In 2024, India’s car and two-wheeler sales set a record, with more than 42 lakh vehicles sold.
According to ratings agency Icra, car and two-wheeler sales in India are predicted to expand at a modest rate of 4-7 percent in FY26, with the majority of demand drivers remaining neutral or positive. In terms of two-wheelers, Icra expects industry volumes to expand at a healthy pace of 6-9 percent in FY26, following an estimated 11-14 percent growth in FY25.
In FY24, the passenger vehicle (PV) industry produced 4.2 million units, a record high. Wholesale volumes remained stable year-to-date (YTD) in FY25, driven by consistent production from automobile manufacturers; however, volume growth in the industry has been modest, at around 2%, against the backdrop of waning replacement demand and high inventory levels, according to ICRA’s report. Strong retail sales in recent months have contributed to the control of dealer inventory levels.
Nonetheless, inventories remain fairly high, it stated. “The industry’s growth in FY2025 is expected to be between 0% and 2%. The majority of the industry’s demand drivers remain neutral or positive, including disposable income, new model releases, cost of ownership, and so on. As a result, even if the sector’s base remains strong, ICRA expects PV industry volumes to expand at a moderate rate of 4-7 percent in FY2026,” the ratings agency added.
In the two-wheeler (2W) industry, Icra reported that volumes increased by roughly 10% year on year in FY2025, with the sector continuing to recover from lower levels seen in FY2020- FY2022. Improved rural demand following a healthy monsoon precipitation has boosted industry prospects in recent months.
According to the report, rural demand for the industry is projected to remain strong, with rabi planting doing well so far. “A reduction in income-tax outgo as a result of tax brackets modifications in the Union Budget is projected to boost disposable income and demand.
ICRA expects 2W industry volumes to expand at a healthy pace of 6-9 percent in FY2026, up from an estimated 11-14 percent in FY2025,” ICRA stated. The domestic commercial vehicle (CV) industry is predicted to expand in FY26.
Icra added that factors such as improved economic activity, ongoing budgetary support for infrastructure spending, good freight availability, which supports freight rates, and restrictions such as scrappage policy and a push towards cleaner vehicles might increase replacement demand.
“Mandatory scrapping of older government vehicles and replacement demand would fuel bus growth, whereas LCV (truck) growth is likely to be slower, owing to cannibalization from e3Ws and a slowdown in e-commerce, among other things. M&HCVs (trucks), LCVs, and buses are expected to expand by 0-3%, 3-5%, and 8-10%, respectively, in FY2026, according to the report.
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