ICRA Projects 5-7% Growth for Passenger Vehicle Industry in FY2026

The passenger vehicle industry is expected to witness steady growth in the current financial year, according to a monthly report released by ICRA. The rating agency projects industry volumes to grow between 5-7% in FY2026, supported by sustained demand momentum and ongoing new model launches by original equipment manufacturers.

ICRA's assessment is based on robust performance indicators observed during the first nine months of FY2026, which recorded a wholesale volume growth of 5.9% year-on-year, while retail volumes expanded by 8.1% during the same period.

December 2025 marked a particularly strong month for the industry, with both wholesale and retail volumes surging 27% on a year-over-year basis. ICRA attributes this growth to the recent Goods & Services Tax rate cuts and the winter wedding season, which traditionally drives vehicle purchases. Wholesale volumes reached 4.0 lakh units during the month, prompting select manufacturers to curtail periodic maintenance shutdown periods to maintain production momentum.

The improved demand environment has also positively impacted inventory management across the sector. According to ICRA, citing data from the Federation of Automobile Dealers Association, inventory levels declined to 37-39 days by December 2025, down from 60 days recorded at the end of September 2025. This reduction reflects stronger retail offtake and better alignment between production and market demand.

Utility vehicles continue to dominate the passenger vehicle landscape, accounting for 65% of overall industry volumes in December 2025, though this represents a slight decline from the 69% share recorded in October 2025. ICRA notes that the mini, compact, and super-compact segments have experienced some revival following the GST rate cuts. While utility vehicles are expected to remain the primary volume drivers, the rating agency anticipates a partial recovery in passenger car segment demand.

On the export front, ICRA reports a 12% year-on-year decline in December 2025 volumes, attributed to manufacturers prioritizing domestic supplies. However, the nine-month period shows a healthier picture, with export volumes expanding 16% year-on-year, indicating increased supply push from Indian manufacturers to international markets. Maruti Suzuki India Limited maintained its position as the leading exporter with approximately 46% market share, followed by Hyundai Motor India Limited.

ICRA's outlook suggests that the combination of new product launches, sustained consumer demand, and favorable market conditions will support the industry's growth trajectory through the remainder of FY2026.