The combined impact of fuel price hikes, vehicle price increases and inflation is likely to moderate demand across segments in the coming months, despite healthy current sales momentum, according to Nomura’s May 2026 auto sector preview.
Passenger vehicle wholesales are still estimated to grow 24 per cent year-on-year to 427,000 units in May 2026, while retail sales may rise 14 per cent to 366,000 units. Two-wheeler wholesales are projected to increase 10 per cent to 1.84 million units, while retail sales may grow 5 per cent to 1.80 million units. The report noted that waiting periods across key models have largely normalised and discounts are inching up, indicating softer demand conditions.
Entry-level demand may weaken
The brokerage said higher fuel and vehicle prices are likely to hit entry-level passenger vehicles and commuter motorcycles harder, as affordability remains a key factor in these segments. Most auto makers are facing cost pressures of 300-400 basis points in the first quarter of FY27, while price hikes taken so far have been limited to 1-2 per cent.
EV adoption accelerates
Nomura said rising fuel prices and supportive government policies could further accelerate EV adoption in India. Passenger vehicle EV penetration is estimated at 6.4 per cent in May 2026, compared with 4 per cent in FY26 and 2.4 per cent in FY25. Two-wheeler EV penetration is projected at 8.8 per cent, up from 6.5 per cent in FY26 and 6.1 per cent in FY25.
Electric two-wheeler retail sales are estimated at around 159,000 units in May 2026, up 52.1 per cent year-on-year. TVS Motor retained the top position with sales of around 40,800 units, followed by Bajaj Auto at 36,300 units. Ather Energy posted 88 per cent year-on-year growth with sales of 26,400 units.
Commercial vehicles under pressure
Nomura maintained a cautious stance on medium and heavy commercial vehicles (MHCVs), saying rising diesel prices and higher ownership costs are likely to sharply impact demand. The brokerage also cited reports of fuel shortages affecting operational truck fleets in parts of India. MHCV wholesale volumes are estimated to rise 9 per cent year-on-year to 31,000 units in May 2026, while retail registrations are projected to grow 7 per cent to 33,500 units. However, Nomura warned that its FY27 and FY28 growth estimates of 8 per cent and 5 per cent still carry downside risks.
Among major makers, Tata Motors Commercial Vehicles is expected to post 9 per cent growth in MHCV volumes, while Ashok Leyland’s MHCV sales may decline marginally by 1 per cent year-on-year.
Rural risks persist
Nomura also flagged softer tractor demand and warned that weak monsoon rainfall linked to El Niño risks could further impact rural demand. Tractor wholesales are estimated to grow 4 per cent year-on-year in May 2026.