Domestic passenger vehicle (PV) volumes are estimated to grow 4–6 per cent year-on-year in 2026–27, supported by sustained demand momentum.Srikumar Krishnamurthy, senior vice president & co-group head – corporate ratings at ICRA, said, “The current fiscal 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 conducive financing environment. Although demand sentiment remains optimistic, volumes are reaching levels that would weigh on the potential for outsized growth in 2026-27,” he added, as quoted by news agency ANI.ICRA expects PV wholesale volumes to grow 5–7 per cent in 2025–26 before moderating to 4–6 per cent in 2026–27, due to a higher base and elevated system-level inventory.Utility vehicles continue to outperform other categories, supported by shifting consumer preferences and new model launches. The share of alternative powertrains — including CNG, hybrids and electric vehicles, is rising steadily amid regulatory pushes and evolving customer preferences.

Two-wheelers: Growth to ease after recovery

The two-wheeler (2W) industry is currently witnessing a gradual recovery, with growth estimated at 6–9 per cent in 2025–26, aided by healthy agricultural output and improved financing availability.However, growth is expected to normalise to 3–5 per cent in 2026–27.ICRA noted that premiumisation is shaping demand trends in the segment. While entry-level motorcycle demand remains under pressure due to affordability constraints, premium motorcycles and scooters have recorded a sharp recovery.

Commercial vehicles: Bus segment to lead

Commercial vehicle (CV) wholesale volumes are projected to expand 7–9 per cent in 2025–26, led by the light commercial vehicle and bus segments.Replacement demand and infrastructure activity remain supportive, though regulation-led price hikes may limit stronger growth for trucks.For 2026–27, the CV segment is estimated to grow 4–6 per cent overall, with bus volumes expected to outperform at 7–9 per cent growth, driven by replacement demand from State Road Transport Undertakings.

Electrification: A key structural theme

Highlighting broader industry trends, Krishnamurthy said, “The Indian automotive industry is currently at crossroads amid changing consumer preferences, technological advancements, and 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”, Krishnamurthy added.Overall, while growth is set to continue into 2026–27, it is expected to remain moderate as the industry adjusts to a higher base and evolving demand dynamics.