The industry, which faced various regulatory issues in big export markets like Algeria and Sri Lanka, and a slowdown in Europe in 2014, had exported 5,61,972 units in 2013.
A change in the product mix by carmakers had also led to lower shipments.
"Passenger car exports were down last year as many companies changed their product baskets. Ford exported a lot of utility vehicles in place of cars last year. Likewise, Maruti also exported quite a bit of Ertigas," Society of Indian Automobile Manufacturers (SIAM) deputy director general Sugato Sen told PTI.
Besides, traditional export markets like Europe, Sri Lanka and Algeria are not doing well and thus affecting the overseas dispatches, he added.
In Sri Lanka, Indian carmakers are facing high taxation issues while Algeria has brought in changes in the technical regulations 'overnight', thereby impacting the exports to these markets, Mr Sen said.
Similarly, Europe hasn't recovered from the prolonged slowdown.
"We are doing well in Latin American countries and some parts of Africa as far as exports are concerned," Mr Sen added.
In order to enhance exports, carmakers are also looking at new avenues and have identified about over 20 new regions to keep overseas sales ticking.
Car exports last month stood at 60,407 units, up 24.42 per cent from 48,551 units in December 2013.
Commenting on the two-wheeler segment, Mr Sen said Indian manufacturers had a "good year" with overall overseas shipments at 24,75,945 units, up 22.25 per cent from 20,25,394 units in 2013.
"We can even do better than this. The quantum of exports is very less as compared to the domestic sales. In 2014, we produced 18.5 million two-wheelers, out of which around 16 million were sold in domestic market and only around 2.5 million were exported," Mr Sen said.
ASEAN, SAARC and Latin American markets including Colombia and Peru are strong export markets for Indian two-wheelers.
"We have been doing well in the two-wheeler segment for a couple of years now. Last year, Bajaj alone exported 1.56 million bikes, HMSI exported 1.9 lakh units, Hero 2 lakh units, TVS Motor Company around 3.12 lakh units and Yamaha shipped around 1.72 lakh units," Mr Sen said.