India's Auto Industry: Moderate Growth Expected Through FY26

The Indian passenger vehicle market is projected to grow at a moderate 4-7% in FY26, according to a report by Icra. Two-wheeler sales are also expected to see healthy growth, with rural demand being a key driver. The commercial vehicle sector will register marginal growth supported by economic activities and infrastructure spending.

According to a recent report by ratings agency Icra, passenger vehicle sales in India are poised for moderate growth of 4-7% in FY26. The report indicates that most demand drivers, including disposable income and new model launches, remain either neutral or favorable for sustained growth in this sector.

Meanwhile, the two-wheeler industry shows promising prospects, with an estimated growth of 6-9% in FY26, following a robust 11-14% increase in FY25. Improved rural demand, backed by healthy monsoon precipitation and increased disposable income due to tax reforms, are significant contributors to this upward trend.

In the commercial vehicle domain, marginal growth is anticipated for FY26. Positive factors such as economic development, government infrastructure spending, and regulatory shifts like the scrappage policy are expected to fuel demand. However, segments like LCV trucks may experience subdued growth owing to competition from electric three-wheelers and a slowdown in e-commerce.