India's passenger vehicle sales may moderate to 4-6% in FY27: ICRA

New Delhi: India's passenger vehicle industry growth is expected to moderate to 4-6 per cent in FY27, largely due to the high base and evolving macroeconomic conditions, ratings agency ICRA said on Friday.

For FY26, the industry is estimated to report wholesale volume growth of around 7-9 per cent, supported by strong festive demand, GST rate cuts and multiple new model launches, ICRA said in a statement.

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"The industry continues to witness structural shifts, with utility vehicles accounting for nearly 67 per cent of overall sales, reflecting sustained premiumisation trends," it said.

Further, rising penetration of alternative powertrains such as CNG and electric vehicles is aiding demand diversification, ICRA said.

Despite the anticipated moderation in growth, passenger vehicle original equipment manufacturers (OEMs) are expected to continue with significant capital expenditure towards new product development and electric vehicle platforms, while tractor manufacturers are likely to benefit from stable input costs and operating leverage, it added.

Going forward, key monitorables for the PV industry include inflationary pressures arising from geopolitical developments and interest rate movements, ICRA said.

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Similarly for the tractor industry, ICRA said growth is likely to moderate to 1-4 per cent in FY2027, given the high base and expected normalisation in demand.

The tractor industry has witnessed a sharp uptick, with wholesale volumes growing by 22.8 per cent in the 11 months of FY2026, supported by favourable monsoons, improved agricultural output and GST reduction on tractors.

"(Tractor) industry volumes are expected to reach an all-time high in FY2026," it said.

Going forward, tractor demand will remain closely linked to monsoon performance and rural income levels, with potential El Nino conditions posing a downside risk.

Despite the anticipated moderation in growth, the credit profiles of OEMs in both sectors are expected to remain strong, supported by low leverage, healthy liquidity and improving operating performance, ICRA noted.