INDIA REPORT
India’s auto sector delivered a resilient performance in the first half of FY26 (April–September 2025), supported by healthy two-wheeler volumes, steady passenger-vehicle demand, and a modest recovery in commercial vehicles — even as the industry navigated EV market churn and shifting policy tailwinds.
Two-wheelers continued to underpin volume growth: production and domestic sales surged, with about 10,200,000 (1.02 crore) two-wheelers produced/sold in 1H FY26. This strength was driven by durable rural demand, improved affordability, and strong scooter and motorcycle cycles during the pre-festive and monsoon seasons.
Passenger vehicles showed robustness across the board, with roughly 2.05 million units recorded in the six-month period (Apr–Jun ~1.01m; Jul–Sep ~1.04m). OEMs benefited from a combination of steady urban demand, renewed festive spending and a partial easing of supply constraints. Strong export momentum — India recorded a record H1 export tally — also helped OEM plant utilizations.
Three-wheelers and commercial vehicles painted a mixed picture. Three-wheeler volumes recovered to near-pre slowdown levels with an H1 total close to 394,00 (3.94 lakh) units, supporting last-mile mobility and small-goods logistics. Commercial vehicles returned to modest growth — H1 wholesale CVs were roughly 463,000 (4.63 lakh) units — led by light- and medium-commercial segments, while heavy-truck demand remained sensitive to freight rates and fleet replacement cycles. Industry analysts flagged just a low-single digit YoY rise in CVs for H1.
Government-side trends. Government policy moves were a pronounced near-term demand stimulant. The GST rate rationalization (GST 2.0) and select duty adjustments boosted consumer sentiment and helped compress the purchase calculus for several passenger-vehicle segments during the festive window. Simultaneously, continued public capex on roads and logistics corridors lifted LCV/MCV freight activity — supporting CV demand recovery.
OEM-side trends. Manufacturers faced a two-track environment. Legacy incumbents posted healthy volumes and margin recovery aided by exports, while newer EV-first players confronted churn — notable revenue and volume downgrades at some e-two-wheeler startups highlighted the consolidation underway in electrified mobility. Capital discipline, localization of battery supply chains, and model rationalization were recurring OEM responses.
Demand-side analysis. Urban replacement and festival buying propelled personal vehicles (PVs), rural resilience — aided by crop prices and informal credit — kept two-wheelers buoyant, and freight-led restocking lifted LCVs. Inflation normalization and lower financing costs remained important enablers, though affordability pressures persist for entry segments.
Overall assessment. H1 FY26 reflects a mature, segmented recovery — broad volume strength in two-wheelers and passenger cars, selective recovery in CVs, and a realignment in the EV space. The near-term outlook hinges on festive momentum sustaining into Q3, continued export demand, and how quickly OEMs can stabilize EV unit economics while leveraging government incentives and capex-driven freight growth. PSR
Aditya Kondejkar is Research Analyst – South Asia Operations for Power Systems Research
