The Indian automobile industry is likely to see muted growth in FY26, with most segments expected to register only low to mid-single-digit expansion, according to a recent report by Motilal Oswal. The report pegs overall industry growth at a modest 6-7%, citing broad-based demand weakness across key categories.
Two-Wheeler Segment Faces Downside Risks
Among the most vulnerable sectors is the two-wheeler segment, where the report warns of downside risks to current estimates if demand doesn’t recover soon. The sector continues to post negative growth, with motorcycle volumes declining 9% year-on-year, scooter ICE sales falling 5%, and moped sales slipping by 11%.
Passenger Vehicles See Volumes Fall
The passenger vehicle (PV) segment also remains under pressure, with volumes declining 1.4%. The slump is most pronounced in the small car segment, where marquee models posted double-digit declines in Q1FY26. Sales of Maruti Alto dropped 36%, Spresso fell 38%, and Celerio slid 43%.
The overall car segment posted an 11% year-on-year decline in Q1, with almost all major players witnessing a downturn in volumes.
Mixed Trends in Commercial Vehicles
In the commercial vehicle (CV) space, the trend remains mixed. Medium and Heavy Commercial Vehicle (MHCV) goods volumes declined 4.5%, while Light Commercial Vehicle (LCV) goods were nearly flat with a 0.5% drop. However, the bus segment showed resilience, with MHCV buses growing 7.6% and LCV buses expanding 8.8%.
Market Performance: Tata Motors vs VECV
Within the CV category, Tata Motors underperformed across all four sub-segments, while VE Commercial Vehicles (VECV) managed to outperform in most categories during the quarter.
Industry Outlook: Hope Rests on SUVs and Exports
Despite the sluggish outlook, some industry leaders remain optimistic. Nalinikant Gollagunta, CEO – Automotive Division, Mahindra & Mahindra, expressed confidence in certain growth pockets. He stated that the company is “confident of mid to high teens growth in SUVs, strong double-digit growth in exports, and will stick to guidance of high single-digit growth for LCVs for FY26.”
With persistent demand challenges across two-wheelers, passenger cars, and parts of the commercial vehicle space, the Indian auto industry is entering FY26 with tempered expectations. While pockets like SUVs, buses, and exports show some resilience, overall sectoral growth hinges on a broader recovery in consumer demand and macroeconomic tailwinds.
