India's automobile industry achieved its strongest-ever performance in FY26, with record sales across all vehicle segments supported by GST cuts and strong second-half demand. According to ICRA's latest report, the passenger vehicle industry is projected to experience moderation in growth to 4-6% in the current fiscal year (FY27), due to high base effect and evolving macroeconomic conditions. The PV industry achieved 7-9% wholesale volume growth in FY26, fueled by strong festive demand, GST rate reductions and numerous new model launches, as reported by Autocar Professional.
The report reveals significant structural shifts in India's PV market, with utility vehicles accounting for nearly 67% of total PV sales, reflecting sustained premiumisation trends. According to ICRA's analysis, increasing penetration of alternative powertrains, specifically Compressed Natural Gas (CNG) and Electric Vehicles (EV), is diversifying demand in the automotive sector. The retail sales for FY2025-26 grew by 13.1% at 2.96 crore units, just short of the 3 crore milestone, as reported by Upstox News Desk. Electric passenger vehicle sales grew 84% in FY26 to about 198,000 units, driven by new model launches and better supply, though adoption remains at an early stage as charging infrastructure and price gaps continue to influence buying decisions.
The latest FADA report showed the passenger vehicle segment witnessed strong growth in March at record numbers, with monthly sales growing by 25.3% YoY to 2.69 million units. ICRA noted that going forward, key monitorables for the PV industry include inflationary pressures arising from geopolitical developments and interest rate movements. Domestic passenger vehicle sales are estimated to have grown 7-8% in FY26, supported by lower GST rates, strong festival demand and improving rural sales, with volumes projected to reach about 4.6-4.65 million units for the year. The Maruti Suzuki Dzire emerged as India's best-selling car in FY26 with about 2.3 lakh units sold, showing continued demand for sedans even as SUVs dominate the market.
The automobile industry witnessed significant shifts in market rankings during FY26. Hyundai Motor India slipped to fourth place in domestic passenger vehicle sales, overtaken by Mahindra and Tata Motors after its volumes declined while rivals recorded strong double-digit growth. In the two-wheeler segment, Hero MotoCorp maintained its leadership with about 6.07 million units, slightly widening the gap with Honda, supported by strong hold in commuter motorcycles and growth in its electric vehicle portfolio. Electric two-wheeler registrations grew 22% to about 1.40 million units, showing steady demand as traditional manufacturers gained share, with penetration rising to about 6.5% of total sales.
The electric mobility sector continues to show strong growth momentum, with electric three-wheeler sales crossing 830,000 units for the first time in FY26, growing 19% driven mainly by strong demand and rising market share of established manufacturers. VinFast has opened bookings for its seven-seater electric VF MPV 7 ahead of its April 15 launch, marking the company's entry into the electric MPV segment. Suzuki Motorcycle India plans to expand its electric vehicle lineup beyond the e-Access with a gradual rollout into more affordable segments, backed by stronger localisation and local development. Novelic has entered the Indian market with millimetre-wave radar solutions aimed at supporting advanced vehicle safety features, positioning its technology as a cost-effective option for automakers.
