India's auto industry poised for 6-8% growth in 2026
What's the story
India's automobile sector is gearing up for a strong start in 2026, with sales projected to grow by 6-8%. The optimistic forecast is driven by policy support such as Goods and Services Tax (GST) rationalization, easing monetary conditions, and income tax relief measures. These factors are expected to improve affordability and sustain consumer demand across different vehicle segments.
Market trends
Passenger vehicle volumes rebound, SUVs lead demand
After a slow start, passenger vehicle volumes rebounded sharply in 2025. This was mainly due to strong urban demand, stable rural incomes, and improved financing availability. SUVs continued to dominate the market while CNG and electric vehicles gained traction. This gradual shift in powertrain mix indicates a steady transition rather than a disruptive one.
Industry challenges
Rising compliance costs and supply-side constraints
As the industry prepares for stricter regulations, it is also facing rising compliance costs. The introduction of CAFE norms from 2027 and future emission standards could pressure margins and pricing. Mandatory safety requirements like ABS and CBS for two-wheelers are already pushing up entry-level prices. Supply-side constraints remain a structural challenge with global uncertainties, tariffs, and currency depreciation posing risks for component-intensive vehicles.
Strategic shifts
Investment cycles shift toward electrification and infrastructure
Automakers are increasingly investing in electrification, charging infrastructure, and platform upgrades. They are also scaling conventional powertrains to meet near-term demand. This dual-track strategy shows a gradual market transition rather than a sharp pivot. The overall outlook for the auto sector in 2026 is positive but nuanced: growth is likely to continue due to policy support and consumption resilience but will be shaped by regulatory readiness and cost pressures.
Industry expectations
Maruti Suzuki expects industry growth to 7-8% in 2026
Maruti Suzuki MD and CEO Hisashi Takeuchi said, "We expect GST benefits to fully unfold in 2026, driving industry growth to 7-8% annually." He added that this would fuel employment generation within the country. Takeuchi also noted that after a slow start, the industry accelerated into a high-growth trajectory in 2025 due to progressive GST reform.
Dealer confidence
Dealers confident of double-digit growth in 2025
Federation of Automobile Dealers Associations (FADA) president CS Vigneshwar said dealers were confident of closing the 2025 calendar year with double-digit growth in both two-wheeler and passenger vehicle categories. He added, "With stable rural incomes and the ongoing marriage season, we expect this positive momentum to carry forward into early 2026." However, he warned that steep price hikes by OEMs from January could pressure demand.
Component industry outlook
ACMA anticipates steady growth for Indian auto component industry
The Automotive Component Manufacturers Association of India (ACMA) also expects the growth momentum to continue in the next year. ACMA Director General Vinnie Mehta said, "The Indian auto component industry is expected to continue to grow steadily next year, with domestic demand and localization providing support." This comes despite global uncertainties and supply-chain risks that still loom over the sector.