PV industry to hit record 5 mn domestic, export units in FY26: Crisil

Passenger vehicle industry in India is expected to touch a record cumulative domestic and export volume of 5 million units this fiscal despite the annual growth rate slowing down to 2-4 per cent, according to Crisil Ratings.

However, penetration of electric vehicles (EVs) is seen at a moderate 3-3.5 per cent despite new launches and declining battery costs due to high prices, modest charging infrastructure and range anxiety, restricting the market to urban users as a second car option, the insights-driven analytics firm said in a statement. 

The growth in the EV segment has slowed after doubling last year on a low base, it added.

"India's passenger vehicle (PV) industry is set to scale a fresh high this fiscal with domestic and export volume cumulatively crossing 5 million units even as the annual growth rate slows to 2-4 per cent," Crisil Ratings said.

This marks the fourth consecutive year of record sales, although momentum has significantly eased from the 25 per cent surge in fiscal 2023 after the pandemic, it added.

The domestic market accounted for about 85 per cent of total volume last fiscal, with exports accounting for the rest, Crisil Ratings said.

On the EV front, it said growth has slowed after doubling last year, but on a low base.

The entry of global premium EV models, including Tesla would intensify competition in the premium segment, which accounts for less than 10 per cent of the overall volume, and will likely reset consumer expectations across categories, pushing Indian Original Equipment Manufacturer (OEMs) to accelerate technology upgrades, Crisil Ratings said. 

"That said, the current high tariffs will limit imports," it noted.

Going ahead, the pace of interest rate cuts and EV adoption, as well as potential supply shocks could impact the availability of chips and battery cells amid global tensions, and will, therefore, bear watching, it added.

"PV growth will moderate to 2-4 per cent this fiscal, but UVs (utility vehicles) will continue to cruise with around 10 per cent growth, supported by new launches. With UVs contributing 68-70 per cent of volumes and bulk of upcoming models, the shift toward premiumisation is structural," Crisil Ratings Senior Director, Anuj Sethi said. 

Rural recovery, expected from a likely above-normal monsoon and reduction in interest rates, should improve demand for entry-level cars, Sethi added.

On the exports front, Crisil Ratings said growth is likely to moderate to 5-7 per cent in FY26, down by a third, amid global headwinds.

"The 25 per cent US tariff, effective June 2025, poses limited risk as the US forms just about 1 per cent of total PV volumes," it said, adding OEMs can pivot to alternative markets such as Mexico, the Gulf countries, South Africa, and East Asia though ongoing geopolitical tensions could weigh on exports' momentum.