Domestic, export passenger vehicle volumes to cross 5 million units in FY26

The Indian passenger vehicle industry will move towards record sales, with domestic and export volume cumulatively crossing 5 million units this fiscal. 

According to Crisil, even as the annual growth rate slows to 2-4 per cent, it will mark the fourth consecutive year of record sales, with momentum significantly eased from a 25 per cent surge in fiscal 2023 after the pandemic. 

Utility vehicles will drive volume growth this fiscal aided by new launches, easing interest rates, rising CNG adoption and rural tailwinds. 

“As volume growth slows, original equipment manufacturers (OEMs) will rely on premiumisation and better product mix to protect margins. Softer input costs, better utilisation and price hikes are likely to partly offset rising regulatory compliance costs, which will help maintain operating margin for the industry at 12-12.5 per cent this fiscal,” mentions a Crisil report. 

Cash flows and robust cash surplus will allow OEMs to fund high capex, while keeping balance sheets strong and credit profiles stable. 

UVs to lead

“Passenger vehicle growth will moderate to 2-4 per cent this fiscal, but UVs will continue to cruise with nearly 10 per cent growth, supported by new launches. With UVs contributing 68-70 per cent of volumes and the bulk of upcoming models, the shift toward premiumisation is structural. Rural recovery, expected from a likely above-normal monsoon and reduction in interest rates, should improve demand for entry-level cars,” said Anuj Sethi, Senior Director, Crisil Ratings. 

The passenger vehicle export growth is expected to moderate to 5-7 per cent in fiscal 2026 due to global headwinds. The 25 per cent US tariff, effective June 2025, poses limited risk as the US forms just approximately 1 per cent of total PV volumes. 

“PV capex is expected to stay elevated at nearly ₹30,000 crore this fiscal as OEMs ramp up capacity, accelerate EV investments, and push localisation and digital upgrades despite slowing demand growth,” said Poonam Upadhyay, Director, Crisil Ratings. 

Published on April 25, 2025