India’s automotive industry faces moderated growth of 3-6% in wholesale volumes for FY27 (April 2026-March 2027), down from robust H2 FY26 gains driven by GST cuts and rural demand. ICRA attributes this to a high base effect and normalizing pent-up demand, though structural trends like premiumisation and EVs offer resilience.
Segment-Wise Projections
Passenger vehicles (PV) are forecast to grow 4-6%, supported by replacement demand and SUV popularity, with alternative powertrains like CNG, hybrids, and EVs gaining share. Two-wheelers expect 3-5% rise, commercial vehicles 4-6%, as regulatory upgrades raise prices but replacement cycles aid volumes.
Key Growth Drivers and Challenges
Premiumisation trends push consumers toward higher-spec models across segments, boosting average realizations despite slower volume growth. EV penetration accelerates in two-wheelers, three-wheelers, and buses, aided by falling costs, better infrastructure, and policies, while PV and CV EVs grow steadily from a low base. Challenges include elevated inventories and emission/safety norms hiking prices, tempering rapid expansion.
ICRA’s Outlook
Srikumar Krishnamurthy of ICRA noted FY26’s tale of two halves—subdued H1, strong H2 recovery—setting a higher FY27 base that limits outsized gains. Medium-term positives include powertrain diversification and rural momentum, signaling a “cautious but resilient” trajectory.
