India's Auto Sector Sees Structural Shift: Deloitte Wheelwatch Report

India's automotive industry is experiencing a structural realignment as consumer preferences shift toward premium and electric vehicles, while entry-level segments struggle with subdued demand, according to Deloitte India's latest Wheelwatch report released in December 2025.

The report, which tracks the sector's performance from April to October FY2026, shows domestic two-wheeler wholesale sales grew modestly by 1 percent year-on-year, though retail sales jumped 12.6 percent during the same period. This gap suggests manufacturers exercised caution with dispatches following earlier inventory accumulation.

Electric two-wheeler registrations climbed 16.4 percent, with penetration reaching 6.3 percent nationally. Kerala emerged as the leader with 13.9 percent EV penetration, more than double the national average, while Karnataka followed at 12.5 percent.

The passenger vehicle segment recorded 1.3 percent wholesale growth, but electric PV registrations surged 108 percent, pushing EV penetration to 3.8 percent from 1.9 percent in the previous year. Kerala again topped the charts with 8.4 percent EV penetration in passenger vehicles.

Premium segments demonstrated strong momentum across categories. Sport and performance motorcycles grew 23.1 percent, while premium scooters surged 44 percent. In passenger vehicles, mid-size entry cars increased 9.6 percent, and large luxury models rose 3.5 percent.

However, commuter motorcycles declined 5.8 percent and executive motorcycles plummeted 35.4 percent. Compact entry-level cars also faced pressure, reflecting affordability concerns in rural markets.

The report attributes the mixed performance to uneven rural recovery, fiscal consolidation, and services-driven urban consumption. Recent GST reforms reducing rates from 28 percent to 18 percent on mass-market vehicles have boosted affordability, contributing to improved retail conversion rates.

Rajat Mahajan, Partner and Automotive Sector Leader at Deloitte India, noted that the market is fragmenting across income levels and geography, with value-driven consumers pausing while aspiration and sustainability narratives gain traction.

State policies continue shaping EV adoption patterns. Uttar Pradesh revised its EV subsidy scheme in October 2025, limiting benefits to vehicles manufactured within the state to boost local production. The central government extended the PM E-DRIVE scheme for commercial vehicles until March 2028 and expanded coverage to include e-trucks.

The report indicates that EV growth is concentrated in regions where infrastructure, policy support, and consumer awareness converge, creating a widening gap between leading and lagging states in the electric transition.