India’s automobile industry is definitely poised at an interesting juncture. Helped by GST cuts, rural demand, analysts at Jefferies and Nuvama expect the auto sector to head into FY26 on a stronger footing. This is particularly striking against the global backdrop which indicates slowdown trends across major global markets.
Here is a detailed analysis on why the Indian auto sector may well have accelerated to the growth highway.
Rural recovery boosts tractors and two-wheelers
According to the Nuvama report, both Mahindra & Mahindra and Escorts Kubota have raised their tractor industry growth outlook to 10–12% in FY26, supported by better rural sentiment, tax reforms and hopes of a favourable monsoon. Bosch also expects tractor production to rise about 10% in FY26.
The report also adds that two-wheelers are also set for a stronger year. Bosch now estimates 9–10% growth in 2W production in FY26, up from its earlier forecast of 6–9%. This improvement is important because large global tractor markets, especially in North America and Europe, are still weak.
Govt capex to support commercial vehicle demand
The Jefferies report shows that central government capital expenditure (capex) is up 32% year-to-date, even though it declined in October. When excluding telecom and the Department of Economic Affairs (DEA), capex remains strong at 31% YTD, far above the 6% full-year target.
Road and rail spending are both ahead of schedule, with road capex up 21% YTD and 64% of the FY26 budget already utilised, while rail capex is up 4% YTD with 65% of the annual target achieved by October.
This steady infrastructure push is supporting demand for commercial vehicles. According to the Nuvama report, Tata Motors expects CV volumes to grow in high single digits in H2FY26 as construction and mining activity picks up after the monsoon.
Bosch also estimates 7–10% growth in MHCV production and 5–6% growth in LCVs for FY26, while Volvo expects the Indian MHCV market to expand by 6% in CY26.
Construction equipment (CE) sales were slow earlier due to a long monsoon and lower demand after emission-related price hikes. But Escorts Kubota expects CE volumes to pick up from the second half of Q3FY26, the Nuvama report added.
Global CE makers like Volvo expect mixed growth in CY26, but strong backlogs and infrastructure spending should support overall improvement.
Passenger Vehicles: India stays positive while global markets low
The Nuvama report cites S&P Global, which expects flat PV production in Europe and a 3% decline in North America in CY26.
India, however, is expected to grow faster. Bosch estimates 7% growth in car production in FY26, up from its earlier 4–7% range. OEMs such as Maruti Suzuki and Hyundai continue to have BUY ratings, reflecting steady domestic demand.
Component makers benefit
The Nuvama report notes that some global segments, especially commercial vehicles and construction equipment, will likely perform better in CY26 than in CY25. This is good for Indian component makers with global customers.
Companies such as Balkrishna Industries, Bharat Forge, and SAMIL are expected to benefit because they supply to markets that are now stabilising, as per Nuvama.
The Jefferies report highlighted that roads, railways and defence now form most of the capex, excluding DEA and telecom, ensuring steady demand for sectors linked to infrastructure.
Both reports point to one message: India’s auto sector is benefiting from strong local demand, not global trends. Better rural income, strong monsoons, tax reforms and higher government spending are driving the recovery. With tractors, two-wheelers, commercial vehicles and passenger cars all showing upward revisions, FY26 is shaping into a year where India grows despite global softness.