in sales of the vehicles, particularly affordable cars and two-wheelers. 

Challenges faced by Automobile industry

Following the festive season, the automakers in India faced issues in sales growth. It is also due to gradual removal of discounts. In recent times, the automakers are paying attention to two crucial factors which are overall demand trends and surge in price levels in the market. It will aid them in anticipating the future outlook of the auto industry and company as well. 

Higher rural demand

In terms of rural and urban demand, the demand for vehicles by rural region was higher in the range of 200 to 300 bps compared to the urban growth in the third quarter of FY25. This demand trend in rural areas highlights that people living in rural regions are showcasing higher interest in buying vehicles against the people living in urban regions. Despite strong growth from rural areas, the auto industry required a stronger boost in order to have complete revival of demand in the industry.

Factors contributing to revival of demand

As per the past trends, the auto industry recorded higher demand for vehicles in the wedding or festive season.  As the wedding season is coming up, many automakers anticipate that it will lead to higher demand for autos in the market as many purchase vehicles for personal use or as gifts. 

Apart from wedding and festive season, government incentives and infrastructure projects play a crucial role in strengthening the auto demand in the industry. In recent times, the auto industry believes that recovery in the infrastructure project by the government of India would lead to a boost to the auto sector. These plans will lead to faster infrastructure growth, expansion in income generation, mainly in rural regions. This will ultimately lead to strengthening of sales in the auto industry.

Additionally, other factors like interest rates and income tax cuts can also help in boosting demand for vehicles in the market. In case of contraction in interest rates, it will encourage people to take more loans for purposes like auto purchases as they have to repay less amount of loan. 

In the Budget 2025, the government of India announced income tax cuts up to Rs.12.75 lakhs of income. It led to expansion in disposable income of the people. It resulted in marginally easier for consumers to purchase new vehicles. 

International demand trend

In the third quarter of the financial year 2025, many automakers recorded robust strength demand in the international market which was higher than earlier estimates. In contrast to this, automobile component players recorded slowdown in demand trends in this third quarter. This current trend is anticipated to remain in the future quarters as well. 

In present times, the automobile industry in India is in a situation of uncertainty. The driving factors like contraction in interest rates, wedding season, and higher rural demand can lead to a boost to the revival of demand and sales in the auto industry in the upcoming terms.

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