Electric vehicle penetration across categories is expected to rise meaningfully by FY30, driven by electric two-wheelers, three-wheelers and buses.India’s automotive sector is set to record moderate wholesale volume growth in 2026–27 after stronger expansion in the latter half of 2025–26, according to a latest report by research agency ICRA.
It added that passenger vehicle volumes are estimated to rise by 4–6 per cent, supported by ongoing demand. Two-wheeler volumes are projected to increase by 3–5 per cent as growth stabilises on a higher base. Commercial vehicle volumes are expected to grow by 4–6 per cent, led by economic activity and bus-segment demand.
“The current fiscal has unfolded as a tale of two halves for the Indian automotive industry, with the first half witnessing subdued demand while the second half is seeing a strong recovery on the back of policy support and healthy rural demand,” said Srikumar Krishnamurthy, senior vice-president and co-group head – corporate ratings, ICRA.
He added that industry sales volumes have been robust over the past few months, aided by the GST rate cut, pent-up demand, supportive rural output, and conducive financing environment. Although demand sentiment remains optimistic, volumes are reaching levels that would weigh on the potential for outsized growth in 2026–27.
For 2025–26, passenger vehicle wholesale volumes are projected to grow by 5–7 per cent, supported by GST-related affordability changes, replacement demand and interest in personal mobility. The share of CNG, hybrid and electric powertrains continues to increase. Wholesale PV growth is expected to ease to 4–6 per cent in 2026–27 due to a higher base and inventory levels.
Two-wheeler industry volumes are forecast to grow by 6–9 per cent in 2025–26, followed by 3–5 per cent in 2026–27. Entry-level motorcycle demand remains under pressure, while premium motorcycles and scooters have recovered. Electric two-wheeler penetration is expected to rise.
Commercial vehicle wholesale volumes are forecast to grow by 7–9 per cent in 2025–26, backed by demand in the light commercial vehicle and bus categories. Growth of 4–6 per cent is projected for 2026–27, with medium and heavy commercial vehicles expected to grow by 5–7 per cent and light commercial vehicles by 3–5 per cent. Bus volumes are projected to increase by 7–9 per cent.
The Indian automotive industry is currently at crossroads amid changing consumer preferences, technological advancements and focus on sustainability, according to Krishnamurthy.
“ICRA expects the growth trajectory to continue in 2026–27 even as growth is likely to remain modest across segments. Over the medium term, vehicle electrification is expected to be a key structural theme, with EV penetration rising steadily across segments,” he added.
Electric vehicle penetration across categories is expected to rise meaningfully by FY30, driven by electric two-wheelers, three-wheelers and buses. Adoption of electric passenger cars and light commercial vehicles is also expected to improve.
