Ratings agency ICRA in its latest report has said that India's passenger vehicle (PV) industry is projected to experience moderation in growth to 4-6 per cent in the current fiscal year (FY27), due to high base effect and evolving macroeconomic conditions. It said that PV industry is projected to achieve 7-9 per cent wholesale volume growth in FY26, fueled by strong festive demand, GST rate reductions and numerous new model launches.      

According to the report, the industry continues to witness structural shifts, with utility vehicles accounting for nearly 67 per cent of total PV sales in India, reflecting sustained premiumisation trends. Further, it said increasing penetration of alternative powertrains, specifically Compressed Natural Gas (CNG) and Electric Vehicles (EV), is diversifying demand in the automotive sector. Despite the anticipated moderation in growth, it said passenger vehicle original equipment manufacturers (OEMs) are projected to continue investing heavily in new product development and electric vehicle platforms, while tractor manufacturers are likely to benefit from stable input costs and operating leverage. It said going forward, key monitorables for the PV industry include inflationary pressures arising from geopolitical developments and interest rate movements.

Similarly, ICRA said the tractor industry is also expected to see moderated growth of 1-4 per cent in FY27, following a high base and expected normalisation in demand. It said the tractor industry has witnessed strong momentum, with wholesale volumes rising 22.8 per cent in the first 11 months of FY26, aided by favourable monsoons, improved farm output and GST reduction on tractors. It added that going forward, tractor demand will remain closely linked to monsoon performance and rural income levels, with potential El Nino conditions posing a downside risk.