Brokerage firm Nomura has lifted its volume growth estimates for Indian passenger and commercial vehicles, expecting steady consumer demand and better supply chains. Investors are looking at SUV popularity and faster electric vehicle adoption as key drivers for this sector outlook.
Brokerage firm Nomura has revised its outlook for the Indian automotive sector, increasing its volume growth projections for fiscal years 2027 and 2028. The firm highlights that resilient consumer demand remains a core support, even as vehicle prices have increased and fuel costs have fluctuated. This update suggests that despite macroeconomic pressures, the appetite for new vehicle purchases remains steady among Indian buyers.
Passenger Vehicle and SUV Demand
Nomura expects passenger vehicles to continue leading the industry's expansion. The brokerage has upgraded its volume growth forecast for this segment to 13% in FY27 and 6% in FY28. A significant part of this optimism is tied to the demand for sport utility vehicles, or SUVs, which has been a major revenue driver for most manufacturers. As supply chain problems—such as the availability of critical electronic components—continue to ease, companies are expected to produce more vehicles to meet this ongoing demand.
Electric Vehicle Growth Targets
Beyond traditional combustion engines, the report projects a notable shift toward electric vehicles. In the passenger vehicle segment, electric penetration is estimated to rise from 3.9% in FY26 to 8.8% by FY28, with a further increase to 12.7% expected by FY30. The transition is also visible in the two-wheeler market, where electric adoption is forecast to grow from 6.6% in FY26 to 11.3% by FY28, reaching nearly 20% by the end of the decade. This transition remains a critical area for investors to monitor, as it directly impacts the future product mix and capital spending requirements of major auto players.
Segment-Wide Performance Outlook
Growth estimates were also adjusted upward for other segments. The two-wheeler segment is now expected to see growth of 8.5% in FY27 and 6.6% in FY28. Medium and heavy commercial vehicles, which are often considered a barometer for broader economic activity, have seen their growth forecasts revised to 8% and 5% for the same periods. Additionally, the tractor segment, which is highly dependent on rural income and monsoon trends, saw its FY27 growth projection rise to 5%.
Investor Monitorables
While the industry outlook appears optimistic, investors should track several factors that can influence these numbers. The final benefits for companies will depend on their ability to maintain profit margins amid rising input costs and the competitive pressure of launching new models. Furthermore, the pace of electric vehicle adoption will rely on the expansion of charging infrastructure and government policy support. The industry’s ability to manage costs while investing in new technology will be the next major trend for shareholders to observe in upcoming quarterly results.