New Delhi: The Indian automotive industry is projected to experience a normalisation of wholesale volume growth, with a moderate expansion of 3-6 per cent expected across various segments in the 2026-27 fiscal year. This follows a period of elevated growth in the latter half of 2025-26, which was primarily driven by post-GST reform factors and favourable rural demand.
According to ICRA, domestic passenger vehicle (PV) volumes are estimated to grow by 4-6 per cent year-on-year (YoY) in 2026-27, supported by sustained demand momentum. Simultaneously, the two-wheeler industry (2W) is likely to expand by 3-5 per cent as growth moderates on an improved base. Commercial vehicle (CV) volumes are expected to remain driven by economic activities and healthy prospects in the bus segment, leading to an overall segment growth of 4-6 per cent.
Srikumar Krishnamurthy, Senior Vice President & Co-Group Head – Corporate Ratings at ICRA, stated, “The current fiscal has unfolded as a tale of two halves for the Indian automotive industry, with the first half witnessing subdued demand while the second half is seeing a strong recovery on the back of policy support and healthy rural demand. Industry sales volumes have been robust over the past few months, aided by the GST rate cut, pent-up demand, supportive rural output, and a conducive financing environment. Although demand sentiment remains optimistic, volumes are reaching levels that would weigh on the potential for outsized growth in 2026-27.”
In the PV segment, wholesale volumes are expected to grow by 5-7 per cent in 2025-26 before moderating to the 4-6 per cent range in 2026-27 due to a higher base and elevated system-level inventory. Utility vehicles continue to outperform other categories, aided by changing consumer preferences and new model launches. The share of alternative powertrains, including CNG, hybrids, and electric vehicles, is rising steadily due to regulatory pushes and evolving customer preferences.
The 2W industry is currently undergoing a gradual recovery with an estimated growth of 6-9 per cent in 2025-26, supported by healthy agricultural output and better financing availability. However, this growth is expected to normalise to 3-5 per cent in 2026-27.
ICRA observed that premiumization is playing a significant role in this segment; while entry-level motorcycle demand remains under pressure due to affordability constraints, premium motorcycles and scooters have seen a sharp recovery.
CV wholesale volumes are expected to expand by 7-9 per cent in 2025-26, led by the light commercial vehicle and bus segments. While replacement demand and infrastructure activity remain supportive, regulation-led price hikes may constrain higher growth for trucks.
For 2026-27, the CV segment is estimated to grow by 4-6 per cent, with bus volumes likely to perform better at 7-9 per cent growth due to replacement demand from State Road Transport Undertakings.
“The Indian automotive industry is currently at a crossroads amid changing consumer preferences, technological advancements, and a focus on sustainability. ICRA expects the growth trajectory to continue in 2026-27, even as growth is likely to remain modest across segments. Over the medium term, vehicle electrification is expected to be a key structural theme, with EV penetration rising steadily across segments”, Krishnamurthy added.
