New Delhi: After a record-breaking year, India’s automobile industry is entering 2026 on a relatively strong footing, with sales growth expected in the 6-8 per cent range. The outlook is underpinned by policy support, including GST rationalisation, easing monetary conditions, and income tax relief, which together are likely to improve affordability and sustain consumer demand across vehicle segments.
The momentum reflects more than cyclical recovery. Passenger vehicle volumes in 2025 rebounded sharply after a slow start, aided by stronger urban demand, stable rural incomes and improved financing availability.
SUVs continued to dominate demand, while CNG and electric vehicles gained traction, indicating a gradual but steady shift in the powertrain mix rather than a disruptive transition.
However, 2026 is shaping up as a preparatory year ahead of tighter regulations.
The industry faces rising compliance costs as it readies for CAFE norms from 2027 and future emission standards, which could pressure margins and pricing. Mandatory safety requirements, such as ABS and CBS for two-wheelers, are already pushing up entry-level prices and could temper volume growth in price-sensitive segments.
Supply-side constraints remain a structural challenge. While localisation has improved, global uncertainties, tariffs and currency depreciation continue to pose risks, particularly for component-intensive and premium vehicles. Gridlock in supply chains and pricing discipline by OEMs will be critical to sustaining dealer confidence into the first half of 2026.
At the same time, investment cycles are shifting. Automakers are increasingly allocating capital toward electrification, charging infrastructure, and platform upgrades, while also scaling conventional powertrains to meet near-term demand. This dual-track strategy reflects a market that is transitioning gradually rather than pivoting sharply.
Overall, the auto sector’s outlook for 2026 is positive but nuanced: growth is likely to persist, supported by policy tailwinds and consumption resilience, yet increasingly shaped by regulatory readiness, cost pressures and the pace at which consumers absorb higher prices and new technologies.
“We expect GST benefits to fully unfold in 2026, driving industry growth to 7-8 per cent annually, which will fuel employment generation within the country. In line with market demand, in both domestic and export markets, we will expand our capacity to meet consumer needs,” Maruti Suzuki MD and CEO Hisashi Takeuchi told PTI.
The auto major looks at 2026 with optimism and confidence for the overall industry, he stated.
Takeuchi noted that 2025 marked a landmark year for Maruti Suzuki and the Indian automobile industry.
After a slow start, the industry accelerated into a high-growth trajectory, thanks to the progressive GST reform, he stated.
“This mega reform rejuvenated the economy, and the passenger vehicle industry is poised to achieve its highest-ever calendar year volumes of 45 lakh units with a growth of 5 per cent over the previous year,” Takeuchi noted.
Federation of Automobile Dealers Associations (FADA) president CS Vigneshwar said that the dealers were confident of closing the 2025 calendar year with double-digit growth in both two-wheeler and passenger vehicle categories.
“With stable rural incomes and the ongoing marriage season, we expect this positive momentum to carry forward into the early part of 2026,” Vigneshwar stated.
As per our latest Dealer Satisfaction Index (December 2025), 74 per cent of dealers across India expect good to very good growth in the next three months (December-February) period, he added.
If OEMs ensure timely stock availability and avoid abrupt pricing actions, the current momentum should sustain well into the first half of 2026, he said.
Speaking about possible dampeners for the growth story, Vigneshwar said steep price hikes by OEMs from January could exert pressure on demand in the near term.
Besides, the mandatory implementation of a combined braking system (CBS/ABS) across all two-wheeler categories can lead to an increase in entry-level prices by at least Rs 5,000, thus impacting consumer sentiments.
According to Society of Indian Automobile Manufacturers (SIAM) President Shailesh Chandra, all segments across the industry are expected to close the calendar year with growth over the previous calendar year. “In addition, we expect strong double-digit growth in the export volumes across all segments, indicating growing brand acceptance of vehicles made in India.”
Looking ahead, with a supportive policy environment and improving global outlook, the industry remains optimistic about sustained growth in 2026, aligned with India’s vision of a Viksit Bharat, he added.
The Automotive Component Manufacturers Association of India (ACMA), which represents the domestic automotive components industry, also expects the growth momentum to continue in the next year.
“The Indian auto component industry is expected to continue to grow steadily next year, with domestic demand and localisation providing support, even though global uncertainties and supply-chain risks persist,” ACMA Director General Vinnie Mehta stated.
Chandra, who is also the MD and CEO of Tata Motors Passenger Vehicles, said GST rationalisation, coupled with policy tailwinds, such as repo rate cuts and income tax benefits, will enhance accessibility and stimulate demand.
“We are uniquely positioned to lead in high-growth segments, including the continued surge in SUV demand, alongside the accelerating adoption of CNG and EV technologies. Our strong portfolio across these categories places us squarely in the sweet spot of this market transition,” he added.
Overall, 2026 offers unprecedented potential for growth, anchored by brand strength, a powerful launch calendar, regulatory tailwinds, and leadership in future-ready powertrains, Chandra said.
Touching upon the upcoming CAFE III norms, Chandra said: “While the exact contours of CAFE III have not been finalised, we earnestly believe that the government will articulate it in a manner that supports a directional shift towards sustainable technologies”.
Mahindra & Mahindra Auto Division CEO Nalinikanth Gollagunta said the company is committed to continuing to achieve operational excellence and setting new benchmarks in design and product innovation next year.
“On the electric front, our focus is twofold: ramping up operational capacity to 8,000 eSUVs per month and strengthening the public charging ecosystem,” he added.
“With customers at the centre of our vision, I believe 2026 will be a defining year, where Mahindra strengthens its leadership, and India asserts itself as a global force in SUVs,” Gollagunta stated.
EY-Parthenon Partner and Future of Mobility Leader Som Kapoor said the industry is likely to grow by 5-8 per cent in 2026.
“With forthcoming regulations, such as BS7 and CAFE 2027 currently under active deliberation, 2026 will reveal long-term transition strategies for PV OEMs,” he added.
Honda Cars India VP (Sales and Marketing) Kunal Behl said continued SUV demand and gradual electrification will further strengthen India’s position as a key global automotive market.
“Looking at 2026, we remain confident of sustained demand and steady growth, supported by a strengthening economy, easier access to financing, and supportive government policies,” he added.
Echoing similar sentiments, Renault Group India CEO Stephane Deblaise said 2026 will be pivotal for the firm, with the return of the iconic Renault Duster.
“We are in the right place at the right time, with the government’s landmark GST 2.0 reforms and progressive policies creating a dynamic environment that will strongly support our ambitions in India,” he added.
A Toyota Kirloskar Motor spokesperson stated that the automaker’s commitment to decarbonisation remains steadfast through its multipath approach, offering a broad range of technologies tailored to diverse customer needs and real-world usage.
Elaborating on the luxury car segment, Mercedes-Benz MD and CEO Santosh Iyer said the impact of GST 2.0 has been strong on the overall economy, and the recent GDP growth data further reinforces the confidence in this growth trajectory.
“However, the positive effect of the GST 2.0 may erode in the mid- to long-term as prices will go up due to deteriorating forex,” he added.
The luxury car market leader has a positive outlook for the segment for 2026, as customers can expect new product introductions, both in the ICE and BEV segments, Iyer stated.
BMW Group India president and CEO Hardeep Singh Brar said that after closing 2025 with high double-digit growth, expectations for 2026 will, of course, be high.
“We are growing faster than the average luxury car industry growth. I think the focus for 2026 for the luxury car industry should really be on increasing the size of the market. The size of the pie has been the same for far too long,” he added.
The Indian economy is resilient; it is driven by consumption, and now the mindset towards enjoying meaningful and personal luxury is changing, Brar said.
“Some challenges from this year will continue into the start of 2026. The rupee depreciation is not showing signs of abating, and that puts pressure on cost. The continued global tariffs situation and supply chain challenges, like the availability of critical components, can be a dampener for the overall industry,” he added.
Reflecting on 2025, Audi India Head Balbir Singh Dhillon said the first half of the year came with its set of industry-wide challenges, but the resilience of the luxury market and strong GST-led demand helped the segment somewhat regain lost ground in the latter months.
PTI
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