Passenger vehicle sales volume in India is expected to grow at a moderate pace of 4-7 per cent in FY26 with most demand drivers remaining neutral or favourable, according to ratings agency Icra.

As for two-wheelers, Icra said it estimates the industry volumes to grow at a healthy pace of 6-9 per cent in FY26, following an estimated 11-14 per cent growth in FY25.

Passenger vehicle (PV) industry volumes reached an all-time high of 4.2 million units in FY24. In year-to-date (YTD) FY25, wholesale volumes remained stable, led by steady production by automobile manufacturers but the industry volume growth has been modest at about 2 per cent against the backdrop of waning replacement demand and high inventory levels, Icra said in a statement.

Healthy retails have helped moderate dealer inventory holding in the past few months. Nonetheless the inventory continues to be moderately high, it added.

“The industry’s growth in FY2025 is expected at 0-2 per cent. Most of the demand drivers for the industry — disposable incomes, new model launches, cost of ownership — remain neutral or favourable. Accordingly, even as the base for the industry continues to remain high, Icra estimates the PV industry volumes to grow at a moderate pace of 4-7 per cent in FY2026,” the ratings agency said.

In the two-wheeler (2W) industry, Icra said volumes witnessed strong growth in the current fiscal at about 10 per cent YoY growth in YTD FY2025, with the industry continuing to recover from lower levels during FY2020-FY2022.

As far as the domestic commercial vehicle industry is concerned, it is expected to register a marginal growth in FY26.