India's Auto Industry Poised for Mixed Growth in 2026 Amid Regulatory and Economic Shifts

India's automobile industry is entering 2026 with an expected sales growth of 6-8%, driven by policy support and strong consumer demand. While SUVs and electric vehicles gain traction, the industry faces challenges from new regulations and compliance costs. Investment in electrification and platform upgrades continues amid supply-side constraints.

India's automobile industry, after a record-setting year, is stepping into 2026 on a strong note, with projected sales growth in the realm of 6-8%. The optimistic outlook can be attributed to policy support measures such as GST rationalisation and income tax relief that are likely to bolster affordability and sustain consumer demand across vehicle segments.

The rebound in passenger vehicle volumes in 2025, driven by urban demand and improved financing availability, highlights a recovery that extends beyond cyclical trends. While SUVs dominate market demand, CNG and electric vehicles are gradually gaining traction, signaling a shift in the powertrain mix. However, 2026 is expected to be a year of preparation for tighter regulations with rising compliance costs.

Faced with ongoing supply-side challenges, automakers are channeling capital towards electrification and platform upgrades. The auto sector's outlook remains positive, buoyed by strong consumer sentiment and policy tailwinds, yet challenged by regulatory pressures and evolving market dynamics.