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Informist, Friday, Mar. 27, 2026

NEW DELHI – Growth in automobile sales is expected to moderate in 2026-27 (Apr-Mar) due to a higher base in FY26 which was largely policy-led, emerging challenges from global uncertainties, and input cost pressures, ratings agency ICRA said on Friday. "Continued investments in electrification, steady replacement demand and improving rural incomes are expected to support the sector over the medium term," the firm said.

So far in FY26, the automobile sector has reported a broad-based growth across sub-segments due to benefits from the cut in goods and services tax, improved affordability, and resilient economic activity. In particular, the cut in GST improved the affordability of two-wheelers and enhanced fleet economics in the commercial vehicle segment.

Two-wheeler despatches are expected to hit multi-year highs in FY26 on the back of improving rural demand, better financing availability and GST-led affordability gains. Wholesale sales of two-wheelers in India are expected to grow around 9% on year in FY26, before moderating to 3-5% in FY27 due to a high base, ICRA said. "Even so, underlying demand is expected to remain supported by replacement cycles and healthy rural incomes," ICRA said.

The domestic wholesale sales of commercial vehicles have increased almost 13% on year in this financial year so far, benefiting from higher freight movement and infrastructure activity aside from the cut in GST. "Within segments, medium and heavy commercial vehicles recorded particularly strong growth while light commercial vehicles (LCVs) continued to benefit from improved last-mile freight activity and higher sensitivity to GST-led cost reductions," ICRA said.

The firm expects commercial vehicle sales to exceed forecast of 7-9% on year for FY26, which may moderate to 4-6% in FY27. "While demand momentum remains healthy, elevated funding costs and a preference for pre-owned vehicles, particularly in the LCV segment, could act as near-term constraints," ICRA said.

The automobile components sector could grow 7-9% on year in FY27 due to replacement demand, premiumisation, and a gradual recovery in exports. The ongoing military conflict in West Asia may not have a material direct impact on these companies due to their limited export exposure to the region, ICRA said. "Indirect risks could arise from disruptions in passenger vehicle exports, around 25-30% of which are linked to West Asian markets, potentially affecting component demand. In addition, pressures from supply-chain disruptions, higher energy costs, gas availability concerns and rupee volatility remain key monitorables," ICRA said.  End

Reported by Anand JC

Edited by Akul Nishant Akhoury

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