High Base & Macro Factors To Slow Passenger Vehicle Growth To 4–6% In FY27: ICRA

New Delhi, Apr 4 (KNN) India’s passenger vehicle (PV) industry growth is expected to moderate to 4–6 per cent in FY2027, primarily due to a high base and evolving macroeconomic conditions, according to ICRA.

For FY2026, the industry is projected to record a stronger wholesale volume growth of 7–9 per cent, supported by festive demand, GST rate cuts, and multiple new model launches.

ICRA noted, "The industry continues to witness structural shifts, with utility vehicles accounting for nearly 67 per cent of overall sales, reflecting sustained premiumisation trends." At the same time, increasing adoption of alternative powertrains such as CNG and electric vehicles is helping diversify demand, PTI reported.

Capex to Continue Despite Moderation

Despite slower growth expectations, original equipment manufacturers (OEMs) are likely to maintain significant capital expenditure, particularly in new product development and electric vehicle platforms. 

Key risks for the sector include inflationary pressures driven by geopolitical developments and changes in interest rates.

Tractor Industry Growth Also to Ease

The tractor industry is also expected to see moderated growth of 1–4 per cent in FY2027, following a high base. 

The segment witnessed strong momentum in FY2026, with wholesale volumes rising 22.8 per cent in the first 11 months, aided by favourable monsoons, improved farm output, and GST reductions. Industry volumes are likely to reach a record high in FY2026.

Going forward, tractor demand will remain closely tied to monsoon performance and rural income levels, with potential El Niño conditions posing downside risks.

Credit Profiles Remain Strong

ICRA said that despite moderation in growth, the credit profiles of OEMs in both passenger vehicle and tractor segments are expected to remain stable, supported by low debt levels, healthy liquidity, and improving operational performance.

(KNN Bureau)