Passenger vehicle volumes seen at 4–6% in FY27: ICRA

Utility vehicles to anchor growth, rural demand supportive even as higher base tempers expansion in FY27

February 17, 2026 18:24 IST

India’s Auto Sector Set for Moderate 3–6% Growth in FY27 as Demand Normalizes: ICRA

The automotive industry is set to enter a phase of moderate growth in FY27, with wholesale volumes across segments expected to expand by 3–6%, according to ICRA. The forecast signals a normalisation after the elevated growth seen in the second half of FY26, which was driven by GST rate cuts and a revival in rural demand.

ICRA expects passenger vehicle (PV) volumes to grow 4–6% year-on-year in FY27, compared with an estimated 5–7% expansion in FY26. While improved affordability, replacement demand and preference for personal mobility supported recent growth, the higher base and relatively elevated system inventory are likely to temper momentum next year. Utility vehicles are expected to continue outperforming, supported by new launches and consumer preference for larger, feature-rich models. The shift toward alternative powertrains such as CNG, hybrids and EVs is also gaining traction.

“The current fiscal has unfolded as a tale of two halves,” said Srikumar Krishnamurthy, Senior Vice President & Co-Group Head – Corporate Ratings, ICRA. “Although demand sentiment remains optimistic, volumes are reaching levels that would weigh on the potential for outsized growth in 2026-27.”

The two-wheeler industry, which is estimated to grow 6–9% in FY26 on the back of healthy farm output and improved financing availability, is expected to moderate to 3–5% growth in FY27. Entry-level motorcycles remain under pressure due to affordability constraints, while premium motorcycles and scooters continue to see stronger traction. Electric two-wheeler penetration is projected to rise steadily, though supply-side issues such as rare earth availability remain watch points.

In commercial vehicle segment, wholesale volumes are likely to grow 4–6% in FY27, after a stronger 7–9% rise in FY26 led by light commercial vehicles and buses. While infrastructure activity and replacement demand remain supportive, regulation-led price increases may constrain faster growth, particularly in trucks.

Over the medium term, ICRA sees electrification as a key structural theme, with EV penetration rising steadily across segments despite near-term moderation in overall growth.

This article was first uploaded on February seventeen, twenty twenty-six, at twenty-four minutes past six in the evening.