New Delhi: Passenger vehicle (PV) sales in India are projected to grow by 4-7% in FY2025-26, buoyed by favourable market conditions and steady demand, according to a report by ratings agency ICRA.
The two-wheeler (2W) segment is anticipated to outpace PV growth, with an expected increase of 6-9% in FY26, driven by strong rural demand and improved economic conditions. This follows an estimated 11-14% growth in FY25, the report noted.
Passenger vehicle industry volumes reached a record 4.2 million units in FY24.
Year-to-date (YTD) FY25 wholesale volumes have shown modest growth of around 2%, supported by consistent production levels among manufacturers.
“Key demand drivers, including disposable incomes, new model launches, and cost of ownership, remain neutral to favourable. Given the high base, the PV industry is likely to grow at a moderate pace of 4-7% in FY26,” ICRA stated.
In the two-wheeler segment, volumes have surged by approximately 10% year-on-year in YTD FY25, marking a recovery from subdued levels seen between FY2020 and FY2022. Improved rural demand, supported by a good monsoon and strong rabi crop sowing, has bolstered the industry’s performance.
The Union Budget’s income-tax exemptions are expected to enhance disposable incomes, further stimulating demand in the two-wheeler market.
ICRA projects two-wheeler volumes to grow healthily at 6-9% in FY26, following significant gains in FY25.
Commercial vehicle (CV) sales are also poised for growth, fuelled by increased economic activity, sustained government investment in infrastructure, robust freight availability, and policy initiatives such as the vehicle scrappage policy and a push for cleaner vehicles.
“Mandatory scrapping of older government vehicles will boost demand for buses, while the growth in Light Commercial Vehicles (LCVs) may face headwinds from competition with electric three-wheelers and a slowdown in e-commerce,” the report noted.
ICRA estimates growth in Medium and Heavy Commercial Vehicles (M&HCV) at 0-3%, LCVs at 3-5%, and buses at 8-10% in FY26, reflecting a varied performance across segments.
With steady demand across passenger, two-wheeler, and commercial vehicle segments, India’s automotive industry is set for moderate yet steady growth in the coming years.
