Domestic passenger vehicle sales expected to grow 4-7 pc in FY26: Icra

New Delhi, Feb 27: According to ICRA Ratings, India's passenger vehicle (PV) sales are projected to grow at a moderate pace of 4-7% in FY26, driven by neutral to favorable demand factors. Meanwhile, the two-wheeler (2W) segment is set to witness a robust 6-9% growth in FY26, following an estimated 11-14% expansion in FY25.

Passenger Vehicle Market Outlook​

The PV industry achieved a record-high sales volume of 4.2 million units in FY24. However, growth in FY25 has remained modest at around 2%, impacted by waning replacement demand and high inventory levels. Despite steady production and healthy retail sales moderating dealer inventories in recent months, ICRA noted that the overall inventory remains moderately high.

For FY25, ICRA projects PV industry growth at 0-2%, as most demand drivers—including disposable incomes, new model launches, and cost of ownership—remain neutral or favorable. Looking ahead, sales are expected to pick up in FY26 with a 4-7% increase.

Two-Wheeler Industry Performance​

The two-wheeler segment recorded a 10% year-on-year (YoY) growth in YTD FY25, reflecting a continued recovery from the low levels between FY20 and FY22.

Rural demand has been crucial in this resurgence, supported by a healthy monsoon and favorable rabi crop sowing. Additionally, the recent income tax slab revisions in the Union Budget are expected to boost disposable incomes, further driving demand. ICRA forecasts a decisive 6-9% growth in 2W sales in FY26, following the 11-14% estimated growth in FY25.

Commercial Vehicle Segment: Marginal Growth Expected​

The domestic commercial vehicle (CV) industry is expected to grow marginally in FY26, with various economic and policy factors influencing demand.

Key growth drivers include:

• Economic activity recovery
• Infrastructure investment backed by continued budgetary support
• Freight demand stabilization, supporting freight rates
• Vehicle scrappage policy and the shift towards cleaner vehicles

However, segment-wise performance will vary:

• Bus sales are projected to rise by 8-10%, driven by mandatory scrapping of older government vehicles and replacement demand.
• Light commercial vehicles (LCVs) are expected to grow by 3-5%, though they face challenges from e3W adoption and an e-commerce slowdown.
• Medium & Heavy Commercial Vehicles (M&HCVs) will likely see limited growth of 0-3%.

Overall, while passenger vehicles and two-wheelers are set for moderate to strong growth, according to ICRA, commercial vehicle sales will see only marginal improvement in FY26.