Rare Earth magnet crisis, geopolitical tensions to impact auto sales, warns FADA

The ongoing rare earth magnet crisis, geopolitical tensions, and US tariffs are likely to hit domestic automobile sales, the Federation of Automobile Dealers Association (FADA) warned in a note on Monday. 

“Evolving geopolitical tensions and potential spill-over from US tariff measures warrant vigilant supply chain management and could temper consumer sentiment. Also, challenges in securing rare-earth materials have stalled component production, further constraining supply and retail volumes,” says C Vigneshwar, President, FADA. 

The development comes at a time when the retail sales for the domestic automobile market have surged marginally by 4.85% year-on-year in the April to June quarter of FY26. Of this, two-wheeler retail sales were up 5.02% YoY, three-wheeler sales were up 11.79% YoY, tractor sales were up 6.29% YoY, passenger vehicle sales were up 2.59% and commercial vehicle sales were up 1% YoY. 

“While 2W showed some early-cycle softness, we remain confident of a robust ramp-up in the coming months as seasonal demand and targeted OEM initiatives take effect,” says C Vigneshwar.  

In June, the domestic retail sales were up by 4.84% year-on-year to 20,03,873 units, as against 19.11,354 units in the same period last year. The two-wheeler sales were up by 4.73% during the month under review to 14,46,387 units, as against 13,81,040 units in the same period last year. The three-wheeler sales were up 6.68% YoY to 1,00,625 units as against 94,326 units. The passenger vehicle sales were up by 2.45% to 2,97,722 as against 2,90,593 units in the same period last year. The commercial vehicle sales were up 6.6% to 73,367 units, as against 68,825 units in the same period last year. 

For the near term, FADA expects above-normal monsoon to bolster rural demand even as heavy-to-very-heavy precipitation zones introduce logistical complexities. “Early Kharif sowing, up 11.3% YoY to 262.15 lakh hectares, underlines stronger farm incomes and augurs well for two-wheeler uptake in the hinterlands. Simultaneously, robust government capital expenditure through June–August—targeting roads, railways, metros, and green-energy projects—will underpin CV and CE (construction equipment) segments,” says FADA.