ICRA has revised its wholesale growth estimate for the PV industry for FY2026 to 1–4 per cent, a sharp revision from its previous estimate of 4–7 per cent.
Credit rating agency ICRA has presented a dualistic picture for India’s auto sector, marking contrasting trends in the passenger vehicle (PV) and two-wheeler markets for May 2025. While geopolitical concerns and supply chain issues have sapped PV demand, ICRA is cautiously optimistic about the overall market trend, backed by solid rural demand and consistent new model offerings.
Passenger vehicle growth outlook
ICRA has revised its wholesale growth estimate for the PV industry for FY2026 to 1–4 per cent, a sharp revision from its previous estimate of 4–7 per cent. This downgrade follows as the sector is hit by heightened inventories and manufacturing issues—particularly in the electric vehicle (EV) segment—owing to shortages of rare earth magnets due to export restrictions by China.
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In spite of these drawbacks, wholesale volumes for PVs continued at 3.4 lakh units in May 2025. ICRA opines that the new model launches from OEMs will provide a cushion against muted retail action and assist in sustaining market momentum during the year.
Consumer sentiment dips
The May PV wholesale sales decline of 13.6 per cent year over year compared to April was primarily on account of deteriorating consumer sentiment due to escalating geopolitical tensions in north India. Nonetheless, ICRA draws attention to the fact that the decline needs to be seen in perspective, considering SUVs and UVs continue to attract robust buyer demand, accounting for 64–65 per cent of overall PV sales. This consistent preference confirms the segment’s long-term popularity and resilience.
ICRA also identifies strong PV export growth—up 24 per cent year-on-year—as a silver lining. While forex deficiencies in a few African markets and global inflation may cap further upside, India’s leading exporters such as Maruti Suzuki and Hyundai remain strong drivers of overseas demand.
Two-wheelers offer stability and rural strength
The two-wheeler industry, led by rural and semi-urban demand, promises a more optimistic picture. While May’s wholesale volumes were flat at 1.58 million units on account of carryovers from April’s shutdowns, retail sales grew by 7 per cent year-on-year during the month. The healthy Rabi harvest, good wedding season, and good rural incomes contributed to this growth.
Also Read : Shortage of rare earth magnets can decelerate India’s automotive ride: Crisil
Electric two-wheelers (e2Ws) also saw a positive 9 per cent sequential volume growth, at 100,266 units. In the outlook, ICRA expects wholesale volume growth of 6–9% in the two-wheeler segment in FY2026, assuming good monsoon forecasts and a continued recovery in urban markets.
Overall industry outlook
As short-term issues such as geopolitical uncertainty and supply chain delays weigh on the automobile sector, ICRA research suggests that longer-term structural demand forces – such as rural resilience, a strong demand for SUVs and new product launches – could help stabilize the market.
ICRA views the situation in a cautiously positive light: the sector is challenged by headwinds but no shortage of positive rejuvenating levers.
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First Published Date: 29 Jun 2025, 08:00 AM IST
