The passenger vehicle industry in India is projected to see wholesale volume growth of about 7-9% in FY26. This growth is supported by strong festive demand, GST rate cuts, and the introduction of multiple new models, as per a report by credit rating agency ICRA. However, the growth is anticipated to slow down to 4-6% in FY2027 due to the high base and changing macroeconomic conditions.
The report suggests that growth in India’s passenger vehicle and tractor sectors is likely to ease in FY27 following a robust performance in FY26. Despite this, a stable outlook is maintained, driven by healthy demand factors and strong credit profiles. Notably, utility vehicles constitute nearly 67% of total sales, indicating a sustained trend towards premiumization in the industry.
Moreover, there is a notable shift towards alternative powertrains like CNG and electric vehicles, contributing to demand diversification. The tractor industry has experienced a significant upsurge, with wholesale volumes growing by 22.8% in the current fiscal year, supported by favorable monsoons, improved agricultural output, and GST reductions on tractors.
While industry volumes are expected to reach record highs in FY26, growth is predicted to moderate to 1-4% in FY2027 due to the high base and an expected normalization in demand. Despite this moderation, the credit profiles of original equipment manufacturers (OEMs) in both sectors are expected to remain robust, backed by low leverage, strong liquidity, and improving operational performance.
Passenger vehicle OEMs are likely to continue substantial capital expenditure on new product development and electric vehicle platforms. On the other hand, tractor manufacturers are poised to benefit from stable input costs and operational leverage. Overall, although growth is set to stabilize post a strong FY2026, both sectors are well-positioned for sustained performance, underpinned by structural demand drivers and resilient financial profiles.
