Passenger vehicle sales to grow 4-6% in FY27 despite 28% H1 surge; inventory rises ahead of festive season: ICRA

India's passenger vehicle (PV) industry is expected to maintain its growth momentum in FY2027, with wholesale volumes projected to expand by 4-6%, even as the pace of expansion moderates in the coming months, according to a report by rating agency ICRA. The outlook comes after a strong first half, supported by GST rate cuts, improved replacement demand and sustained traction for newly launched models.

Wholesale dispatches rose 22% year-on-year (YoY) to 4.6 lakh units in September 2026, while retail registrations recorded a sharper 43% increase during the month. Automakers maintained production levels to meet domestic demand, with higher discounts and the continued impact of revised GST rates also supporting vehicle purchases. During H1 FY2027, wholesale and retail volumes increased approximately 28% and 29%, respectively.

Inventory rises to 45 days ahead of festive season

Despite strong retail offtake, passenger vehicle inventory levels increased to 43-45 days at the end of September, reflecting pre-festive stocking by manufacturers and dealerships. However, the inventory position remained significantly healthier than the 60-day level recorded in September 2025, ICRA said.

Utility vehicles (UVs) continued to dominate the market, accounting for approximately 68% of total passenger vehicle volumes during H1 FY2027. While SUVs and other UVs remain the principal growth drivers, the mini, compact and super-compact car segments have also witnessed a modest recovery following the GST rate reductions. ICRA expects UVs to retain their leadership, alongside an improvement in passenger car demand.

Maruti Suzuki leads exports; EV penetration gains ground

Passenger vehicle exports increased 25.8% sequentially in September, although manufacturers increasingly prioritised production to cater to domestic demand. Maruti Suzuki India maintained its position as the country's leading passenger vehicle exporter, followed by Hyundai Motor India.

Meanwhile, electric vehicle (EV) penetration in the passenger vehicle market increased to around 7.5% in H1 FY2027, compared with 4.2% in FY2026. Higher fuel prices and growing consumer preference for electric mobility contributed to the improvement.

Higher costs, weak monsoon pose risks to FY27 outlook

ICRA cautioned that several factors could constrain industry growth in the second half. These include the elevated base of H2 FY2026, normalisation of pent-up demand, rising input costs and higher vehicle prices. Recent price increases announced by Maruti Suzuki and Hyundai Motor India could also weigh on volumes.

Additionally, a below-average monsoon could affect rural consumer sentiment and vehicle purchases. While the industry registered 28% wholesale growth in H1 FY2027, ICRA expects the full-year growth rate to moderate to 4-6%.