ICRA sees 6–9% two-wheeler growth, 5–7% PV expansion in FY26; January sales signal strong demand revival

Domestic automobile demand recorded strong growth across both two-wheeler (2W) and passenger vehicle (PV) segments in January 2026, supported by sustained demand momentum, GST rate cuts, wedding season demand and new model launches, according to ICRA Limited’s latest sector update.

The rating agency has projected domestic two-wheeler volumes to grow 6–9% in FY2026, while passenger vehicle wholesale volumes are expected to expand 5–7%, indicating steady momentum through the remainder of the fiscal year.

Two-wheelers post sharp double-digit gains

Two-wheeler wholesalers dispatched 1.8 million units in January, marking a 25% year-on-year (YoY) increase. For the April–January period (10M FY2026), wholesale volumes rose 6.7% YoY, reflecting improving underlying demand conditions.

Retail sales were equally buoyant, climbing 20.8% YoY in January, aided by festival-linked purchases during Pongal and Makar Sankranti and strong wedding-season footfalls. Dealer interactions pointed to healthy enquiry pipelines, improved digital lead conversions and a visible shift towards premium and mid-segment motorcycles.

Electric two-wheelers continued to gain traction, with retail volumes reaching 123,012 units in January, up 25.3% YoY. However, penetration remains moderate at around 6% of total two-wheeler sales during 10M FY2026, suggesting gradual adoption.

Exports also strengthened, rising 20% YoY in January and 23.7% in the April–January period, supported partly by a favourable base effect and improving overseas demand.

Passenger vehicles: steady growth, lower inventories

Passenger vehicle (PV) wholesales increased 12% YoY to 4.5 lakh units in January. On a sequential basis, dispatches rose 14% compared to December 2025, when output was temporarily affected by annual maintenance shutdowns at several plants.

Retail PV sales grew 7% YoY in January. Over 10M FY2026, wholesale volumes expanded 6.7%, while retail sales were up 8%, indicating sustained consumer interest.

Dealer inventory levels improved significantly, falling to 32–34 days in January from around 60 days at the end of September 2025, reflecting better alignment between production and retail off-take.

Utility Vehicles (UVs) accounted for 67% of total PV volumes in the April–January period and remain the principal growth driver. PV exports rose 33% YoY in January and 17% over 10M FY2026, signalling a stronger export push from domestic manufacturers.