Indian automobile sales will see normalization of growth in the fiscal year 2026-27 at 3.6 percent, following a period of rapid growth seen toward the end of the fiscal year 2025-26 amid the reduction in the Goods and Service Tax (GST) rates, according to a report by Indian rating agency ICRA on Wednesday, February 18.
Sales growth here denotes dispatches from manufacturers to dealers.
Giving the granular forecast of sales growth across categories, ICRA said that passenger vehicle (PV) volumes are estimated to grow by 4-6 percent year on year in 2026-27, supported by sustained demand momentum. Simultaneously, two-wheeler sales are likely to expand by 3-5 percent 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 percent.
"The current fiscal 2025-26 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,” ICRA said.
"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,” it added.
