Passenger vehicle (PV) demand in India is expected to remain steady in FY2027, with growth pegged at around 8%, though emerging risks could test the sustainability of this momentum, according to a recent report by Nomura .
The outlook follows a strong start to FY2027, with PV wholesales estimated to grow 26% year-on-year in April 2026, while retail volumes are seen rising at a relatively modest 10%, indicating a divergence between dispatches and actual consumer demand. This gap suggests that while automakers are pushing volumes, underlying demand growth could be more measured.
Premiumisation
Nomura expects PV growth to be supported by continued premiumisation, with SUVs and higher-end models driving incremental demand. New launches and strong order pipelines have sustained interest, even as waiting periods have largely normalised, signalling improved supply-side conditions.
Rising Input Costs
However, the report also mentions that risks are beginning to emerge. Commodity costs for PV manufacturers have risen by about 380 basis points between September 2025 and April 2026, driven largely by higher steel and precious metal prices. This is expected to translate into margin pressures, particularly in the April–June quarter, prompting automakers to consider price hikes with some already have commenced.
Such increases could weigh on demand, especially in entry-level segments where affordability remains a concern. The report also flags the risk of a potential fuel price hike after the state elections in May, which could further dampen consumer sentiment and impact purchase decisions, however the government has been denying that there will be a price hike in the near term.
At the same time, electrification is gaining traction. The EV mix in the PV segment is expected to reach around 5.4% in April 2026, with further upside possible if supported by policy incentives or higher fuel prices.
While the near-term outlook remains stable, Nomura cautions that rising input costs, pricing actions and macro uncertainties could create headwinds resulting in price increases and lesser demand.