India’s automobile industry returned to peak levels in FY2025-26, with all major vehicle segments posting their highest annual sales in seven years, marking a decisive recovery after a muted start to the year.

According to SIAM data, total domestic vehicle sales rose 10.4% year-on-year to 2.83 crore units, with passenger vehicles, two-wheelers, three-wheelers and commercial vehicles all recording their best annual performance in recent years.

The turnaround was led by a strong second half, where demand accelerated on the back of policy support, improved affordability and lower financing costs, pushing the industry to a broad-based peak.

“Though FY 2025-26 started modestly, the Indian auto industry has closed the year on a high note with every vehicle category posting their highest ever sales in a financial year after seven years,” said Shailesh Chandra, President, SIAM.  

The industry’s performance in FY26 was shaped by a sharp divergence between the first and second halves. While the first half saw subdued growth, the second half recorded a strong rebound, particularly in the January to March quarter.

In Q4, all segments posted double-digit growth, with total domestic sales rising 23.6% year-on-year to 76.4 lakh units. Two-wheelers and three-wheelers led the growth, rising 26.4% and 26.7% respectively, while commercial vehicles grew 18.9% and passenger vehicles 13.2%.  

This late surge underlined improving consumer sentiment, supported by income tax relief, multiple repo rate cuts and broader macroeconomic stability.

PVs Sustain Growth Momentum

Passenger vehicles recorded their highest-ever annual sales of 46.43 lakh units in FY26, growing 7.9% year-on-year. The growth was largely driven by utility vehicles, which continued to gain share, while passenger cars remained largely flat. The segment also saw strong export momentum, with overseas shipments rising 17.5% to 9.05 lakh units.  

Electric passenger vehicle adoption also accelerated sharply, with registrations rising more than 80% during the year, contributing to overall growth.

Two-wheelers Cross Previous Peak

The two-wheeler segment emerged as a key growth driver, posting record sales of 2.17 crore units, up 10.7%, and surpassing its previous peak seen in FY2019. Growth was led by scooters, which grew 18.5%, while motorcycles saw moderate growth of 6.6%.  

The segment also recorded its highest-ever exports at 51.8 lakh units, growing 23.4%, supported by stronger global demand and favourable currency movements.  

Three-wheelers and CVs 

Three-wheelers posted annual sales of 8.36 lakh units, growing 12.8%, supported by rising urban mobility demand and expansion of electric autorickshaws.  

Commercial vehicles also recorded their highest-ever sales at 10.8 lakh units, up 12.6%, reflecting improved economic activity, higher infrastructure spending and easing financing conditions.  

Within the CV segment, growth in goods carriers indicated a recovery in freight movement and consumption demand.

Outlook: Momentum Intact, Risks Remain

The industry expects growth momentum to continue into FY2026-27, supported by strong domestic demand and favourable macroeconomic conditions.

However, concerns remain around geopolitical tensions, particularly in West Asia, which could impact crude oil prices, commodity costs and supply chains. “Domestic demand and macroeconomic fundamentals remain robust… however, uncertainties arising from the West Asia conflict need to be closely monitored,” SIAM said.