Top carmakers remain bullish on FY27 domestic demand amid global risks

Auto companies have not cut back on capex and are planning new launches, even as they remain cautious about margins amid input costs and supply-chain risks

India’s top passenger vehicle makers are ramping up investments, expanding factory capacity, and lining up major launches for FY27, betting on sustained domestic demand growth despite rising concerns over geopolitical tensions, commodity inflation, freight volatility, and supply-chain disruptions.

 

The confidence has numbers behind it. Industry data from the Society of Indian Automobile Manufacturers (SIAM) showed PV dispatches rose to a record 4.66 million units in FY26, with the industry describing the year as a “year of two halves” — weak first-half demand followed by a strong recovery in the second half, aided by GST-led affordability gains and new launches. Domestic PV sales grew 16.7 per cent in the second half of FY26, reversing a 1.4 per cent decline in the first half and helping the industry end the year with 7.9 per cent growth. Maruti Suzuki said around 190,000 customer orders remained unserved at the end of FY26 because of production constraints alone, underlining the strength of the rebound.

   

The momentum is expected to carry into FY27. Crisil Ratings projects the industry will clock record sales of nearly 5.9 million units this fiscal year, with growth of 5–7 per cent, riding on the GST tailwind and sustained demand for utility vehicles. “The GST tailwind will continue in fiscal 2027, though its intensity will moderate gradually,” said Anuj Sethi, Senior Director at Crisil Ratings.

 

Despite input cost pressures, volatile fuel prices, and geopolitical risks around the supply chain, carmakers have not announced any pullback in spending. Instead, automakers are doubling down.

 

Maruti Suzuki has commissioned a second plant at Kharkhoda and is adding another production line in Gujarat during FY27, taking its installed annual capacity to about 2.9 million vehicles from 2.4 million currently. The effective production increase this year is expected to be closer to 250,000 units as the new lines ramp up gradually.

 

“Consequently, the company is proactively accelerating its capacity expansion efforts to address the strong demand and fulfil pending orders,” said Rahul Bharti, Chief Investor Relations Officer, Maruti Suzuki India.

 

Hyundai Motor India has outlined about Rs 7,500 crore of capex for FY27, alongside plans to launch two new SUVs, including a localised EV. It is investing about Rs 6,800 crore ($794 million) to build out its Talegaon plant in Maharashtra to 320,000 units annually from less than 200,000 units now. Hyundai Motor India MD and CEO Tarun Garg said the company had used “calibrated price increases” to partly offset commodity pressures in FY26 and would continue taking “calibrated actions to support margins going forward”, while maintaining guidance of 8–10 per cent growth in both domestic sales and exports.

 

Mahindra & Mahindra has already increased monthly vehicle capacity to about 64,500 units per month from around 59,000 units per month at the end of FY26, with total capacity expected to rise to about 68,000 units per month in the first half of FY27, according to Rajesh Jejurikar, Executive Director and CEO (Auto and Farm Sector). The company is also developing a greenfield plant at Nagpur, expected to become operational around mid-2028 with phased scale-up to 500,000 units annually.

 

Tata Motors Passenger Vehicles, which recorded its highest-ever annual sales of over 640,000 units in FY26 at nearly double the industry growth rate, is equally bullish. Shailesh Chandra, Managing Director and CEO, Tata Motors Passenger Vehicles, said demand momentum had continued through April and May and the company expects to deliver “industry-beating growth” in FY27, supported by new launches and production ramp-up, even as commodity inflation across steel, copper, aluminium, rubber and petroleum-linked inputs remains a key risk. Chandra said the Middle East crisis had itself become a demand driver for EVs, with inquiries and bookings rising an additional 25–30 per cent as fuel prices increased and concerns around oil dependency grew.

 

Taken together, the expansion plans signal that India’s largest carmakers see the current turbulence as a speed bump, and the domestic market remains their most compelling long-term bet.

 

Utility vehicles are expected to lead the charge, with sales projected to grow 7–9 per cent and the segment’s share in total PV sales rising to 69 per cent from 67 per cent in FY26, supported by consumer preference for larger, feature-rich vehicles across price points, according to Crisil. Small cars, which account for around 30 per cent of domestic volumes, are expected to grow at a more modest 2–4 per cent, aided by improved affordability and stable interest rates.

 

What risks are carmakers watching in FY27?

 

Executives across all four companies flagged rising input costs and geopolitical risks as the most significant near-term threats in their quarterly calls.

 

Garg said the company expects “inflationary pressures and geopolitical uncertainties” to continue through FY27. Maruti said commodity costs hurt margins by about 80 basis points sequentially, while Tata Motors Passenger Vehicles said cost reductions had been largely absorbed by commodity inflation during FY26. Mahindra Group CEO and Managing Director Anish Shah said the company had mapped risks across “100,000 parts” and “40 commodities” while increasing localisation, inventory buffers, and alternate sourcing to manage disruptions ranging from semiconductor shortages to rare-earth supply issues.

 

Crisil flagged the same pressures at an industry level. Automakers have already implemented price hikes of 1–3 per cent in FY27 to offset higher input and logistics costs, with steel, aluminium, copper, and platinum-group metals all rising sharply. Operating margins are expected to contract by 50–80 basis points to 9.7–10 per cent from around 10.5 per cent in FY26, despite revenue growth of 9–10 per cent. 

Key numbers in the passenger vehicle market

PV dispatches rose to a record 4.66 million units in FY26

H2 PV dispatches grew 16.7 per cent, reversing a 1.4 per cent decline in H1FY26

FY26 PV dispatches grew 7.9 per cent

5–7 per cent growth is expected in FY27, with PV sales touching 5.9 million units

Maruti is taking annual installed capacity to 2.9 million units from 2.4 million units now

Hyundai is investing about Rs 6,800 crore on the Talegaon plant to take capacity to 320,000 units annually

Mahindra is expanding capacity to 68,000 units per month; the Nagpur plant will add 500,000 units annually

TaMo says the Middle East crisis is boosting demand for EVs, with inquiries and bookings rising 25–30 per cent