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Indian auto sector may witness modest 3-6% volume growth across various segments in FY27: ICRA
Feb-18-2026

Rating agency ICRA in its latest report has said that the Indian automotive industry is expected to see a normalisation of wholesale volume growth, with a modest expansion of 3-6 per cent expected across various segments in the next fiscal year (FY27). This follows strong recovery seen in the second half of FY26, on the back of factors like post-Goods and Services Tax (GST) reforms and a recovery in rural demand. It noted that key emerging trends in the sector like premiumisation and transition in powertrain mix reflect a structural shift in consumer preferences and technology adoption. 

The report said in the passenger vehicle (PV) segment, domestic wholesale volumes are expected to grow by 5-7% in FY26, supported by improved affordability following GST rate cuts, healthy replacement demand and sustained preference for personal mobility. It noted that the share of alternative powertrains (CNG, hybrids and electric vehicles or EVs) has been rising steadily, reflecting both regulatory push and evolving customer preferences. In FY27, domestic PV volumes is expected to grow to 4-6%, supported by sustained demand momentum.  

According to the report, the domestic two‑wheeler (2W) market continues its gradual recovery with estimated growth of 6-9% in FY26, aided by healthy agricultural output, better financing availability and improved affordability. However, the growth is expected to normalise to 3-5% in FY27. It said premiumisation has been playing out in the 2W industry as well, with entry-level motorcycle demand remaining under pressure, reflecting higher vehicle prices and affordability constraints at the lower end of the consumer pyramid. 

The agency further stated that in the commercial vehicle (CV) segment, wholesale volumes are expected to expand by 7-9% in FY26, led by the uptick in demand in the light commercial vehicle (LCV) and bus segments. In FY27, wholesale volume in the CV segment is estimated to grow by 4-6%, within which medium and heavy commercial vehicles (M&HCV) are expected to grow 5-7%, while light commercial vehicles (LCV) are seen expanding 3-5%. Bus volumes are likely to remain relatively better with 7-9% growth, aided by healthy replacement demand from State Road Transport Undertakings.
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