New Delhi– India’s passenger vehicle (PV) industry is projected to reach a new record in fiscal year 2026, with combined domestic sales and exports surpassing 5 million units, even as annual growth moderates to 2-4%, according to a report released Friday.
The Crisil Ratings report marks this as the fourth consecutive year of record PV sales, though growth momentum has slowed significantly from the 25% surge seen in fiscal 2023 post-pandemic.
Utility vehicles (UVs) are expected to be the primary driver of growth this year, supported by new model launches, easing interest rates, increased adoption of compressed natural gas (CNG) vehicles, and improving rural demand.
“While overall PV growth will moderate to 2-4% this fiscal, UVs are set to grow at a robust 10%, driven by new launches,” said Anuj Sethi, Senior Director at Crisil Ratings. “With UVs accounting for 68-70% of volumes and the majority of upcoming models, the shift toward premiumization in the market is structural.”
Sethi added that an expected rural recovery, bolstered by a likely above-normal monsoon and lower interest rates, could boost demand for entry-level cars.
Strong cash flows and healthy cash reserves will enable original equipment manufacturers (OEMs) to fund their high capital expenditure plans comfortably, maintaining strong balance sheets and stable credit profiles, the report noted.
Last fiscal year, the domestic market accounted for 85% of total PV volumes, with exports making up the remaining 15%.
The vehicle fuel mix is also evolving rapidly. CNG-powered vehicles are gaining traction, with their market share expected to reach 15% this fiscal due to lower running costs and an expanding network of over 7,000 refueling stations.
The report also highlighted that OEMs can explore alternative export markets such as Mexico, the Gulf countries, South Africa, and East Asia, though ongoing geopolitical tensions may impact export momentum.
Capital expenditure in the PV sector is expected to remain elevated at Rs 30,000 crore this fiscal as OEMs ramp up production capacity, accelerate investments in electric vehicles (EVs), and push for greater localization and digital upgrades.
“This high capex is sustainable, supported by strong internal accruals and cash surpluses, with the capex-to-Ebitda ratio holding steady at 0.5x,” said Poonam Upadhyay, Director at Crisil Ratings.
The entry of global premium EV brands, including Tesla, is expected to intensify competition in India’s premium segment, which currently accounts for less than 10% of overall PV sales. This could reset consumer expectations and push Indian OEMs to accelerate technology upgrades. However, high import tariffs are likely to limit the volume of premium EV imports. (Source: IANS)
