India's festive auto demand holds up; what is industry's biggest challenge?

India's passenger vehicle market is heading into the peak festive buying period with demand fundamentals largely intact, but the challenge for automakers is shifting from generating enquiries to converting increasingly discerning customers into buyers. A combination of evolving powertrain preferences, heightened awareness of ownership costs and improving retail momentum suggests that the market is entering a more considered phase of growth.

The contrasting signals emerge from two industry assessments released by Grant Thornton Bharat and the Federation of Automobile Dealers Associations (FADA). While Grant Thornton's consumer survey highlights changing purchase preferences and a sizeable pool of undecided buyers, FADA's October retail data points to resilient underlying demand despite a sharp year-on-year decline.

32.9 pc of prospective buyers remain undecided

Grant Thornton Bharat's Festive Drive: What Consumers Want in Their Next Ride, based on responses from more than 1,300 consumers and over 500 dealers, found that 32.9 per cent of prospective buyers remain undecided about purchasing a vehicle this festive season. Only 24.9 per cent identified themselves as likely or definite buyers, suggesting that a significant share of potential demand is yet to translate into purchase decisions.

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For manufacturers, this represents both an opportunity and a challenge. Buyers are spending more time comparing powertrains, assessing running costs and evaluating the long-term value proposition before committing to a vehicle.

The shift is particularly evident in powertrain preferences. Hybrid vehicles emerged as the preferred choice for 37 per cent of respondents, ahead of electric vehicles at 22.8 per cent. Sustainability is also becoming an important consideration, with 70 per cent of consumers describing it as either extremely or somewhat important when choosing their next vehicle.

However, the growing interest in alternative technologies does not mean conventional purchase considerations have lost relevance. Safety remains the most important buying criterion, cited by 57 per cent of respondents, followed by fuel efficiency at 51.6 per cent and price at 47.2 per cent. SUVs and crossovers continue to dominate consumer preference, attracting 58.3 per cent of respondents.

The survey also exposes gaps in consumer confidence around India's evolving fuel and regulatory landscape. While 40.9 per cent expressed concerns about engine performance and maintenance implications associated with E20-compatible vehicles, only 32.6 per cent were aware of the upcoming CAFE Phase III regulations.

What FADA's October retail numbers say

Saket Mehra, Partner and Auto & EV Industry Leader at Grant Thornton Bharat, said consumers were increasingly evaluating vehicles through the lens of total ownership value rather than upfront price alone. He added that the industry's ability to differentiate would depend not just on product innovation but also on customer education, transparency and ownership experience.

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FADA's October retail numbers provide another perspective on the market's underlying health. Total vehicle retail stood at 31,72,466 units, declining 23.80 per cent year-on-year but rising 25.05 per cent over September. The annual contraction, according to the dealer body, needs to be viewed against an unusually strong October 2025, when Navratri and Diwali coincided and the initial benefits of GST 2.0 supported demand.

This year, with Navratri falling in October and Diwali moving into November, a substantial part of the festive buying activity has shifted across months.

EV retail touches all-time high

Passenger vehicle retail reached 5,07,768 units, up 18.86 per cent month-on-month but down 14.23 per cent year-on-year. FADA described October as the third-best October on record. Dealer inventory remained at around 43-45 days, broadly unchanged from September, with expectations of moderation as festive sales gather pace.

The alternative-fuel transition is another important trend. FADA reported passenger vehicle retail shares of 41.60 per cent for petrol/ethanol, 24.59 per cent for CNG/LPG, 16.57 per cent for diesel, 9.94 per cent for hybrids and 7.30 per cent for electric vehicles. Across vehicle categories, EV retail touched an all-time high of approximately 3.55 lakh units, taking overall EV penetration to around 11.5 per cent, against about 6 per cent a year earlier.

FADA President Sai Giridhar said October's year-on-year decline was "almost entirely optical", arguing that the 25.05 per cent sequential increase offered a more meaningful measure of festive demand. He also noted that electric vehicle demand had outpaced supply in October, making availability rather than customer interest the binding constraint.

Dealer sentiment remains encouraging. FADA's online members' survey found that 51.65 per cent expected retail growth in November, while 50.41 per cent anticipated growth over November 2026-January 2027.

The festive season, therefore, is less about a broad-based demand revival than about the industry's ability to convert existing demand. With buyers becoming more discerning, the winners will be manufacturers that combine the right product mix with competitive pricing, reliable supply, transparent ownership costs and stronger after-sales support.