Auto sales hit record high in FY26 as tax cuts, rate easing drive demand

Sales of automobiles across categories rose to the highest ever last fiscal year, supported by the biggest consumption tax cuts by the Centre, reduction in policy rates, and revision in income tax slabs. Industry-wide sales climbed for the first-time since the pandemic, which had caused a shrinkage in low-end wages and, consequently, mobility demand.

As per data available with industry body Society of Indian Automobile Manufacturers (SIAM), while passenger vehicle sales climbed about 8% to 4.64 million units last fiscal, those of commercial vehicles, three-wheelers and three-wheelers increased by 12.6% (1.08 million units), 12.8% (836,000 units) and 10.7% (21.71 million units), respectively.

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It was in FY19 previously that sales across all four categories of vehicles touched records.

Exports across vehicle categories too rose strongly by 24% to 6,647,685 units in the year under consideration.

“Although FY 2025-26 started modestly, the Indian auto industry has closed the year on a high note with every vehicle category viz. passenger vehicles, commercial vehicles, three-wheelers and two-wheelers, together posting their highest ever sales in a financial year, after seven years,” said Shailesh Chandra, President, SIAM. “The strong contributors to this growth have been the positive sentiments created through GST 2.0 reforms and multiple repo rate cuts during the year.”

In March, too, domestic passenger vehicle sales rose 16% to 442,460 units. Three-wheeler sales climbed 21.4% to 76,273 units and two-wheeler volumes by 19.3% to 1,976,128 units in the same period.

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Chandra said while there has not been any major disruption to demand, supply, and production so far due to the Iran war, industry stakeholders are closely monitoring global geopolitical developments.

The industry is “managing” supplies and ensuring least disruption to production operations, however, underlying costs have escalated, he said.

For now, Chandra said he expects the demand momentum to sustain.

“Looking ahead, domestic demand and macroeconomic fundamentals remain robust as we step into FY 2026-27, which should aid steady growth for the industry. However, uncertainties arising from the West Asia conflict need to be closely monitored, as it may have impacts on production, commodity prices, fuel prices, freight rates and the overall economy,” he said.

Carmakers in India mostly report wholesale dispatches from factories to dealerships and not retail sales to customers.