ICRA Revises Passenger Vehicle Growth Forecast Amid Component Shortages

ICRA revised its growth forecast for domestic passenger vehicle wholesale volumes to 1-4% for FY26, down from 4-7%, due to high inventory levels and a shortage of critical components like rare earth magnets. However, new model launches are expected to partially offset these challenges.

ICRA, a leading ratings agency, has revised its growth forecast for domestic passenger vehicle wholesale volumes to 1-4% for FY26, down from its previous estimate of 4-7%. This adjustment reflects the growing concerns over high inventory levels and the shortage of critical components, such as rare earth magnets, particularly affecting the electric vehicle sector.

The revision comes despite continued efforts by original equipment manufacturers (OEMs) to bolster the market with new model launches, which are expected to partially support overall industry volumes during this fiscal year. In May, domestic passenger vehicle retail sales dropped by 13.6% month-on-month to 302,214 units, compared to 349,939 units in April, a decline attributed to subdued consumer sentiment amid geopolitical tensions between India and Pakistan.

Conversely, the two-wheeler segment performed well, with retail volumes increasing by 7% year-on-year, driven by strong rural demand and a successful harvest. Looking forward, ICRA maintains a cautiously optimistic view for the two-wheeler market, projecting a 6-9% wholesale volume growth for FY26, supported by steady replacement demand, potential urban market recovery, and healthy rural incomes, contingent on a normal monsoon.

(With inputs from agencies.)