Tata Motors sales drop 9% in May 2025: Is EV growth enough to offset ICE pain?

Tata Motors Limited (NSE: TATAMOTORS) reported total sales of 70,187 vehicles in May 2025, marking a 9% year-on-year decline from 76,766 units in May 2024. This downturn was driven largely by domestic market weakness, especially in the internal combustion engine (ICE) passenger vehicle segment and the small commercial vehicle (SCV) category. Despite a modest improvement in electric vehicle (EV) sales and a significant spike in international commercial volumes, the overall picture highlights increasing headwinds across India‘s auto sector during the first quarter of FY26.

The latest sales performance arrives at a time when broader economic forces are reshaping consumer demand, including persistently high interest rates, rural spending stagnation, and growing competition in both the affordable ICE and compact EV categories. As one of India’s most visible auto players, Tata Motors is simultaneously managing product transitions, export push strategies, and evolving regulatory and technology shifts. May’s figures, while not disastrous, reflect a moment of recalibration for the company and the broader industry.

Why Did Tata Motors Sales Fall in May 2025?

The 9% decline in overall sales was primarily attributable to a 10% fall in domestic volumes, which dropped to 67,429 units in May 2025 from 75,173 units in May 2024. Passenger vehicle sales within India declined 11% year-on-year to 41,557 units, inclusive of EVs. Analysts tracking sectoral movements indicate that much of this softness is linked to weakening urban and semi-urban demand, where consumers are deferring purchases in anticipation of further rate cuts or new fiscal announcements.

Industry insiders have also pointed to a saturation of demand in core city clusters, along with increasing inventory build-up at dealerships. Dealers in north and west India have flagged below-normal walk-in rates, especially in the compact sedan and hatchback segments. The company’s ability to drive conversion in its existing lineup seems to be hitting limits, especially with Mahindra, Hyundai, and Maruti Suzuki ramping up competitive campaigns in the ₹7–₹12 lakh price band.

What Do the Commercial Vehicle Sales Indicate About Fleet Sentiment?

Tata Motors sold 28,147 commercial vehicles in May 2025, registering a 5% decline compared to 29,691 units in May 2024. The domestic CV market saw a 9% year-on-year drop to 25,872 units. However, the impact was uneven across subsegments, revealing deeper insights into India’s logistics and freight ecosystem.

The small commercial vehicle and pickup segment, traditionally a volume backbone led by Tata Ace and Yodha models, recorded a 20% fall to 9,064 units. Experts believe this is indicative of reduced last-mile delivery volumes and a tightening in informal sector credit, especially among self-employed logistics operators. Conversely, intermediate and light commercial vehicles (ILMCV) grew by 11% to 4,954 units, reflecting healthy movement in e-commerce and intra-city transport demand.

Heavy commercial vehicles (HCV), including multi-axle and tractor trailers, declined by 10% to 7,106 units. Analysts attribute this to delayed replacement purchases and relatively flat freight indices across the core industrial corridors. On a brighter note, Tata Motors’ commercial vehicle exports surged by 87% to 2,275 units, signaling strong demand in regions like Africa, the Gulf, and Southeast Asia, where Tata’s value engineering approach and affordable service models continue to win market share.

The company’s combined sales of medium and heavy commercial vehicles (MH&ICV) across domestic and international markets totaled 13,614 units, marginally higher than 13,532 units in May 2024. This stability, despite local volatility, points to a slow but persistent fleet upgrade trend across critical infrastructure segments.

Are Tata Motors’ Passenger Vehicles Losing Share or Facing a Cyclical Pause?

Tata Motors’ overall passenger vehicle sales, which include both domestic and export volumes, declined 11% year-on-year to 42,040 units in May 2025. Domestic sales accounted for 41,557 of these, highlighting the extent of local market strain. The company continues to face increasing challenges in sustaining demand for its existing ICE platforms amid changing consumer preferences.

Although models like Nexon, Punch, and Altroz have established themselves as strong players in their respective segments, Tata’s PV strategy is beginning to feel the impact of intensified market activity from rivals. Hyundai’s renewed focus on compact SUVs and Maruti’s hybrid expansion have started pulling away urban budget-conscious buyers. CNG demand remains intact in metro and suburban areas, but Tata Motors has fewer offerings compared to rivals like Maruti and Toyota, which are capitalizing on price-sensitive green mobility transitions.

With overall PV market growth slowing and customer acquisition costs rising, Tata Motors will need to lean harder on innovation cycles and refresh campaigns to protect and expand its share. The company’s performance in the ₹8–₹15 lakh band will be particularly critical to watch in the upcoming quarters.

Is EV Growth at Tata Motors Plateauing or Showing Long-Term Promise?

Amid a sluggish backdrop, Tata Motors’ electric vehicle (EV) sales delivered a measure of stability. Total EV volumes, including both domestic and international sales, rose 2% year-on-year to 5,685 units in May 2025. While this growth is considerably more modest than the double-digit spikes seen in previous quarters, it still reflects a positive deviation from the broader passenger vehicle decline.

Tata Motors’ EV portfolio is managed through two key subsidiaries—Tata Motors Passenger Vehicles Limited and Tata Passenger Electric Mobility Limited. The latter, in particular, has emerged as a strategic pillar for future growth and may be a candidate for value unlocking through a public offering in FY26. The recent launches of models like the Punch.ev and Curvv EV, along with updates to the Nexon.ev, have helped the brand maintain visibility in a fast-fragmenting EV market.

EV penetration as a percentage of total PV sales now hovers around 13–14% for Tata Motors, among the highest in the country. However, experts caution that to maintain momentum, the company must accelerate investments in software architecture, battery efficiency, and charging partnerships. The current pace of EV expansion suggests long-term viability but also growing capital expenditure pressures that could impact short-term profitability.

How Are Investors Reacting to Tata Motors’ May 2025 Performance?

Tata Motors stock ended May 30, 2025, at ₹718.65 per share, down ₹5.80 or 0.80% from the previous close. The stock’s intraday performance was muted, reflecting the market’s tempered expectations ahead of the monthly volume announcement. With a market capitalization of ₹2.64 lakh crore and a free float of ₹1.49 lakh crore, the company remains a key component of institutional portfolios, particularly within ESG and mobility-focused strategies.

Daily traded volume stood at 145.34 lakh shares, and 51.78% of the volume was deliverable, indicating a balanced mix of speculative and long-only investor activity. On valuation, Tata Motors trades at a trailing P/E of 11.29 compared to the Nifty 50 average of 11.52. Analysts believe the current levels offer a reasonable risk-reward for medium-term investors, although near-term sentiment will be shaped by PV recovery signals and CV booking trends.

Foreign institutional investors (FIIs) have slowed incremental allocations to Indian auto stocks in recent weeks, citing a wait-and-watch approach tied to monsoon forecasts and input cost inflation. Domestic institutional investors (DIIs), however, have maintained stable positions in Tata Motors, banking on its global diversification, EV leadership, and improving JLR profitability.

What Lies Ahead for Tata Motors in FY26?

The second quarter of FY26 will be crucial for Tata Motors to demonstrate demand recovery. The festive season beginning August–September could revive showroom traffic, particularly if fuel prices stabilize and credit costs begin to ease. Several analysts expect rural consumption to rebound slightly post-monsoon, which could directly benefit Tata’s SCV and entry-level PV volumes.

Product-wise, the upcoming facelifted Harrier, Sierra EV launch timeline, and broader electrification roadmap will be critical levers for growth. On the commercial side, the company’s continued export push and defense vehicle deliveries may help offset domestic volatility. Meanwhile, capital markets await clarity on the potential listing of Tata Passenger Electric Mobility, which could re-rate valuations if executed favorably.

The road ahead for Tata Motors will likely be defined by its ability to strike a balance between ICE volume resilience, EV scale-up, and international diversification. May 2025 marks a cautionary point in that journey, reflecting both the pressures of the current macro environment and the promise embedded in its evolving product strategy.