Summary: New insights into India’s domestic passenger vehicle (PV) market indicate a steady growth trajectory, with sales expected to rise by 4-7% in the financial year 2026. This moderate expansion is attributed to stable demand drivers, including disposable incomes, new model launches, and ownership costs, as outlined by credit rating agency ICRA.
Market Trends and Growth Expectations
Recent data from ICRA highlights that while the two-wheeler industry is poised for a robust 6-9% growth in FY26, this is lower than the estimated 11-14% growth expected in FY25. Meanwhile, the domestic PV industry experienced a production volume of 4.2 million units in 2024, marking a continued stability in wholesale volumes. However, growth in the sector has remained modest at 2%, influenced by declining replacement demand and high inventory levels.
Stable Wholesale Volumes and Inventory Challenges
Passenger vehicle manufacturers have maintained consistent production levels, contributing to stable wholesale volumes. However, the industry is facing persistent challenges in inventory management. Although retail demand has supported dealer inventory holdings in recent months, the overall inventory levels remain significantly high.
For FY25, the growth forecast for the PV segment is estimated at 0-2%, reflecting the effect of a high base. However, the long-term outlook remains positive, with industry volume growth projected at 4-7% in FY26. Favorable market conditions and stable economic indicators continue to support this outlook.
Two-Wheeler Industry Shows Strong Recovery
The two-wheeler market has been demonstrating a strong recovery, recording a 10% year-on-year growth in FY25. This marks a significant rebound from the lower sales levels witnessed between FY20 and FY22. Improved rural demand, supported by healthy monsoon precipitation, has played a critical role in this resurgence. The positive trend is expected to sustain in the coming years, reinforcing the overall momentum in the automotive sector.
Economic and Policy Support for Industry Growth
ICRA also noted that improvements in economic activities, government budgetary support, and infrastructure development have positively impacted the automobile industry. Additionally, evolving freight regulations and the push towards cleaner vehicle technologies are expected to drive future replacement demand, further strengthening market prospects.
The industry remains poised for steady expansion, supported by stable demand factors and ongoing policy initiatives. As the market navigates challenges such as inventory management and fluctuating replacement demand, a balanced approach to production and retail strategies will be essential in sustaining growth.