Domestic automobile retail sales declined 4% year-on-year in July amid drop in demand for passenger vehicles and two-wheelers, dealers' body FADA said on Thursday.Overall registrations dropped to 19,64,213 units last month, as compared to 20,52,759 units in July 2024.The pullback largely stems from a high-base effect in July 2024, Federation of Automobile Dealers Associations said in a statement.Passenger vehicle sales declined marginally year-on-year to 3,28,613 units in July, as against 3,31,280 units in the same month last year.FADA noted that while auspicious delivery days, plus targeted schemes and rural marketing, drove hinterland volumes; urban demand stayed muted due to restrained customer sentiment.With inventory levels steady at around 55 days, calibrated discounting, streamlined finance facilitation and intensified urban outreach will be crucial for sustaining festive-season growth, it added.Hero MotoCorp Q1 Results: Profit Flat, Revenue Slips Nearly 6%Two-wheeler registrations saw a decline of 6% year-on-year to 13,55,504 units in July as crop-sowing activities and prolonged heavy rains dampened rural footfalls more sharply than urban demand.Dealers are nevertheless confident of a post-monsoon uptick, with several purchase decisions deferred to August ahead of the festive season -- making strategic stock alignment and focused rural -- urban engagement imperative for reviving momentum, FADA stated.Commercial vehicle retail sales grew marginally to 76,439 units last month, as compared to 76,261 units in the year-ago period.The growth in the segment was led by the urban momentum, FADA said.Dealers cited new-model launches, aggressive marketing support, bulk institutional orders and timely stock availability as key drivers, alongside targeted schemes that bolstered school-bus volumes.In contrast, rural haulage demand remained fragmented amid heavy rainfall, seasonal softness in cement, coal and construction logistics, and slower financier disbursements, prompting many buyers to defer purchases to the post-monsoon period, it added.Tractor registrations saw a robust sales growth of 11% year-on-year to 88,722 units in July.The timely release of enhanced agricultural subsidies and favourable monsoon rains -- together with strengthened rural liquidity -- spurred a marked increase in purchase intent, FADA stated.On business outlook, it added that from an agrarian demand perspective, the monsoon outlook through September appears broadly supportive.India is projected to receive normal to above-normal rainfall around 106% of the long-period average, which should bolster crop prospects and rural liquidity, albeit with heightened localized flood and landslide risks in select eastern, northeastern and peninsular pockets."However, external headwinds have emerged as the US administration's imposition of an additional 25% tariff on Indian exports has precipitated a 0.4% dip in benchmark equity indices and a depreciation of the rupee, injecting volatility into financial markets," FADA stated.The resulting wealth erosion and import-cost pressures on exporters could erode consumer confidence, trigger a precautionary rise in household savings and exert downward pressure on discretionary spending -- including on vehicles -- over the near-term, it added.Tata Motors Set To Become A Global CV Player With The Iveco Buyout, Says Motilal Oswal Maintaining 'Neutral'. Read more on Auto by NDTV Profit.