India’s auto sector revs up for 2026 with 6–8% growth forecast

After a record-breaking 2025, India’s automobile industry heads into 2026 with growth momentum intact, supported by GST rationalisation, easing monetary conditions and resilient consumer demand. Sales are expected to grow 6–8%, led by strong SUV demand and gradual gains in CNG and electric vehicles.

However, rising compliance costs ahead of tighter safety and emission norms, currency pressures and supply-chain risks are set to test margins and pricing discipline. As automakers balance near-term demand with long-term investments in electrification and sustainability, 2026 emerges as a transition year—positive, but increasingly nuanced

After a record-breaking year, India’s automobile industry is entering 2026 on a relatively strong footing, with industry-wide sales growth expected in the 6–8 per cent range. The outlook is underpinned by policy support such as GST rationalisation, easing monetary conditions and income tax relief, all of which are expected to improve affordability and sustain consumer demand across segments.

The momentum is not merely cyclical. Passenger vehicle volumes rebounded sharply in 2025 after a slow start, driven by resilient urban demand, stable rural incomes and improved access to financing. SUVs continued to dominate demand, reinforcing their position as the industry’s primary growth engine, while CNG and electric vehicles gained steady traction. The shift in powertrain mix remains evolutionary rather than disruptive, reflecting cautious but consistent consumer adoption of alternative technologies.

However, 2026 is also shaping up as a preparatory year ahead of tighter regulatory requirements. Rising compliance costs linked to upcoming Corporate Average Fuel Efficiency (CAFE) norms from 2027 and future emission standards are expected to pressure margins and influence pricing strategies.

Supply-side challenges remain a structural concern. While localisation levels have improved, global uncertainties, tariff-related disruptions and currency depreciation continue to pose risks, particularly for component-intensive and premium vehicles. Maintaining supply-chain stability and pricing discipline will be critical to sustaining dealer confidence through the first half of 2026.

Overall, the outlook for 2026 remains positive but nuanced. Growth is expected to persist, supported by policy tailwinds and consumption resilience, but will be increasingly shaped by regulatory readiness, cost pressures and the pace at which consumers absorb higher prices and new technologies.

Maruti Suzuki MD and CEO Hisashi Takeuchi said GST benefits are expected to fully unfold in 2026, driving industry growth to 7–8 per cent annually and supporting employment generation. “In line with market demand in both domestic and export markets, we will expand capacity to meet consumer needs,” he said, adding that the company views 2026 with optimism and confidence.

Takeuchi noted that 2025 marked a landmark year for both Maruti Suzuki and the Indian automobile industry. After a slow start, growth accelerated sharply following progressive GST reforms, which rejuvenated the economy. “The passenger vehicle industry is poised to achieve its highest-ever calendar year volumes of 45 lakh units, with growth of around 5 per cent over the previous year,” he said.

Federation of Automobile Dealers Associations (FADA) president CS Vigneshwar said dealers were confident of closing 2025 with double-digit growth in both two-wheeler and passenger vehicle categories. “With stable rural incomes and the ongoing marriage season, we expect this momentum to carry into early 2026,” he said.

According to FADA’s latest Dealer Satisfaction Index, 74 per cent of dealers expect good to very good growth during the December–February period. Vigneshwar added that timely stock availability and the avoidance of abrupt price hikes by OEMs would be crucial to sustaining momentum into the first half of 2026.

Society of Indian Automobile Manufacturers (SIAM) president Shailesh Chandra said all vehicle segments are expected to close 2025 with growth over the previous year. He also highlighted strong double-digit growth in exports across categories, signalling increasing global acceptance of vehicles made in India. With a supportive policy environment and improving global outlook, the industry remains optimistic about sustained growth in 2026, aligned with India’s broader development vision, he said.

The Automotive Component Manufacturers Association of India (ACMA) also expects steady growth next year. ACMA director general Vinnie Mehta said domestic demand and localisation will continue to provide support, even as global uncertainties and supply-chain risks persist.

Tata Motors Passenger Vehicle MD and CEO Shailesh Chandra said GST rationalisation, combined with repo rate cuts and income tax benefits, will improve accessibility and stimulate demand. He highlighted strong growth potential in SUVs alongside accelerating adoption of CNG and electric vehicles.

“Our portfolio places us firmly in the sweet spot of this market transition,” he said, adding that 2026 offers significant growth potential anchored by brand strength, regulatory tailwinds and leadership in future-ready powertrains.

On upcoming CAFE III norms, Chandra said while details are yet to be finalised, the government is expected to frame them in a manner that supports a shift towards sustainable technologies.

Mahindra & Mahindra Auto Division CEO Nalinikanth Gollagunta said the company remains focused on operational excellence and innovation. On electrification, Mahindra plans to ramp up capacity to 8,000 electric SUVs per month while strengthening the public charging ecosystem. “With customers at the centre, 2026 will be a defining year as Mahindra strengthens its leadership and India asserts itself as a global SUV force,” he said.

EY-Parthenon partner and future of mobility leader Som Kapoor expects industry growth of 5–8 per cent in 2026. With regulations such as BS7 and CAFE 2027 under discussion, 2026 will reveal long-term transition strategies for passenger vehicle OEMs, he said.

Honda Cars India VP Kunal Behl said continued SUV demand and gradual electrification will strengthen India’s position as a key global automotive market. He remains confident of steady growth supported by a strengthening economy, easier financing and supportive government policies.

Renault Group India CEO Stephane Deblaise said 2026 will be pivotal for the company, marked by the return of the Renault Duster. He highlighted the positive impact of GST reforms and progressive policies in creating a dynamic environment for growth.

A Toyota Kirloskar Motor spokesperson reiterated the company’s commitment to decarbonisation through a multipath approach, offering a range of technologies tailored to diverse customer needs and usage patterns.

In the luxury segment, Mercedes-Benz India MD and CEO Santosh Iyer said GST reforms have had a strong economic impact, reinforced by recent GDP growth data. However, he cautioned that currency depreciation could erode benefits over the medium to long term. Despite this, the luxury car market leader remains optimistic for 2026, driven by new product introductions across both ICE and BEV portfolios.

BMW Group India president and CEO Hardeep Singh Brar said expectations for 2026 will be high after strong double-digit growth in 2025. He stressed that expanding the size of the luxury market should be a key focus. While consumption-led economic resilience supports demand, challenges such as rupee depreciation, global tariffs and supply-chain constraints could persist into early 2026.

Audi India head Balbir Singh Dhillon said the first half of 2025 posed challenges, but GST-led demand and market resilience helped the luxury segment regain momentum later in the year.

In the tyre segment, JK Tyre & Industries MD Anshuman Singhania said the industry is cautiously optimistic about 2026, expecting mid- to high-single-digit growth driven by stable OEM demand and a strong replacement cycle.

Commercial vehicle tyres are likely to grow at mid-single-digit rates, supported by infrastructure development and freight movement, while passenger vehicle tyres, including two- and three-wheelers, are expected to see high single-digit growth on improving consumer sentiment and mobility demand.