The Indian automotive industry is expected to see a moderation in wholesale volume growth in FY2026-27, settling in the range of 3–6 per cent, as the sector moves past a phase of elevated growth witnessed in the second half of FY2025-26, according to Icra. The ratings agency attributed the earlier surge to post-Goods and Services Tax (GST) reform factors, supportive rural demand conditions and policy-led stimulus, while flagging that the upcoming fiscal will contend with a higher base.
Icra said FY2025-26 has played out unevenly for the sector, with subdued demand in the first half followed by a sharp recovery in the latter months. The rebound was supported by GST rate cuts, pent-up demand, improved rural output and a favourable financing environment. While demand sentiment remains optimistic, wholesale volumes have already reached levels that are likely to limit the scope for outsized growth in FY2026-27.
In the passenger vehicle (PV) segment, domestic wholesale volumes are estimated to grow by 5–7 per cent in FY2025-26, aided by improved affordability following GST cuts, healthy replacement demand and a sustained preference for personal mobility. Utility vehicles continue to outperform, supported by changing consumer preferences and a steady flow of new model launches. However, PV growth is expected to moderate to 4–6 per cent in FY2026-27, reflecting the higher base and relatively elevated system-level inventories. The rising share of alternative powertrains such as compressed natural gas (CNG), hybrids and electric vehicles also points to a structural shift in consumer preferences and technology adoption.
The two-wheeler industry is projected to grow by 6–9 per cent in FY2025-26, supported by healthy agricultural output, improved access to financing and better affordability. This momentum is expected to normalise to 3–5 per cent in FY2026-27. Premiumisation remains a key trend, with demand at the entry level continuing to face pressure due to higher prices and affordability constraints, even as premium motorcycles and scooters see a sharp recovery. Electric two-wheeler penetration is expected to rise steadily, although supply-side risks such as rare earth magnet availability remain an area to watch.
In the commercial vehicle (CV) segment, wholesale volumes are projected to expand by 7–9 per cent in FY2025-26, driven by improved demand in light commercial vehicles and buses. Over the past decade, successive emission and safety regulations have pushed up vehicle prices, weighing on affordability. While replacement demand, infrastructure activity and steady economic conditions remain supportive, regulation-led price increases could constrain growth, particularly in trucks. Overall CV volumes are estimated to grow by 4–6 per cent in FY2026-27, with medium and heavy CVs growing faster than LCVs, and buses outperforming on healthy replacement demand.
Icra expects electric vehicle penetration to increase meaningfully across segments by FY2030, led by two-wheelers, three-wheelers and buses, with passenger cars and LCVs also seeing a gradual rise. Continued policy support, improving charging infrastructure and declining total cost of ownership are expected to underpin this transition.
A separate assessment by Crisil Ratings offers a more constructive view on the two-wheeler cycle, with industry volumes expected to rise 7–9% in FY2026-27, taking annual sales beyond the 29-million-unit mark. While the domestic market is projected to remain steady on improved affordability following GST rate rationalisation, exports are expected to outpace domestic growth for the third consecutive year.
In fiscal 2027, we expect domestic two-wheeler volume to grow 6–8%, broadly in line with the current fiscal. Motorcycles, which account for about 60% of domestic volumes, are likely to see mid-single-digit growth, reflecting a mature commuter base and stable rural demand, while incremental growth is expected to come from scooters, including strong traction in electric scooters driven by rising urban usage and last-mile mobility needs,” said Anuj Sethi, Senior Director, Crisil Ratings.
Crisil notes that FY2025-26, similar to Icra’s assessment, has unfolded unevenly for the two-wheeler industry. Volumes were largely flat in the first half amid weak sentiment, but demand accelerated from September following the GST rate cut, which lowered vehicle prices materially. Rural demand improved on the back of a healthy kharif crop and rising farm incomes, while urban demand strengthened post the tax revision. Soft interest rates and easing inflation have further supported demand.
Crisil analysts further noted that exports are expected to provide incremental support to growth, contributing around 20% of total industry volumes. Crisil expects two-wheeler export volumes to grow strongly in FY2025-26 and sustain mid-to-high teen growth in FY2026-27, led by steady demand from Latin America, Africa and South Asia, which together account for nearly 90% of exports.
In the commercial vehicle (CV) segment, wholesale volumes are projected to expand by 7–9% in FY2025-26 according to Icra, driven by improved demand in light commercial vehicles and buses. Over the past decade, successive emission and safety regulations have pushed up vehicle prices, weighing on affordability. While replacement demand, infrastructure activity and steady economic conditions remain supportive, regulation-led price increases could constrain growth, particularly in trucks. Overall CV volumes are estimated to grow by 4–6% in FY2026-27, with medium and heavy CVs growing faster than LCVs, and buses outperforming on healthy replacement demand.
 "Auto industry growth likely to be 3-6% in FY27 as high base kicks in: Icra")
