New Delhi [India]: India’s automobile industry is expected to experience mixed growth in FY2026, with moderate expansion in passenger vehicles (PVs), steady demand for two-wheelers (2Ws), and continued momentum in the tractor segment, according to a report by Kotak Institutional Equities.
Passenger Vehicle Segment: Modest Growth Expected
The domestic PV industry is projected to grow in the low single digits year-on-year in FY2026, following a flat growth trend in FY2025.
According to the report, “Domestic PV industry wholesale volumes are expected to grow in low single digits YoY (flat YoY growth in FY2025E) in FY2026E, driven by steady growth in the SUV segment due to newer launches and an increase in BEV segment penetration, partly offset by continued weakness in entry-level segment demand and a high base effect.”
- SUVs and MUVs are expected to grow by 6-8%, fueled by new launches and increased electric vehicle adoption.
- Hatchbacks and sedans may see 3-4% growth, constrained by weak demand in the entry-level segment.
- Overall PV industry volumes could rise by 3-5% in FY2026.
Two-Wheeler Market: Strong Growth Driven by Premium Bikes and Scooters
The two-wheeler segment is projected to grow by 6-9% YoY in FY2026, supported by:
- Rising urbanization and increasing preference for premium motorcycles (above 125cc).
- Strong demand for scooters, particularly in urban areas.
- Export recovery, with improving demand in Latin America (LATAM) and Africa, aiding overall growth.
Commercial Vehicles: Mixed Outlook for M&HCV Segment
The medium and heavy commercial vehicle (M&HCV) segment presents a mixed outlook:
- Some automakers anticipate mid-single-digit growth.
- Auto component manufacturers expect flat growth in FY2026.
- Manufacturers remain optimistic about margins, supported by pricing discipline, stable commodity prices, and diversified revenue streams beyond commercial vehicles.
Tractor Industry: Strong Demand to Continue
The tractor industry is expected to maintain its strong growth trajectory, driven by favorable agricultural conditions, including:
- Higher Rabi sowing acreage.
- Improved reservoir levels.
- Favorable Minimum Support Prices (MSP), boosting farmers’ purchasing power.
- OEMs expect strong demand to continue in the first half of FY2026.
Auto Component Industry: Growth Tied to Vehicle Demand
- Domestic demand remains stable, supporting growth for auto parts manufacturers.
- However, slowdown in certain export markets may affect revenue growth for some auto ancillary players.
As India’s auto industry navigates varying demand patterns across segments, SUVs, premium two-wheelers, and tractors are expected to drive growth, while entry-level PVs and M&HCVs may see subdued expansion.