ICRA projects moderation in India's PV industry growth to 4-6% by FY27

Ratings agency ICRA in its latest report has said that India's passenger vehicle (PV) industry is projected to experience moderation in growth to 4-6% in the current fiscal year (FY27), due to high base effect and evolving macroeconomic conditions. It said that the PV industry is projected to achieve 7-9% wholesale volume growth in FY26, fueled by strong festive demand, GST rate reductions and numerous new model launches.

According to the report, the industry continues to witness structural shifts, with utility vehicles accounting for nearly 67% of total PV sales in India, reflecting sustained premiumisation trends. Further, it said increasing penetration of alternative powertrains, specifically Compressed Natural Gas (CNG) and Electric Vehicles (EV), is diversifying demand in the automotive sector.

Despite the anticipated moderation in growth, it said passenger vehicle original equipment manufacturers (OEMs) are projected to continue investing heavily in new product development and electric vehicle platforms, while tractor manufacturers are likely to benefit from stable input costs and operating leverage. It said going forward, key monitorables for the PV industry include inflationary pressures arising from geopolitical developments and interest rate movements.

Similarly, ICRA said the tractor industry is also expected to see moderated growth of 1-4% in FY27, following a high base and expected normalisation in demand. It said the tractor industry has witnessed strong momentum, with wholesale volumes rising 22.8% in the first 11 months of FY26, aided by favourable monsoons, improved farm output and GST reduction on tractors. It added that going forward, tractor demand will remain closely linked to monsoon performance and rural income levels, with potential El Nino conditions posing a downside risk.

The latest FADA report showed the passenger vehicle segment witnessed strong growth in March at record numbers. The FY26 ended on a positive note with monthly sales growing by 25.3% YoY to 2.69 million units. The retail sales for the FY2025-26 grew by 13.1% at 2.96 crore units, just short of the 3 crore milestone.