India’s auto sector reported a mixed performance in Q2FY26 amid the festive season, rare earth supply issues, and the GST cut implemented in September to boost consumption. Kotak Institutional Equities, however, maintained a ‘cautious’ stance on the sector, noting that while festive momentum and GST relief may support short-term demand, structural headwinds in passenger vehicle sales remain a concern.
The report noted that the passenger vehicle segment saw weak demand, while the two-wheeler segment grew strongly. Medium and heavy commercial vehicle sales also recovered, and light commercial vehicle demand increased by 10% overall.
Passenger vehicle demand mixed across regions
In its report Kotak analyses state-wise demand trends in Q2FY26. Passenger vehicles saw a decline in volumes by 1.5% year-on-year. Northern and southern regions also declined by 2-5% YoY, while in western India the volume grew 2% YoY. In most key states passenger vehicles volume see a muted trend, whereas states such as Gujarat, Rajasthan and Punjab witnessed a mid-single-digit yoy increase. Delhi, Karnataka, Andhra Pradesh and Telangana witnessed a 5-8% YoY volume decline.
Two-wheeler volumes rise 7.7%
Two-wheeler’s volume rises 7.7% year-on-year supported by channel filling ahead of the festive season and stronger demand after the GST cut announcement in late September.
Northern and western India led the recovery with volume growth of 9.4% and 13% respectively, while eastern and southern regions grew at a slower pace. The share of scooters in total two-wheeler volumes also increased by 180 basis points during the quarter due to a rise in the scooter mix in the West and South.The scooter mix rose to 52.6% (+130 bps yoy) in South India and increased 310 bps YoY in the western region.