Chennai: India’s passenger vehicle (PV) industry is expected to hit a record 5.9 mn units in domestic sales this fiscal, growing 5-7% on the back of last year’s GST cut and continued demand for utility vehicles, according to CRISIL Ratings.However, rising commodity prices, geopolitical tensions in West Asia and tighter emission and fuel-efficiency norms are expected to increase cost and investment pressures on automakers.CRISIL Ratings, which analysed companies accounting for nearly 94% of wholesale PV volumes, said the September 2025 GST reduction revived demand sharply. Domestic PV sales grew 16.7% in the second half of FY26, reversing a 1.4% decline in the first half and helping the industry end the year with 7.9% growth.Domestic sales account for nearly 86% of total output, while exports make up the remainder.“While the GST tailwind will continue in fiscal 2027, its intensity will moderate gradually,” said Anuj Sethi, Senior Director, Crisil Ratings. He said the small car segment, which contributes around 30% of domestic volumes, is expected to grow 2-4% on improved affordability and renewed first-time buyer demand amid a stable interest-rate environment.Utility vehicles, which made up 67% of PV sales last fiscal, are expected to account for 69% in FY27, driven by strong consumer preference and a wider range of models.CRISIL warned that the West Asia conflict could hurt the sector through higher fuel, commodity and freight costs. Export growth is expected to slow to 6-8% this fiscal after rising 17.5% to 0.9 million units in FY26. West Asia accounts for nearly 25% of India’s PV exports.“The West Asia conflict has sharply increased commodity and freight costs,” said Poonam Upadhyay, Director, Crisil Ratings. She noted that automakers have so far implemented calibrated price hikes of 1-3% this fiscal, passing on only part of the increase to protect demand momentum.The sector is also preparing for stricter regulations, including CAFE-III norms from April 2027, Bharat Stage VII emission standards and higher ethanol blending targets, all of which are expected to increase compliance and investment costs.Electric vehicles, which account for around 5% of PV sales, are likely to benefit from the regulatory push, though charging infrastructure remains critical for faster adoption.
