Despite the moderation, demand is expected to remain supported by GST cuts, new model launches, and continued strength in the utility vehicle segment.Growth in India’s passenger vehicle (PV) industry is expected to moderate to 4-6 per cent in FY2027 from 8.6 per cent in FY2026, mainly due to a high base and emerging macroeconomic risks, even as demand remains steady, according to a report by ICRA.
The report said factors such as a weak monsoon outlook and the ongoing West Asia crisis, which could impact inflation and consumer sentiment, will be key monitorables for the sector.
ICRA said demand is likely to remain supported by GST rate cuts and new model launches by original equipment manufacturers (OEMs), which will partly offset the impact of the elevated base.
The report noted that wholesale volumes rose 16 per cent year-on-year to 4.4 lakh units in March 2026, while retail sales grew 21 per cent, supported by strong demand and new launches.
On a sequential basis, wholesale dispatches increased by 6 per cent in March, indicating sustained momentum.
For FY2026, wholesale volumes grew 8.6 per cent year-on-year to an all-time high of 4.7 million units, while retail volumes rose 11 per cent to 4.6 million units.
ICRA said the growth in FY2026 was uneven, with volumes declining 0.2 per cent in the first half but rising sharply by 17 per cent in the second half following GST rate changes.
The report also highlighted improvement in channel health, with inventory levels declining to around 28 days in March 2026 from over 50 days a year ago, aided by stronger retail offtake, as per data from the Federation of Automobile Dealers Association.
Segment-wise, utility vehicles (UVs) continued to dominate, accounting for 68 per cent of total PV volumes in FY2026, and are expected to remain the key growth driver.
However, demand for passenger cars in mini, compact and super-compact segments has shown some recovery after GST rate cuts, ICRA said.
The report added that export volumes increased by 18 per cent in FY2026, driven by higher supply from Indian OEMs.
Maruti Suzuki India Limited led exports with a 49 per cent market share, followed by Hyundai Motor India Limited, the report said.
