Whalesbook
FY2027 Growth Moderation Expected
ICRA forecasts India's auto sector will shift to a more moderate growth pace in FY2027. This follows a strong expansion in FY2026, boosted by policy measures such as GST rationalisation that improved affordability and consumer confidence.
Commercial Vehicle Strength Continues
The commercial vehicle (CV) segment has been a standout performer. Wholesale volumes surged 23.8% year-on-year in February 2026. For the first eleven months of FY2026, cumulative volumes rose 12.5%. ICRA now expects the CV segment to grow between 7–9% in FY2026, before moderating to 4–6% in FY2027. Factors like higher borrowing costs and a shift to used vehicles may slow this growth, especially for light commercial vehicles.
Two-Wheeler Recovery and Component Sector Stability
The two-wheeler (2W) segment is seeing a widespread recovery, helped by better rural incomes and improved financing. Domestic wholesale volumes are expected to grow about 9% in FY2026, slowing to 3–5% in FY2027. The auto component sector is seen as relatively stable, with growth forecast at 7–9% in FY2027. Companies plan capital spending of ₹28,000–32,000 crore, mainly from their own earnings, to boost capacity and invest in electrification.
Export Risks and Medium-Term Outlook
While direct exposure to West Asia is limited, it accounts for about a quarter of India's passenger vehicle exports. Regional disruptions could indirectly affect component demand, alongside risks from supply chain shifts, energy costs, and currency swings. Despite the expected slowdown in FY2027, ICRA believes structural factors like electrification, replacement demand, and rural recovery will support the sector's medium-term outlook, guiding it back to sustainable, mid-single-digit growth.