India's passenger vehicle industry achieved a historic milestone in FY26 with dispatches reaching a record 4.66 million units, as reported by the Society of Indian Automobile Manufacturers (SIAM). The industry described the year as a 'year of two halves' - weak first-half demand followed by strong recovery in the second half, with domestic PV sales growing 16.7% in the second half and helping the industry end the year with 7.9% growth overall. According to Crisil Ratings, the momentum is expected to continue into FY27 with projected sales of nearly 5.9 million units and 5-7% growth, supported by GST tailwinds and sustained utility vehicle demand.
Leading carmakers are significantly expanding production capabilities to meet growing demand. Maruti Suzuki has commissioned a second plant at Kharkhoda and is adding another production line in Gujarat during FY27, increasing installed annual capacity to about 2.9 million vehicles from 2.4 million currently, with effective production increase expected at 250,000 units as new lines ramp up gradually. Hyundai Motor India has outlined ₹7,500 crore capex for FY27, including plans to launch two new SUVs and a localised EV, while investing ₹6,800 crore to expand its Talegaon plant capacity to 320,000 units annually from less than 200,000 units currently.
Utility vehicles are expected to lead growth with 7-9% sales projection and share rising to 69% from 67% in FY26, according to Crisil Ratings. Small cars, accounting for 30% of domestic volumes, are projected to grow at a more modest 2-4% due to improved affordability and stable interest rates. Tata Motors Passenger Vehicles recorded its highest-ever annual sales of over 640,000 units in FY26, nearly double the industry growth rate, with demand momentum continuing through April and May. The company expects to deliver 'industry-beating growth' in FY27 supported by new launches and production ramp-up.
Despite strong demand, carmakers face significant cost pressures. Maruti Suzuki reported that commodity costs hurt margins by about 80 basis points sequentially, while Tata Motors Passenger Vehicles said cost reductions were largely absorbed by commodity inflation during FY26. Mahindra Group has mapped risks across '100,000 parts' and '40 commodities' while increasing localisation and alternate sourcing to manage disruptions. Crisil projects operating margins to contract by 50-80 basis points to 9.7-10% from around 10.5% in FY26, despite expected revenue growth of 9-10%.
Despite global uncertainties including geopolitical tensions, commodity inflation, and supply-chain risks, carmakers are maintaining aggressive expansion plans. Mahindra & Mahindra has increased monthly vehicle capacity to 64,500 units per month from 59,000 units at the end of FY26, with total capacity expected to rise to 68,000 units per month in the first half of FY27. The company is also developing a greenfield plant at Nagpur, expected to become operational around mid-2028 with phased scale-up to 500,000 units annually. Companies have implemented price hikes of 1-3% in FY27 to offset higher input and logistics costs, with automakers maintaining their position that the domestic market remains their most compelling long-term bet.
